There are currently more than 30 types of tax information returns required by the federal government,[2] and they provide the primary cross-checking measure the IRS has to verify accuracy of tax returns filed by individual taxpayers.
Taken together, these tax information reporting forms touch hundreds of millions of individuals and businesses, and require a large time commitment on the part of businesses, nonprofit organizations, and educational institutions to administer, prepare and file.
Because of this reliance on receiving information returns from the payers of income, the IRS administers a system of assessing monetary penalties,[3] which can be severe, on businesses and other entities that do not file all of the information returns they are required to file, or file the returns with errors that make it more difficult for the IRS to identify the taxpayers who received the income.
Missing this deadline could result in penalties, making it crucial to maintain excellent organization[4] An increasing amount of attention, and government enforcement, is being focused on tax information reporting as the United States Congress and the federal administration seek ways to close the "tax gap"[5] of over $300 billion annually that would be collected by the federal government if all income were reported by U.S. individuals and businesses.
Current proposals[6] to the regulations include tax withholding on payments to independent contractors, a requirement for credit card companies to report to the IRS the gross receipts for businesses that accept their cards, and the elimination of corporate exemption to 1099 reporting.