36SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Dennis Zuehlke Dennis is Compliance Manager for Ascensus. Mr. Zuehlke provides clients with technical support on tax-advantaged accounts (including individual retirement accounts, health savings accounts, simplified employee pension plans, and Coverdell education … Web: www.ascensus.com Details President Obama has signed into law H.R. 1295, the Trade Preferences Extension Act, which contains a provision that sharply increases the tiered penalties for certain information returns and payee statements required to be filed or furnished after December 31, 2015. In most cases, the penalty amounts and calendar year maximums have doubled.The Act, among other things, increases the penalty fees, as well as the maximum penalty amounts, that can be assessed for failing to timely file Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc., with the IRS or failing to timely furnish Copy B of Form 1099-R to the payee (distribution recipient).The penalty also applies for not including all of the information required to be shown on a return, for including incorrect information on a return, for filing on paper when required to file electronically, reporting an incorrect taxpayer identification number (TIN) or failing to report a TIN, or failing to file paper forms that are machine readable.The increase in penalty amounts will replace the current tiered penalty structure with a new tiered penalty structure. The first tier, for information returns filed with the IRS or corrected within 30 days after the deadline, will increase from $30 to $50 per information return, with the calendar year maximum penalty increasing from $250,000 to $500,000.The second tier, for information returns corrected or filed more than 30 days after the deadline, but by August 1, will change from $60 to $100 per information return, with the calendar year maximum changing from $500,000 to $1.5 million.The third tier, for information returns filed or corrected after August 1, will be $250 per information return, rather than $100 per return, with the calendar year maximum as $3 million instead of $1.5 million.The penalty for intentional disregard of the information return filing requirements will increase from $250 to $500 per return, with no maximum.Lower maximum penalties apply to small business filers, defined as firms having average annual gross receipts for the most recent three taxable years that do not exceed $5 million. For small business filers, the first tier calendar year maximum increases from $75,000 to $175,000; the second tier calendar year maximum increases from $200,000 to $500,000; and the third tier calendar year maximum increases from $500,000 to $1 million.The penalty for failure to furnish a correct payee statement is separate from the penalty for failure to timely file with the IRS. The IRS may assess both penalties if a credit union has both failures and cannot show reasonable cause.The increased information reporting penalties apply to both paper and electronic filers. In addition to Form 1099-R, the penalties apply to all other information returns and payee statements covered under Internal Revenue Code Sections 6721 and 6722 , including Form W-2, Wage and Tax Statement.As is the case with many pieces of major legislation, provisions often unrelated to the legislation itself are added as revenue-raisers to cover the cost of the bill. The increased information reporting penalties provision was added to the Trade Preferences Extension Act after a provision that would have added a new information reporting mandate on deposit accounts that pay less than $10 in interest and on non-interest bearing deposit accounts was dropped because of opposition from the Credit Union National Association and other trade groups. And, while this isn’t the first time that increased information reporting penalties have been added to legislation as a revenue-raising provision, the most recent move should come as no surprise.The Obama Administration first proposed increasing the information reporting penalties in early 2009 and included the provision in its fiscal year 2010 budget proposal. The provision was subsequently added as a revenue-raiser to the Small Business Jobs Act of 2010, which increased information reporting penalties for information returns and payee statements required to be filed or furnished after December 31, 2010.Since 2010, most information reporting penalties have more than tripled, and the calendar year annual maximums have risen nearly five-fold. Credit unions would be well-advised to review their information reporting practices and procedures, to ensure compliance with the rules—and avoid costly penalties.