§§6721 and 6722 Information-Return Penalties for W-2/1099 Filers (Notice 972CG)

Author: Chenchen Liu, CPA ｜ YCL Tax, Accounting & Advisory

Bottom line

If you are a Cary / RTP employer or 1099 payer, filing incorrect or missing information returns with the IRS (W-2, 1099-NEC/MISC, and similar) can trigger IRC §6721; failing to furnish correct payee statements can trigger §6722. These are separate penalties—the same failure pattern can stack on both sides. Amounts are tiered by how quickly you correct, and they are inflation-adjusted; the intentional disregard tier is much higher and generally has no maximum. A separate e-file mandate commonly applies when you file 10 or more information returns in aggregate (subject to current IRS rules). If you receive Notice 972CG, reconcile the proposed penalty list to your corrections calendar. This article is compliance planning and education only. It does not promise an outcome. All tier dollars are subject to current IRS published rates/amounts.

Background

The IRS Information return penalties page and Publication 1586 explain that §6721 covers failures to file correct information returns with the IRS on time, while §6722 covers failures to furnish correct statements to payees on time. Restaurants, clinics, startups, and landlords in the Cary corridor often trip these rules by skipping 1099-NEC forms, TIN/name mismatches, W-2 box amounts that disagree with Form W-3 / 941, paper filing past the e-file threshold, or correcting too late to stay in a lower tier. The IRS may propose penalties on Notice 972CG, which is an opportunity to document corrections, reasonable cause, or other responses (education only—abatement depends on facts).

Public IRS inflation-adjusted tiers by the calendar year the returns/statements are due (always re-check the live page) include, for amounts due in 2026: about $60 (corrected within 30 days), $130 (day 31 through August 1), $340 (after August 1 or not filed), and $680 intentional disregard (generally no maximum). For amounts due in 2025: about $60 / $130 / $330 / $660. Large-business calendar-year maxima are often cited near $4,098,500 for the 2026-related year under Rev. Proc. 2024-40 (and successor guidance); small-business caps are lower—cite the IRS Information return penalties page plus the applicable Revenue Procedure, and treat every figure as subject to current IRS published rates/amounts. This article does not walk through IRIS / FIRE / SSA e-file screens (see process-focused packs) and does not replace the dollars on your notice.

What changed / options compared

Note: The comparison below contrasts common misconceptions with compliance framing, not a legislative old-vs-new chart. Tier dollars, e-file thresholds, and large-/small-business maxima are subject to current IRS published rates/amounts.

1. §6721 vs §6722

- Common misconception: You are penalized only for “not giving the worker a copy” or only for “not filing with the IRS.”

- Compliance framing: Filing failures and payee-statement failures are two statutes and can be assessed separately.

2. Earlier correction helps

- Common misconception: Any correction next year costs the same.

- Compliance framing: Tiers rise from ≤30 days, to August 1, to after August 1 / not filed (subject to current IRS published rates/amounts).

3. Intentional disregard

- Common misconception: Only “fraud” counts as intentional disregard.

- Compliance framing: Knowing failures to file or correct can support the higher tier with generally no maximum; classification is fact-specific—this article does not promise an outcome.

4. E-file mandate

- Common misconception: Small employers may always paper-file everything.

- Compliance framing: Crossing the aggregate threshold (commonly ≥10) generally requires e-file; paper filing past the mandate creates its own risk (subject to current rules).

5. Notice 972CG

- Common misconception: 972CG is a final, non-contestable bill.

- Compliance framing: It is typically a proposed penalty notice—verify, correct, and respond by the notice deadline (no abatement promise).

6. Not a deposit penalty

- Common misconception: Treat §§6721/6722 like §6656 failure-to-deposit.

- Compliance framing: Information-return/statement penalties are distinct from the EFTPS deposit ladder.

7. State and SSA

- Common misconception: A federal W-2/1099 correction auto-fixes North Carolina and SSA.

- Compliance framing: State employer filings and SSA corrections need their own tracking.

Self-check: are you affected?

1. You paid contractors at or above common 1099-NEC thresholds (often discussed at $600+) without filing or with blank TINs — List payees and IRS filing status.

2. W-2s went out but Boxes 1/3 (etc.) disagree with Form 941 — Evaluate Form W-2c / W-3c timing.

3. Aggregate information returns may hit ≥10 and you planned all paper — Confirm that year’s e-file mandate.

4. You hold Notice 972CG or a similar proposed-penalty letter — Calendar the response date, tax year, and form checklist.

5. You already corrected but still received a proposed penalty — Gather correction acknowledgments and a timeline.

6. Multi-EIN restaurants or clinics — Count forms and thresholds per EIN.

7. Cary / RTP bilingual employers with North Carolina filing duties — Track federal §§6721/6722 separately from state information returns.

Simplified example (illustrative only)

Example — Cary small employer missing 1099-NEC filings

Assume a services LLC should have issued 12 Forms 1099-NEC for calendar year 2025, but correctly filed only 8 with the IRS and failed to furnish statements to 4 payees. The gaps are fixed in mid-February 2026 (assume that still falls inside the “≤30 days after the due date” window—confirm actual due dates).

- §6721 (IRS filing): For returns corrected within 30 days, the public due in 2026 tier is often about $60 per return (subject to current IRS published rates/amounts)—four returns illustrate a $240 base before caps or other errors.

- §6722 (payee statements): Missing/incorrect statements can be penalized separately under the matching tier—filing and furnishing are not an either/or choice.

- If corrections wait after August 1 (or never happen), the same year’s general tier may rise to about $340 per return; intentional disregard is often cited near $680 per return with generally no maximum (all subject to current IRS published rates/amounts).

- If the aggregate count required e-file but paper was used, additional compliance issues can stack.

These dollars do not calculate any real case and do not apply large-/small-business annual maxima. Caps and tiers must be checked against the IRS page and Rev. Proc. guidance (for example, 2024-40) and remain subject to current IRS published rates/amounts. This article does not promise Notice 972CG relief.

Action plan and timeline

1. Today: Inventory W-2 / 1099 types and counts for the tax year; list whether contractor TINs are on file.

2. Before due dates: Furnish payee copies and file with IRS/SSA; use approved e-file channels when the mandate applies.

3. As soon as errors appear: Correct under Pub. 1586 / form instructions to aim for a lower tier; keep acknowledgments.

4. If you receive Notice 972CG: Within the stated window, reconcile the proposed list; assemble correction proof or reasonable-cause materials (education only—does not promise an outcome).

5. Reconcile to Forms 941 / W-3: Avoid “perfect 1099s, broken employment-tax totals.”

6. Next-year calendar: Add 1099/W-2 deadlines, e-file threshold self-checks, and W-9 TIN solicitation to the employer compliance sheet.

7. Ongoing: When unsure, book a YCL Free Consultation with CPA Chenchen Liu and Gloria to read Notice 972CG and build a correction timeline—does not promise an outcome.

How YCL can help

YCL Tax, Accounting & Advisory (Cary / RTP + Shanghai), with CPA Chenchen Liu and Gloria, supports Chinese-speaking individuals and businesses with bilingual compliance planning:

1. §6721 vs §6722 framing — Separate IRS-filing risk from payee-statement risk.

2. Correction-window calendar — Map ≤30-day / August 1 tiers (subject to current IRS published rates/amounts).

3. Notice 972CG walkthrough — Match proposed forms, dollars, and response deadlines.

4. Document packaging — Organize correction receipts, Forms W-9, filing confirmations, and timelines (no abatement promise).

5. E-file mandate reminders — High-level ≥10 aggregate rules (not a click-by-click IRIS tutorial).

6. Two-office support — Cary for U.S. employer filings; Shanghai for payee-information collection on cross-border payment facts.

7. Free Consultation — Bring 972CG or a form checklist—no promised penalty result.

FAQ

Q: I gave contractors correct 1099s but never filed with the IRS—what applies?

A: Exposure is often primarily under §6721 (filing). If payee statements were also wrong or late, §6722 can still apply separately.

Q: If I “didn’t mean to cheat,” does intentional disregard never apply?

A: Classification turns on facts—such as knowing failures to file or correct—not on a taxpayer’s self-label. This article does not promise an outcome; amounts are subject to current IRS published rates/amounts.

Q: Can I ignore Notice 972CG?

A: That is not advisable. Unanswered proposed penalties can be assessed and move into collection. Respond by the notice deadline after you reconcile the list.

Book a consultation

YCL Tax, Accounting & Advisory

Web: yclcpa.com ｜ Email: info@yclcpa.com

Phone: 919-802-8376 / 980-202-0666 ｜ WeChat: YCLUSA

U.S. office: 1140 Kildaire Farm Rd. STE 208, Cary, NC 27511

Shanghai office: 上海佳通路 31 弄中冶祥腾城市广场 2-516

Free Consultation: please bring the full Notice 972CG (if any), that year’s W-2/1099 checklist, correction acknowledgments, and filing confirmation numbers (you may mask TINs and other sensitive digits).

Disclaimer

This article is general information only. It is not personalized tax, legal, collection-representation, or investment advice. Information-return penalty tiers, e-file thresholds, large-/small-business maxima, and intentional-disregard rules change by tax year and assessment date—verify your notice and current IRS / Revenue Procedure pages. For advice about your situation, consult a licensed professional.