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Final Regulations Issued on De Minimis Error Safe Harbors for Failure to File Information Returns and Payee Statements, T.D. 9984

The IRS has issued final regulations regarding the de minimis safe harbors from the penalties under Code Sec. 6721 for failure to file information returns and Code Sec. 6722 for failure to furnish payee statements. The regulations also include the time and manner a payee may elect out of the safe harbor, as well as rules on reporting basis of securities by brokers as it relates to the de minimis safe harbors. The final regulations adopt the 2018 proposed regulations with only minor modifications.

Safe Harbor Exceptions

The safe harbor to the Code Sec. 6721 and Code Sec. 6722 penalties generally apply to an otherwise correctly filed information return or furnished payee statement that includes a de minimis error of the dollar amount required to be reported. A de minimis error is where:

The final regulations maintain that the safe harbors apply “per statement and not on a “per account” basis per the Code requirements. Nothing in the Code prohibits a filer from providing corrected payee statements on an account basis regardless of the de minimis error safe harbor.

The safe harbors do not apply to the failure to file on or before the required due date. They also do not apply to failures that are due to intentional disregard of the requirements to file an information return or furnish a payee statement.

Election Out of Safe Harbor

The person to whom a payee statement must be furnished may elect not to have the safe harbors apply to a payee statement. The election must be made no later than 30 days after the date when the statement must be furnished or October 15 of the calendar year. The election out is prospective and remains in effect for all subsequent calendar years until revoked.

The payee generally must make the election out of the safe harbors in writing to the filer. The filer, however, can provide a reasonable alternative manner for making the election, including electronically (for example, via email or website) or telephonically. The filer must provide timely notification to the payee describing these alternative methods electing out. The filer must retain records of any election, revocation, or notification.

Cost Basis

Code Sec. 6045 provides that a broker that files an information return to report gross proceeds from the sale of a covered security must also include the customer’s adjusted basis in the security. The regulations provide that adjusted basis for this purpose must be based the correct dollar amount reported on any corrected information return or payee statement due to the de minimis safe harbors under Code Sec. 6721 or 6722.

Effective Date

The final regulations generally apply with respect to information returns and payee statements required to be file or furnished on or after January 1, 2024. However, Reg. §301.6724-1(h) providing for waiver of the Code Sec. 6721 or 6722 penalties caused by the presence of de minimis errors and an election out of the safe harbors applies with respect to information returns required to be filed and payee statements required to be furnished after January 4, 2017.

IRS Highlights Home Energy Credits for Taxpayers, IR-2024-137

The IRS has advised taxpayers that making specific energy-efficient updates to their homes could qualify them for home energy credits. This guidance comes under the expanded provisions of […]

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IRS Highlights Home Energy Credits for Taxpayers, IR-2024-137

IRS Issues FAQs on Disaster Relief Related to Retirement Plans, FS-2024-19; IR-2024-132

The IRS issued frequently asked questions (FAQs) related to distributions from retirement plans and IRS for individuals impacted by federally declared disasters. These FAQs cover the ongoing disaster relief for certain distributions […]

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IRS Issues FAQs on Disaster Relief Related to Retirement Plans, FS-2024-19; IR-2024-132

2025 Inflation Adjustments for Health Savings Accounts Released, Rev. Proc. 2024-25

The IRS has released the 2025 inflation-adjusted amounts for health savings accounts under Code Sec. 223. For calendar year 2025, the annual limitation on deductions under Code Sec. 223(b)(2) for an […]

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2025 Inflation Adjustments for Health Savings Accounts Released, Rev. Proc. 2024-25

FL - Eligibility for tax credit scholarship program expanded

The eligibility for the Florida Tax Credit Scholarship Program is expanded for sales and use tax purposes. The scholarship program […]

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FL - Eligibility for tax credit scholarship program expanded

FL - IRC conformity tie-in date updated, disaster extension established

Florida updated the IRC conformity tie-in date for computing corporate income tax liability from January 1, 2023 to January 1, […]

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FL - IRC conformity tie-in date updated, disaster extension established

FL - Gas and Sulfur production tax rates for 2024-2025 announced

Florida has issued the severance tax rates for the production of gas and sulfur effective July 1, 2024, through June […]

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FL - Gas and Sulfur production tax rates for 2024-2025 announced

No Further Funding Cuts For IRS In FY24

Other than a planned repurposing of Inflation Reduction Act supplemental funding, the Internal Revenue Service saw no other cuts as the President signed off on the resolution […]

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No Further Funding Cuts For IRS In FY24

IRS Criminal Investigation Releases COVID Fraud Conviction Statistics, IR-2024-83

The IRS released statistics that showed 1,644 tax and money-laundering cases related to COVID fraud, totaling $9 billion investigated by the Criminal Investigation (CI). CI is the law enforcement […]

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IRS Criminal Investigation Releases COVID Fraud Conviction Statistics, IR-2024-83

IRS Updates FAQ on Commercial Clean Vehicle Credits (FS-2024-14; IR-2024-111)

The IRS updated frequently asked questions (FAQ) on New, Previously Owned and Qualified Commercial Clean Vehicle Credits. These FAQs provide guidance on how the Inflation Reduction […]

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IRS Updates FAQ on Commercial Clean Vehicle Credits (FS-2024-14; IR-2024-111)

2024 Foreign Housing Expense Amounts Released, Notice 2024-31

KPMG TaxNewsFlash – United States March 20, 2024 The IRS today released Notice 2024-31 [PDF 156 KB] providing the adjustments to the limitation on housing expenses, under […]

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2024 Foreign Housing Expense Amounts Released, Notice 2024-31