Source: https://www.tax.gov/Governments/Employers/CorrectingEmploymentTaxesUsingForm941-X
Timestamp: 2020-07-12 12:28:26
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Title Correcting Employment Taxes Using Form 941-X
/Governments/Employers/CorrectingEmploymentTaxesUsingForm941-X
Did you know you file Form 941-X to correct errors on a previously filed?
Form 941-Employers Quarterly Federal Tax Return? Use Form 941-X to correct: Employee wages, Income tax withheld from wages, Taxable social security wages, Taxable social security tips, Taxable Medicare wages and tips, Taxable wages and tips subject to Additional Medicare Tax withholding.
You must file a separate Form 941-X for each tax period in which there was an error.
For example, a quarterly 941 filer would file four 941-X’s if they made a payroll error throughout the entire calendar year. Do not mail a Form 941-X for a previous quarter along with a Form 941. You have a limited amount of time to file Form 941-X.
Generally, this form must be filed by the later of: 3 years from the date you filed your original return, or 2 years from the date you paid the tax.
All quarterly Forms 941 filed for a calendar year are considered filed on April 15th of the following year if they are actually filed before that date.
For example, if you filed the first three quarterly returns in 2017 and you filed the fourth quarter Form 941 on January 31, 2018, the IRS treats all tax returns as though they were filed on April 15, 2018.
So, in this example the period of limitations or deadline to file corrections for all four 2017 quarterly Forms 941 would be April 15, 2021.
This is because all 4 tax returns are considered filed on April 15, 2018.
Select one of two processes on Form 941-X, Part 1 to correct your previously filed Form 941.
First is “Adjusted employment tax return”. Select this when there are underreported amounts on Form 941, overpayments with more than 90 days remaining before the period of limitations expires or, when you want the overreported amount credited to your Form 941 for the period in which you are filing Form 941-X.
Note, this amount will be credited rather than refunded to you.
And, if you are correcting both underreported amounts and overreported amounts on the Form 941-X, you must check box 1 in Part 1.
Claim is the second process offered in Part 1.
Select this option if you overreported amounts and want a refund of the amount over paid.
This is your only option if you are filing within 90 days or less before the statute expiration to take care of an over payment.
Check the box on line 2. Remember you cannot check this box if you are correcting any underreported amounts.
Now that you have selected the “process” that fits your situation, complete the “Certifications” in Part 2 of the form.
Taxpayers must certify in Part 2: on line 3 that they have filed or will file all applicable Forms W-2C, Corrected Wage and Tax Statements, with the Social Security Administration.
Next, if taxes were originally overreported, and you checked Line 1 in part 1, requesting an adjustment to your Form 941, you must complete Part 2 Line 4.
The employer must repay or reimburse the employee for the over-collected federal income tax for the current year.
Remember, you can’t request a refund for federal income taxes withheld from an employee in a prior year.
The employer is also obligated to repay or reimburse the employee for social security and Medicare taxes for the current and prior years.
In Part 2 both lines 4 and 5 include certification that a written statement has been received from affected employees. This is important because the Tax Code provides that for social security and Medicare tax over-collected in a prior year, an employer must secure the employee's written statement confirming that the employee: hasn’t made any previous claims (or the claims were rejected) and won’t make any future claims for refund or credit of the amount over collected.
Here is an example of one employee’s statement. These statements should not be sent to the IRS, but keep them for your records.
Be aware Rev. Proc. 2017-28 allows employers to secure such consents through electronic means. It will permit, but does not require, the employee consent to be requested, furnished, and retained in an electronic format as an alternative to a paper format.
If you make a reasonable effort to secure the required written statement, yet the employee does not furnish it, the employer may make an adjustment for only the overpaid employer share of social security and Medicare taxes.
If you checked Line 2 in Part 1, requesting a refund or an abatement of the employment taxes overreported, you must complete Part 2 Line 5 by checking all boxes that apply.
On Form 941-X Part 2 you must certify that you have: refunded the employee share of tax, secured statements from your employees, or you are only requesting a refund of the employer paid portion of tax.
Part 2 questions 4 and 5 are very specific to multiple circumstances that commonly arise. You should refer to the Instructions for Form 941-X pages 5 and 6 for the best responses to certifying and reporting corrections.
Note that multiple boxes could be checked for multiple corrections within a 941 period.
If you have an overpayment and selected line 1 in part 1 Adjusted employment tax return, you must complete the certifications in part 2 item 4.
If you have an overpayment and have selected box 2 - Claim, you must complete the certifications in part 2 item 5.
Check box 5a when you can certify that you repaid or reimbursed to the employees their share of social security and Medicare taxes.
Check box 5b when you have not yet repaid or reimbursed the employee share of taxes but you certify that you received consent from each affected employee to file this claim for their share of the taxes and have received written statements for prior years from those employees stating they did not and will not receive a refund or credit personally.
Check box 5c to certify that your overreported tax is only for the employer share of social security and Medicare taxes. This applies when affected employees: Didn’t give you consent to file a claim for refund for the employee share of social security and Medicare taxes, Couldn’t be found, or Didn’t give you a statement described on line 5b.
Finally, Check the box on line 5d to certify that your overreported amount is only for federal income tax, social security tax, Medicare tax, or Additional Medicare Tax that you did not withhold from your employees.
On Part 3 of Form 941-X you will enter the corrections for the quarter and compute the tax due or overpayment. See pages 6, 7, 8, & 9 of the instructions for examples of the many different adjustments taxpayers may face.
And on Part 4 of the form take the time to explain your corrections made to Part 3 above. Include the rationale for adjusting the original Form 941 you filed with the IRS. These explanations will help to process your overpayment or underpayment with the IRS efficiently.
As soon as you realize an error has been made and you owe additional tax as a result of an underpayment, a Form 941-X is due by the due date of the return for the return period in which the employer discovered the error. In other words, in the quarter that the error was discovered or occurred.
Generally, you won’t be assessed interest and penalties if you file Form 941-X by the due date of the return for the period in which you discovered the error. However, you must pay the additional tax due at the time you file.
For example if you find an underreporting error on your 2016 fourth quarter 941 in March of 2017, you have until April 30, 2017, to file Form 941-X and pay the tax due. April 30th is the due date for January, February & March payroll taxes reported on Form 941.
Revenue Ruling 2009-39 describes how an employer corrects employment tax reporting errors using the interest-free adjustment and refund claim processes under sections 6205, 6402, 6413, and 6414 of the Internal Revenue Code with ten (10) examples.
Tell us on line 24 if you have not repaid or reimbursed employees or obtained consents at the time you file the claim.
You MUST repay or reimburse your employees or secure consents and certify that you have done so before the IRS can allow the claim.
Be sure to always sign and date the form before mailing to the IRS.
For additional information Visit IRS.gov and search “Correcting Employment Taxes”.
Select “Correcting Employment Taxes” from the search results.
Once there, you will find links to the “X” forms and instructions and to Revenue Ruling 2009-39.
Thank you for investing your time to hear about filing Form 941-X to correct employment tax reporting