July 6, 1990
TO: TAX MEMBERS NO. 21-90
CLOSED-END FUND MEMBERS NO. 25-90
UNIT INVESTMENT TRUST MEMBERS NO. 46-90
OPERATIONS MEMBERS NO. 17-90
TRANSFER AGENT ADVISORY COMMITTEE NO. 19-90
ACCOUNTING/TREASURERS MEMBERS NO. 14-90
RE: IRS WAIVES PENALTIES FOR 1989 INFORMATION RETURNS
CORRECTED BY OCTOBER 1, 1990
__________________________________________________________
As we previously informed you, the Omnibus Budget
Reconciliation Act of 1989 ("OBRA 1989") substantially modified
the information reporting penalty system and provided separate
$50 penalties for failure to file correct information returns
with the IRS (Code section 6721), for failure to furnish correct
statements to payees (Code section 6722), and for failure to
comply with other information reporting requirements, such as
using a correct taxpayer identification number ("TIN") on an
information return or statement (Code section 6723). (See
Institute Memorandum to Closed-End Fund Members No. 68-89, Tax
Members No. 48-89, Unit Investment Trust Members No. 70-89,
Operations Committee No. 27-89, Accounting/Treasurers Committee
No. 55-89 and Transfer Agent Advisory Committee No. 31-89, dated
December 19, 1989). The new section 6721 penalties are time-
sensitive in that the $50 penalty for failure to file correct
information returns is reduced to $15 if the failure is corrected
on or before the day 30 days after the required filing date and
to $30 if the failure is corrected more than 30 days after the
required filing date but on or before August 1.
The attached IRS Notice announces that, notwithstanding the
changes made by OBRA 1989, the IRS will waive penalties for
failure to include correct information on previously filed 1989
information returns if the information returns are corrected by
October 1, 1990. This penalty waiver is being granted because
the instructions for information returns due in 1990 were printed
prior to enactment of OBRA 1989 and advise taxpayers to correct
errors by October 1. However, the IRS is not automatically
waiving, on grounds of correction, penalties for failure to file
information returns by the required filing date. Penalties for
failure to file are waived only upon a showing that the failure
was due to reasonable cause and not to willful neglect.
We will keep you informed of developments.
Keith D. Lawson
Associate General Counsel
Attachment
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