IRS Clarifies Which Penalties Apply to Form 1041 K-1 with Incorrect TIN

Posted by Kim Chen on August 8th, 2016

In a recent Program Manager Technical Advice Memorandum (PMTA), the IRS Office of Chief Counsel clarified which penalties apply when a Form 1041 (Beneficiary’s Share of Income, Deductions, Credits, etc.) is filed with the IRS and furnished to a beneficiary with an incorrect Taxpayer Identification Number (TIN). The Section 6723 penalty, which covers failures to comply with other information reporting requirements, applies to the form filed with the IRS and is not subject to an inflation adjustment. On the other hand, the Section 6722 penalty, which covers failures to furnish correct payee statements, applies to the form furnished to the beneficiary and is subject to an inflation adjustment. PMTA 2016-007.