In 2014, our electronic file to the IRS was incorrect. Our software did not use the tax reporting name...


Q. (cont.) However, the 1099s that were printed and sent to the suppliers contained the correct information for the tax reporting name. We were not aware of this incorrect file until we received the CP2100. We then corrected the software issue, so that in future the tax reporting name would be used. We did not respond in any other way, since the correct information was sent to the suppliers. So we never thought to send corrected 1099s to the IRS. Now we’ve received a 972CG, and are unsure of how to respond to this to show we did not send the file in willful neglect. What can we do to show this information?

A. You should reply to the IRS by letter explaining what happened, what you did and why.  You may be able to have the penalty abated or at least have it reduced if the IRS is charging willful neglect and you can show that failure to correct the 1099s was not willful neglect. Provide whatever documentation you have supporting your explanation (e.g., the software glitch, steps you took to correct it, evidence that correct forms went out to the suppliers, the actions you took when you received the CP2100, etc.).

See Responding to a 972CG Penalty Notice. Also see IRS Publication 1586, and IRS Publication 1281, which addresses what to do when you receive a CP2100 or CP2100A.

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