Under 6722(c)(3)(B) payees may elect
that an exception to penalties not apply so that penalties may
apply if payors don't provide corrected returns and statements. The
collection of information will be this election, a retraction of
the election, or specified retention of records of elections or
retractions. The collection is necessary for the effective
operation of the exception and election framework. Respondents are
payees or payors.
New legislation under
sections 6721(c)(3) and 6722(c)(3) provides that payors that
otherwise timely and accurately file information returns and
furnish payee statements do not need to correct information returns
and payee statements containing “de minimis” errors in order to
avoid application of the section 6721 and 6722 penalties. Under
section 6722(c)(3)(B), however, payees can elect “at such time and
in such manner as the Secretary may prescribe” that this safe
harbor does not apply; if this election is in effect, payors would
have to provide corrected information in order to avoid the
penalties. The legislation is effective with respect to information
returns required to be filed and payee statements required to be
provided after December 31, 2016. The information collection in the
notice is the requirement in section 2 of the notice that for a
payee to make an election under section 6722(c)(3)(B) the payee
must make a disclosure to the payor of certain information to
obtain the benefit of having the de minimis error safe harbor not
apply. This is a voluntary disclosure requirement to another
person. The notice also includes the option for payees to retract
the election, so that the election is no longer in effect. This
also is a voluntary disclosure requirement to another person.
Finally, the collection of information includes the requirement
that payors retain records of any election or retraction for as
long as that information may be relevant to the administration of
any internal revenue law. This is a mandatory specified record
keeping requirement. This information collection requirement is
needed prior to the expiration of time periods established under
normal processing times because, as noted above, the new
legislation is effective with respect to information returns
required to be filed and payee statements required to be provided
after December 31, 2016. To publish guidance prior to that
effective date, approval no later than December 15, 2016 is
necessary. The information collection requirement is essential to
the mission of the Internal Revenue Service (IRS). As explained
above, section 6722(c)(3)(B) provides that the election by payees,
that the de minimis error safe harbor not apply, shall be made “at
such time and in such manner as the Secretary may prescribe”.
Guidance regarding the time and manner for the election, as well as
any retraction of the election, is needed before the effective date
of the legislation in order to further the IRS’s mission to serve
America’s taxpayers. The rules regarding recordkeeping are
necessary to facilitate compliance with information reporting
requirements. If normal clearance procedures are followed, notice
will not be issued before the effective date of the new
legislation. Taxpayer’s may be harmed because they will be left
without clear and enforceable guidance regarding the time and
manner for the election; therefore, they will be left without
certain recourse to elect that the de minimis error safe harbor not
apply. If that is the case, the new legislation under sections
6721(c)(3) and 6722(c)(3) will be in effect providing that payors
do not have to correct de minimis errors on information returns and
payee statements in order to avoid penalties, but payees won’t have
guidance regarding how to elect, under new section 6722(c)(3)(B),
that this safe harbor not apply. Payees will be in a significantly
disadvantaged position in terms of obtaining accurate information
for purposes of maintaining their records and filing their own
income tax returns, because without the election that the safe
harbor not apply, payors will likely have no incentive to correct
de minimis errors. To give payees the ability to elect that the
safe harbor not apply, so that they do not face this disadvantage
and can accurately meet their own tax responsibilities, guidance is
necessary before January 1, 2017.
PL:
Pub.L. 114 - 113 202 Name of Law: Protecting Americans from Tax
Hikes Act of 2015 (PATH Act)
US Code: 26
USC 6721 Name of Law: Failure to file correct information
returns
US Code: 26
USC 6722 Name of Law: Failure to furnish correct payee
statements
Notice 2016-XX is a new notice
and therefor there is an increase in burden, as this is a new
information collection. We are estimating that there will be
8,984,600 responses with an estimate time per response being
approximately 5 minutes (.08 hours). This results in an annual
estimated time burden and increase of 760,569 hours.
No
No
No
No
No
Uncollected
Mark Bond 202 317-5204
No
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.
NOT-133723-16 12-7-16.docx
Notice 2016-XX - De Minimis Error Safe Harbor to the I.R.C. §§ 6721 and 6722 Penalties