New Utah Mandate to Electronically File Tax Forms Reporting Income Tax Withholding, and Delay in Issuing Individual Tax Refunds until March 1st

The 2015 Utah Legislature passed Senate Bill 250 which is effective January 1, 2016.  The new law requires an employer to electronically file W-2s and Forms 1099 having state income tax withholding by January 31^st.  There does not appear to be an exception for small employers, and so this requirement impacts all businesses reporting Utah income tax withholdings for 2015 and later.  Information can be found here on the Utah State Tax Commission’s website.  The Tax Commission will provide more information as it works to implement the new law.

Failure to electronically file this information on time will result in significant penalties.  The penalties are complex and increase depending upon how late the information is provided.  If the information is provided more than 14 days after the due date but not later than 30 days after the due date, the penalty is $30 per form not to exceed $75,000.  If the information is filed more than 30 days late but by June 1^st the penalty is $60 per form not to exceed $200,000.  The penalty for filing after June 1, or for failing to file at all, is $100 per form not to exceed $500,000.

The new law also prohibits the Tax Commission from issuing individual income tax refunds prior to March 1^st unless the employer and the employee have both filed forms and returns as required.  This delay will allow the Tax Commission time to match the withholding reported with the tax return claiming the credit.

The purpose of this new law is to cut down on fraudulent tax refunds.  The Tax Commission discovered its computers were compromised on February 1, 2015 and had to suspend issuing 2014 tax refunds for a period of time, and this new law is clearly a response to that event.