IRS Lightens up on Deadlines and Penalties
The new rule for filing information returns allows for a March 31 filing deadline instead of the earlier February 28. The stipulation is that this new deadline applies only to information returns filed online. The IRS is hoping this extension of time will encourage more taxpayers to file electronically, which will help the IRS reach its Congressional mandate that 80 percent of tax returns be filed electronically by 2007.
Information returns covered by this ruling include Forms W-2, W-2G, W-2, the Form 940 series including Form 941, Form 1098 for mortgage interest, the Form 1099 series, and Form 8027 for reporting tips.
The other changed rule affects certain taxpayers who fail to pay their tax on time. The previous penalty rate of .5 percent per month has been lowered to .25 percent per month. This new lower rate applies only to taxpayers who file their tax return on time and who enter into an installment agreement with the IRS.
Both regulations are retroactive. The extended filing date regulation applies to returns that were required to be filed after December 31, 1999. The reduced penalty regulation applies to taxpayers using installment agreements that are in affect for months after December 31, 1999.