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IRS Civil Penalty for Failure to File Correct Information Returns

Are you a business owner?  Have you filed your W2/W3 forms completely and correctly each year with the Social Security Administration (SSA)?

This is an important question to ask yourself.  If you haven’t filed your W2/W3 forms, your business may be looking at a hefty Civil Penalty.  We’ve had clients with Civil Penalties over the $1 Million mark.  Sounds ridiculous, but it’s true.

The IRS shares information with the SSA.  It takes them a few years to do it, so right now the IRS is probably looking at W2/W3 forms from 3 years ago.  The Service will compare a business’s 941’s with the W2/W3 forms for a given year.  The totals reported on the W3 should match the totals of the four 941 forms when added together.  When there is a discrepancy, one of two things can happen.  The IRS looks to assess additional tax to the business.  Or, the IRS looks to assess a Civil Penalty to the business.


If the W2/W3 totals are more than the 941 totals, the IRS will likely look to assess additional tax to the business.

If the 941 totals are more than the W2/W3 totals, the IRS will likely took to assess a Civil Penalty to the business under Internal Revenue Code (IRC) section 6721.  If there is a slight discrepancy, the Civil Penalty may not be too high.  Where most businesses with this issue get into big trouble is when they don’t file the W2/W3 forms at all or the SSA isn’t able to process them because they’ve been submitted in the wrong format.

Before issuing the additional tax assessment or Civil Penalty to a business, the IRS will make attempts by mail to get updated and accurate information from the business taxpayer.  I can’t stress enough, the importance of opening your mail from the IRS.  If proper documentation is not provided to the IRS by the deadline given in the IRS notice, the additional tax or Civil Penalty will be assessed.

Penalty Abatement

M&M has successfully requested the abatement of IRC 6721 Civil Penalties for many clients.  We’re confident we can do the same for you and your business.  If your business has received a Civil Penalty assessment for a 941-W2/W3 discrepancy, contact M&M.  Even if you don’t hire us to resolve your back-tax liabilities, you’ll learn quite a bit about the process.  Call us at 866-487-5624 to speak with an M&M Tax Advisor.



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