Section 6722 of the Internal Revenue Code focuses on penalties for providing incorrect statements to payees, a critical component in maintaining compliance under the Affordable Care Act (ACA) among other tax-related responsibilities. This section penalizes the failure to provide accurate information to employees about their health coverage or other required data.
Penalties Overview Under Section 6722
The penalties under Section 6722 can be significant, designed to ensure that all required payee statements are accurate and delivered timely. The fine per incident can range from $50 to $280, with maximum penalties reaching up to $3 million annually, depending on the violations and the corrective actions taken by the employer.
Common Triggers for Section 6722 Penalties
Employers might incur penalties under Section 6722 for several reasons, including:
- Failing to provide payee statements by the due date.
- Issuing statements with incorrect or incomplete information.
- Failure to correct misinformation in a timely manner.
Responding to Section 6722 Penalties
If you face penalties under Section 6722, take the following steps:
- Review the IRS notice for details about the discrepancies.
- Correct any errors in future statements and, if possible, reissue corrected statements to affected payees.
- Consult with a tax professional to ensure compliance and explore any potential for penalty abatement.
Strategies to Prevent Future Issues
To avoid penalties and ensure compliance with Section 6722:
- Implement a reliable system for generating and distributing payee statements.
- Regularly train HR and payroll staff on the latest IRS requirements and compliance standards.
- Use tools like ACA-Track to help manage and verify the accuracy of employee data and compliance reporting.
For additional guidance on how to effectively manage IRS compliance and avoid penalties, visit ACA-Track’s service descriptions.
