Section 6721 of the Internal Revenue Code addresses penalties imposed for the late filing or incorrect filing of information returns, including those related to the Affordable Care Act (ACA) compliance. This section is critical for employers as it defines the financial repercussions for not adhering to filing standards and deadlines.
Overview of Penalties Under Section 6721
The penalties under Section 6721 can vary significantly based on the nature and timing of the errors. They are designed to enforce compliance and ensure timely and accurate information reporting. Penalties can range from $50 to $280 per return, with a maximum penalty of over $3 million depending on the size of the employer and the lateness of the filing.
Common Reasons for Penalties
Penalties under Section 6721 can be assessed for various reasons, including:
- Failing to file an information return by the due date.
- Filing an incorrect or incomplete return.
- Failing to include all required information or including incorrect information.
How to Respond to Penalties
If you are assessed a penalty under Section 6721, it is important to:
- Review the notice from the IRS carefully to understand the specific reasons for the penalty.
- Correct any inaccuracies in the filings as instructed to mitigate further penalties.
- Consider consulting with a tax professional to navigate the complexities of correcting the filing and possibly abating the penalty.
Preventative Measures
To avoid penalties under Section 6721 in the future, employers should:
- Ensure that all filings are done on time and are complete and accurate.
- Implement robust systems and software like ACA-Track that help in managing and verifying compliance data accurately.
- Stay updated with the latest IRS regulations and filing requirements.
For more information on maintaining compliance and managing IRS penalties, visit ACA-Track’s service descriptions.
