Penalty for failure to file form 1098 (2024)

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 businesses.

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 businesses.

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 information.

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.

Exception

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.

Exception

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.

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