There are various penalties associated with failure to file 1098 forms correctly and timely. These penalties apply to paper filers as well as to electronic filers. The following penalties generally apply:
Failure to file Form 1098 by the Due Date
If you are required to file Form 1098 and you fail to file correct information
by the due date, you may be subject to a penalty. The penalty applies for
failure to file timely, or failure to include all information required to be
shown on the return, or for including incorrect information. The penalty applies
if you report incorrect tax id or if you file on paper when you were required to
file Form 1098 electronically.
It is generally recommended to file as soon as possible if you have missed the
deadline to file form 1098 as the penalty increase with time. The penalty is:
If you file within 30 days of the deadline the penalty is $30 per 1098 form
with a maximum of $250,000 per year or $75,000 for small businesses.
If you file after 30 days of the deadline but before August 1, the penalty is
$60 per 1098 form with a maximum of $500,000 per year or $200,000 for small
If you file after August 1 or you do not file at all, the penalty is $100 per
1098 form with a maximum of $1,500,000 per year or $500,000 for small
- If failure to file correct information return is due to intentional disregard of
filing requirements, the penalty is at least $250 per 1098 form with no maximum.
You are considered a small business if your average annual gross receipts for the
3 most recent years was $5 million or less.
Exceptions to the penalty
There are few exceptions to the failure to file penalty for form 1098.
- If you could show a reasonable cause and not willful neglect for failure to file
form 1098 this penalty will not apply.
- An inconsequential error or omission is not considered a failure to include correct
- A failure to file correct information return will not apply if you file a corrected
1098 form by August 1.
Failure to furnish correct payee statement
You may be subject to penalty, if you fail to provide correct payee statements (or
statement to the recipient) and you cannot show a reasonable cause. Generally 1098
payee statements are due by January 31. The amount of the penalty is separate from
the above penalty but is applied in the same manner as above.
An inconsequential error or omission is not considered a failure to include correct
information. If any failure to provide payee copy is intentional disregard of the
requirement then the penalty is $250 per 1098 form with no maximum.
Failure to file form 1098 electronically
You are required to file electronically if you file more than 250 forms. If you are required and you do not file electronically, you may be subject to a penalty of up to $100 per 1098 form.
You can request a waiver to file electronically. You must request for the waiver at least 45 days before the due date of the returns. If you have received a waiver then the penalty may be waived.
Fraudulent filing of 1098 form
If you willfully file fraudulent information return for payments you claim you made
to another person, that person may be able to sue you for damages.