Page 36 - IRS Employer Tax Guide

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Fileid: … ations/P15/2020/A/XML/Cycle07/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
amounts you withheld (the amounts reported on the re- process or the claim process. See the Instructions for
cord), no additional changes to the record of federal tax li- Form 941-X or the Instructions for Form 944-X for details
ability are necessary for these adjustments. on how to make the adjustment or claim for refund or
abatement.
Prior Period Adjustments Income tax withholding adjustments. In a current cal-

Forms for prior period adjustments. Use Form 941-X endar year, correct prior quarter income tax withholding
or Form 944-X to make a correction after you discover an errors by making the correction on Form 941-X when you
error on a previously filed Form 941 or Form 944. There discover the error.
are also Forms 943-X, 945-X, and CT-1 X to report cor- You may make an adjustment only to correct income
rections on the corresponding returns. Use Form 843 tax withholding errors discovered during the same calen-
when requesting a refund or abatement of assessed inter- dar year in which you paid the wages. This is because the
est or penalties. employee uses the amount shown on Form W-2 or, if ap-
plicable, Form W-2c, as a credit when filing his or her in-
See Revenue Ruling 2009-39, 2009-52 I.R.B. come tax return (Form 1040, etc.).
TIP 951, for examples of how the interest-free adjust- You can't adjust amounts reported as income tax with-
ment and claim for refund rules apply in 10 differ- held in a prior calendar year unless it is to correct an ad-
ent situations. You can find Revenue Ruling 2009-39 at ministrative error or section 3509 applies. An administra-
IRS.gov/irb/2009-52_IRB#RR-2009-39. tive error occurs if the amount you entered on Form 941 or
Form 944 isn't the amount you actually withheld. For ex-
Background. Treasury Decision 9405 changed the ample, if the total income tax actually withheld was incor-
process for making interest-free adjustments to employ- rectly reported on Form 941 or Form 944 due to a mathe-
ment taxes reported on Form 941 and Form 944 and for matical or transposition error, this would be an
filing a claim for refund of employment taxes. Treasury administrative error. The administrative error adjustment
Decision 9405, 2008-32 I.R.B. 293, is available at corrects the amount reported on Form 941 or Form 944 to
IRS.gov/irb/2008-32_IRB#TD-9405. You’ll use the adjust- agree with the amount actually withheld from employees
ment process if you underreported employment taxes and and reported on their Forms W-2.
are making a payment, or if you overreported employment
taxes and will be applying the credit to the Form 941 or Additional Medicare Tax withholding adjustments.
Form 944 period during which you file Form 941-X or Generally, the rules discussed above under Income tax
Form 944-X. You’ll use the claim process if you overrepor- withholding adjustments apply to Additional Medicare Tax
ted employment taxes and are requesting a refund or withholding adjustments. That is, you may make an ad-
abatement of the overreported amount. We use the terms justment to correct Additional Medicare Tax withholding
“correct” and “corrections” to include interest-free adjust- errors discovered during the same calendar year in which
ments under sections 6205 and 6413, and claims for re- you paid wages. You can't adjust amounts reported in a
fund and abatement under sections 6402, 6414, and prior calendar year unless it is to correct an administrative
6404. error or section 3509 applies. If you have overpaid Addi-
tional Medicare Tax, you can't file a claim for refund for
Correcting employment taxes. When you discover an the amount of the overpayment unless the amount wasn't
error on a previously filed Form 941 or Form 944, you actually withheld from the employee's wages (which
must: would be an administrative error).
If a prior year error was a nonadministrative error, you
• Correct that error using Form 941-X or Form 944-X, may correct only the wages and tips subject to Addi-
• File a separate Form 941-X or Form 944-X for each tional Medicare Tax withholding.
Form 941 or Form 944 you’re correcting, and
• File Form 941-X or Form 944-X separately. Don't file Collecting underwithheld taxes from employees. If
you withheld no income, social security, or Medicare
with Form 941 or Form 944. taxes or less than the correct amount from an employee's
Report current quarter adjustments for fractions of wages, you can make it up from later pay to that em-
cents, third-party sick pay, tips, and group-term life insur- ployee. But you’re the one who owes the underpayment.
ance on Form 941 using lines 7–9, and on Form 944 using Reimbursement is a matter for settlement between you
line 6. See Current Period Adjustments, earlier and the employee. Underwithheld income tax and Addi-
Report the correction of underreported and overrepor- tional Medicare Tax must be recovered from the em-
ted amounts for the same tax period on a single Form ployee on or before the last day of the calendar year.
941-X or Form 944-X unless you’re requesting a refund. If There are special rules for tax on tips (see section 6) and
you’re requesting a refund and are correcting both under- fringe benefits (see section 5).
reported and overreported amounts, file one Form 941-X
or Form 944-X correcting the underreported amounts only Refunding amounts incorrectly withheld from em-
and a second Form 941-X or Form 944-X correcting the ployees. If you withheld more than the correct amount of
overreported amounts. income, social security, or Medicare taxes from wages
See the chart on the back of Form 941-X or Form paid, repay or reimburse the employee the excess. Any
944-X for help in choosing whether to use the adjustment excess income tax or Additional Medicare Tax withholding

Publication 15 (2020) Page 35