Informational returns are one of the most important compliance tools the IRS has to ensure that taxpayers file and pay the correct amount of taxes. Currently, there are more than 40 informational returns, all of which carry potential penalties for taxpayers who do not file returns with the required information correctly and on time. Penalties related to informational returns are among the most important penalties in the Internal Revenue Code. 1 An informational return is a form designed to provide the IRS and other government agencies with the information needed to verify taxpayers' tax returns, 2 Informational returns include forms that most U.S.
taxpayers are familiar with, such as Form W-2, Wage and Tax Return, forms more obscure, such as Form 8937, Report on Organizational Actions Affecting the Value Base, and newer forms, such as Form 1010 94-C, Transmission of Employer-Provided Health Insurance Information on Offers and Coverage, and 1095-C, Employer-Provided Health Insurance Offer and Coverage. The W-2 form is one of the best-known informational statements. It is used to declare the salaries paid to employees and the taxes that are withheld from them. Employees are familiar with the W-2 form because they receive it from their employer every year and use it to prepare their personal income tax returns.
The IRS uses the Information Returns Program (IRP) to compare informational returns with individual tax returns to determine compliance. 4 These forms are a vital part of the self-reporting system for income tax in the United States. If employers don't prepare and file forms W-2 and W-3 as required, employees won't have the information needed to prepare their personal income tax returns, the IRS will have no way of comparing the information contained in employee returns with what the employer actually paid them, and the Social Security Administration will have no way of calculating what each individual's benefits should be once those people reach retirement age. The three-tier sanctions structure established in Secs.
Income tax returns for individuals or corporate taxpayers who file a Form 1120 as a member of the United States Tax Section will help you keep up to date and make your office more efficient. In other words, if the IRS contacts a company regarding the lack of W-2 and W-3 forms, and the employee responsible for filing during the tax year in question no longer works at the company, the taxpayer may want to consider filing the correct forms with the IRS within the 30-day period, without admitting that the forms were not originally filed on time. Taxpayers can also challenge fines for returning information through the IRS appeals process and through IRS Due Process of Collection (CDP) appeals.