Intentional Disregard Penalty: 2026 Amount, Notice 972CG, and Appeals

The intentional disregard penalty is what the IRS assesses under Internal Revenue Code sections 6721 and 6722 when it decides a business knew about an information return filing obligation and chose not to meet it. For returns due in calendar year 2026, it is $680 per return or payee statement, or a percentage of the amount that should have been reported, whichever is greater. There is no annual cap on total liability, and the reduced limits available to small businesses do not apply.¹

What Makes a Failure “Intentional Disregard”

The IRS does not have to prove malice. It has to show you knew about the filing obligation and did not meet it. Treasury Regulation § 301.6721-1 sets out four factors the agency weighs as a totality-of-the-circumstances test, with no single factor controlling:

A pattern of failing to file on time or file correct information across multiple periods.
How quickly you corrected the problem after finding it. Prompt correction helps; waiting until the IRS makes contact hurts.
Whether you responded to IRS requests. Failing to correct a return within 30 days of a written IRS request is treated as particularly strong evidence of disregard.
Whether the cost of complying would have exceeded the penalty for getting caught. If the IRS can show that logic, it can infer you made a calculated decision to skip compliance.

That last factor is the one businesses often miss. A company with hundreds of payees that decides occasional fines are cheaper than a proper reporting system is giving the IRS a ready-made argument.²

The 2026 Per-Return Amount and How It Compares

For returns due in 2026, the intentional disregard floor is $680 per return. The same $680 applies whether the filer is a small business (average annual gross receipts of $5 million or less) or a large entity. Confirm the amount for the tax year of the return at issue, not the year the IRS assesses the penalty. A return due in 2024 carries the 2024 rate even if the assessment comes later.¹

The other penalty tiers for the same 2026 cycle:

Filed up to 30 days late: $60 per return.
Filed 31 days late through August 1: $130 per return.
Filed after August 1 or never filed: $340 per return.
Intentional disregard: $680 per return, or the applicable percentage of the unreported amount if that figure is higher.

The gap from $340 to $680 understates the real difference. Every lower tier is subject to an annual aggregate cap that limits total exposure for the year. Intentional disregard is not.¹

When the Percentage Beats the Flat Amount

When a percentage of the unreported amount produces a bigger number than $680, the IRS applies the percentage. The rate depends on the return type, and the percentages are set by statute (they are not adjusted for inflation).

The 10 Percent Rate

Most information returns, including W-2s and the common 1099 variants, fall under 10%. A failure to report $75,000 of nonemployee compensation on a 1099-NEC produces a $7,500 penalty on that single return, not $680.³

The 5 Percent Rate

A 5% rate applies to broker and barter exchange returns filed under section 6045(a) (typically Form 1099-B), exchanges of partnership interests, and dispositions of donated property. A $200,000 stock transaction missed on a 1099-B produces a $10,000 penalty rather than the $20,000 a 10% rate would generate.³

Form 8300 Cash Transaction Reports

Cash transactions over $10,000 reported on Form 8300 carry the steepest civil floor: $25,000 per transaction, or the amount of cash received, capped at $100,000 per transaction. Both figures are adjusted annually for inflation. Willful failures involving Form 8300 can also trigger criminal charges on top of the civil penalty, which is a separate exposure worth flagging to counsel if a cash reporting issue is in play.⁴⁵

No Annual Cap, No Small Business Relief

This is what makes the penalty dangerous at scale. The statute removes the annual limitation in section 6721(b), (c), and (d) once a failure is classified as intentional disregard. The small business reduced limitation in paragraph (d) goes with them.³

A five-person company that willfully skips 500 required 1099 forms is looking at $340,000 at the flat rate alone, with nothing to cap the total. If the unreported dollar amounts are large, the percentage calculation can drive the number well past that.⁴

Two Sections, Stacking Penalties

Section 6721 covers the return you send to the IRS. Section 6722 covers the payee statement you give the recipient (the W-2 you hand an employee, the 1099 you send a contractor). Both use the same structure: $680 per failure in 2026, or the applicable percentage of the unreported amount, whichever is greater, with no annual cap for intentional disregard.⁴

A single underlying obligation can trigger both. Intentionally failing to report a $100,000 payment can produce $10,000 under section 6721 for the missing IRS return and another $10,000 under section 6722 for the missing payee statement. The two penalties stack.⁶

Fighting the Classification

Reasonable cause is the standard defense to information return penalties, but the IRS treats it as unavailable once a failure is labeled intentional disregard. The classification itself is what you have to defeat, which means arguing the failure belongs in a lower tier.⁷

To keep a failure out of intentional disregard territory, you generally need to show two things. First, that you acted in a responsible manner before and after the failure: requesting extensions when practical, trying to prevent foreseeable problems, and correcting errors promptly. Correction within 30 days of discovering the problem or the removal of the obstacle is generally treated as prompt.⁴

Second, that significant mitigating factors or events beyond your control contributed to the problem. The IRS recognizes things like being a first-time filer of the form, a good prior compliance history, actions by the IRS or a third-party agent that contributed to the failure, loss of access to business records, or economic hardship preventing electronic filing. What the IRS generally does not accept: not knowing about a filing requirement, relying on a tax professional without verifying the work, or ordinary carelessness.⁷

The practical move when you discover a gap is to correct it immediately and document everything. A business that files corrected returns within days and can show the original failure came from a system migration or a vendor error has a real shot at avoiding the intentional disregard label. One that ignores the problem or delays after IRS contact usually does not.

Notice 972CG and the Appeals Window

The IRS typically proposes information return penalties through Notice 972CG. You have 45 days from the date of the notice to respond with a reasonable cause explanation before the penalty is formally assessed (60 days for foreign filers). Missing that window makes the fight significantly harder.¹

If the IRS rejects the explanation and assesses, you can request a conference with the IRS Independent Office of Appeals. You must have already submitted a written abatement request, received a denial letter, and filed the appeal within the deadline in that letter, generally 30 days. A useful appeal includes a detailed factual account, supporting records or correspondence, and a specific argument for why the failure was not intentional.⁸

How Long the IRS Has to Assess

For information returns that were filed late or with incorrect information, the IRS generally has three years from the later of the due date or the actual filing date to assess penalties. For returns that were never filed, there is no statute of limitations. The clock never starts.⁴

That open-ended exposure is part of why intentional disregard cuts so deep. A batch of 1099s that a business skipped in 2019 can be penalized in 2026 or later at the 2019 per-return rate, because the assessment period never began to run.

1
Internal Revenue Service. Information Return Penalties
2
eCFR. 26 CFR 301.6721-1 – Failure to File Correct Information Returns
3
Office of the Law Revision Counsel. 26 USC 6721 – Failure to File Correct Information Returns
4
Internal Revenue Service. IRM 20.1.7 Information Return Penalties
5
Internal Revenue Service. IRS Form 8300 Reference Guide
6
Office of the Law Revision Counsel. 26 USC 6722 – Failure to Furnish Correct Payee Statements
7
Internal Revenue Service. Penalty Relief for Reasonable Cause
8
Internal Revenue Service. Penalty Appeal