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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.

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FL - Governor proposes tax cuts in state of the state address

In his State of the State Address, Florida Gov. Ron DeSantis proposed $1.1 billion in tax cuts, the continuation of […]

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Employee Benefit Plan Filing Extension Procedures Updated

Starting in 2024, Form 5558 is no longer used to request an extension of time to file Form 5330, Return of Excise […]

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More Than 1,000 Projects Registered Through IRS ECO Tool, IR-2024-14

The Internal Revenue Service said that more than 1,000 projects have been registered through the agency’s Energy Credits Online tool. The tool was created to help taxpayers who are taking […]

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FinCEN Commences Beneficial Ownership Reporting Under Bipartisan Corporate Transparency Act

The Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), has begun accepting beneficial ownership information report under the bipartisan Corporate Transparency Act, enacted in 2021. This effort requires companies doing […]

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FinCEN Commences Beneficial Ownership Reporting Under Bipartisan Corporate Transparency Act

IRS Encourages Taxpayers to Get Ready for 2024 Filing Season, IR-2024-1

The IRS has encouraged taxpayers to utilize tips, tools and other resources available on the IRS website to Get Ready for 2024 filing season. The agency is set to announce the start […]

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Transitional Guidance on Reporting of Information on Receipt of Digital Assets Announced, Announcement 2024-4, IR-2024-12

The IRS has provided transitional guidance under Code Sec. 6050I with respect to reporting transactions involving receipt of digital assets. The Service has further clarified that at this time, digital assets are not required […]

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Transitional Guidance on Reporting of Information on Receipt of Digital Assets Announced, Announcement 2024-4, IR-2024-12

IRS Updates List of Qualified Census Tracts for Qualified Mortgage Bonds and Mortgage Credit Certificates, Rev. Proc. 2024-08

The IRS has provided issuers of qualified mortgage bonds and issuers of mortgage credit certificates with an updated list of qualified census tracts for each state, the District of Columbia and Puerto Rico. […]

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IRS Announces Leadership Restructuring, IR-2023-237

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IRS: Taxpayers and Tax Professionals Should Protect Themselves from Scams, IR-2023-223, IR-2023-224, IR-2023-226, IR-2023-227, IR-2023-229

As the National Tax Security Awareness Week concludes, the IRS emphasized on the ongoing need for taxpayers and tax professionals to stay […]

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