Part III. Administrative, Procedural, and Miscellaneous

section 3406 do not apply to payments made through a QPCA if the payments are made to a qualified payee or during a grace period. Section 31.3406(g)–1(f)(3) requires a QPCA to notify the cardholder/payor when payments are made to a merchant/payee who is not a qualified payee.

.04 Information reporting penalties and waivers for reasonable cause . Section 6721 provides that a payor may be subject to a penalty for failure to file a complete and correct information return. Section 6722 provides that a payor may be subject to a penalty for failure to furnish a complete and correct information statement to a payee. A failure subject to the section 6721 and section 6722 penalties includes a failure to include correct payee TINs.

Section 6724 provides that the penalties under section 6721 and section 6722 may be waived if the filer shows that the failure was due to reasonable cause and was not due to willful neglect. Section 301.6724–1(e)(1)(vi)(H) and (f)(5)(vii) of the Regulations on Procedure and Administration provide that a cardholder/payor in a payment card transaction may establish reasonable cause based on its reliance on a QPCA.