Businesses that pay contractors, employees, landlords and others must send them statements and send copies to the IRS. These information returns include Forms 1099 and W-2. When they are late, incomplete or wrong, the IRS can charge a penalty on each form, and the amounts add up quickly for a company with many payees. This page explains the penalty tiers for returns due in 2026, the annual limits, the safe harbors and how to ask for relief.
What triggers the penalties
A penalty can apply for any of these failures:
- not filing the return by the due date
- not furnishing the payee statement by its due date
- including incorrect or missing information, such as a wrong taxpayer identification number or name
- not filing electronically when required. For returns due in 2024 and later, a filer with 10 or more information returns must e-file.
For the 2025 tax year, the General Instructions give a February 2, 2026 due date for Form 1099-NEC and March 2, 2026 for paper filing of many other Forms 1099, or March 31, 2026 for e-filing. Forms W-2 follow a separate January date. Check the instructions for the exact day when it falls on a weekend. For the payroll side, see our guides on Forms W-2 and W-3 and contractors and Form 1099-NEC.
The penalty tiers for returns due in 2026
The IRS lists the per-form amounts for each year. For 2026:
| When filed or corrected | Penalty per form | Annual cap, most filers | Annual cap, small business |
|---|---|---|---|
| Within 30 days after the due date | $60 | $683,000 | $239,000 |
| After 30 days but by August 1 | $130 | $2,049,000 | $683,000 |
| After August 1, or never filed | $340 | $4,098,500 | $1,366,000 |
| Intentional disregard | $680 or more | No maximum | No maximum |
A business is small for this purpose if its average annual gross receipts for the three most recent tax years ending before the calendar year the returns were due are $5 million or less. The amounts rise with inflation, and the IRS table shows lower figures for earlier years, such as $310 for returns due in 2024 and $330 for 2025 in the highest tier. Amounts for returns due in later years may differ, so use the IRS table for the right year.
Example (hypothetical). A small business forgot to file 12 Forms 1099-NEC for 2025 and did not file until after August 1, 2026. The tier is $340 each, or $4,080. If it had filed and corrected within 30 days, the penalty per form would have been $60, or $720. The business is well below its annual cap in either case.
The same tiers apply to payee statements under section 6722, so a business that both files late and sends payees late statements can face both penalties on the same form.
Safe harbors that avoid or reduce penalties
- Small dollar errors. The IRS says no correction is required if the difference in the dollar amount is no more than $100, and the difference in tax withheld is no more than $25.
- Corrections by August 1. If returns were filed on time and corrected by August 1, the penalty does not apply to the greater of ten returns or 0.5% of the total number required to be filed.
- Reasonable cause. See below.
Certain forms with a different penalty, such as late forms for some retirement and savings accounts, carry a flat $50 per return with no maximum unless reasonable cause is shown. Check the General Instructions for the list.
Reasonable cause and relief
The IRS may remove or reduce the penalty if you acted in good faith and can show reasonable cause. For information returns you must show you acted responsibly before and after the failure, and that there were significant mitigating factors or events beyond your control. The IRS gives examples such as first-time filing of the form, a good compliance history, actions by the IRS or another person, lack of access to business records and economic hardship that prevented e-filing. See the reasonable cause penalty relief page.
If you receive Notice 972CG, respond within 45 days, or 60 days for foreign filers, before the penalty is assessed. For missing or incorrect names and taxpayer identification numbers, Publication 1586 explains the reasonable cause rules and the steps that show due diligence. First-time abatement does not cover these penalties, so reasonable cause and the safe harbors are the main routes. Interest on a penalty is removed if the penalty is removed.
How to avoid information return penalties
- Collect Form W-9 from each contractor before the first payment, and verify names and taxpayer identification numbers.
- Keep a payee list by year with payments by category.
- Reconcile the list to your books before filing.
- File on time electronically. If you cannot meet the deadline, check the rules for an extension.
- Correct errors quickly. The tier depends on how soon the correction is made.
How we can help
We can prepare and e-file Forms 1099 and W-2, set up a payee collection process, and review notices for accuracy. If you received a penalty notice, we can compare it with the tiers and caps for the year, check whether the safe harbors apply, and prepare a reasonable-cause response. We cannot guarantee that the IRS will waive a penalty. See our payroll services or contact us.
Frequently asked questions
Do I owe the penalty if I filed on time but the form had a wrong name?
You can. Incorrect or missing information counts as a failure to file a correct return, but the correction tiers and safe harbors reduce the cost.
Does the small business cap apply to me?
If your average annual gross receipts for the three most recent tax years ending before the return year were $5 million or less, yes.
Is there a penalty for sending the payee a late statement?
Yes. Section 6722 penalizes late or incorrect payee statements using the same tiers as the filing penalty.
Where do I find the amounts for another year?
The IRS information return penalties page lists a table by year.
Official sources
- IRS: Information return penalties
- IRS: General instructions for certain information returns (2025)
- IRS: Penalty relief for reasonable cause
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.