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Part 21. Customer Account Services

Chapter 7. Business Tax Returns and Non-Master File Accounts

Section 2. Employment and Railroad Tax Returns (Cont. 1)

21.7.2  Employment and Railroad Tax Returns (Cont. 1)

21.7.2.4 
Employment Tax Returns Procedures

21.7.2.4.14 
Form 944, Employer's ANNUAL Federal Tax Return

21.7.2.4.14.2 
Form 944 CP Notices

21.7.2.4.14.2.1  (02-21-2007)
CP 250A

  1. CP 250A is issued to taxpayers who file Form 944 and have a total tax liability on line 7 of Form 944 of more than $1,000.

  2. These are only the returns that have met the PCD (Program Completion Date), posting in or before cycle 09 of each year (on or around February 22nd).

  3. This notice instructs the taxpayer that he is no longer eligible to file Form 944 and he must file quarterly using Form 941 for the current year.

  4. Follow the chart below for inquiries from taxpayers that received CP 250A.

    If And Then
    TP files Form 944 for 2007 and exceeds the $1,000 threshold TP states he wants to remain in the Form 944 program and will not exceed the $1,000 threshold in 2008

    Note:

    Verify with the taxpayer that he will, in fact, have a total tax liability of $1,000 or less for 2008. If doubt exists, do not allow the taxpayer to file Form 944.

    		Allow the TP to remain in the Form 944 program.

    1. Change the filing requirement to Form 944.

    2. Issue Letter 3007C to the taxpayer for verification of filing requirement change.

    3. Instruct the taxpayer of his deposit requirements.

    Note:

    Taxpayer may have exceeded the $1,000 threshold for many reasons. (For example, taxpayer corrected an administrative error from a prior year or a unique situation they had in 2007 that they don't expect to have in 2008.)

    TP files Form 944 for 2007 and exceeds the $1,000 threshold TP states he wants to remain in the Form 944 program, even though he will exceed the threshold Instruct the TP that he must file Form 941 and that he is not eligible for the Form 944 program.

21.7.2.4.14.2.2  (10-01-2007)
CP 250B

  1. CP 250B is issued to taxpayers who file Form 944 and have a total tax liability on line 7 of Form 944 of more than $1,000, but the return did not meet the PCD of cycle 09. This notice is for the returns processed between cycles 10 - 49.

  2. This notice instructs the taxpayer they will remain a Form 944 filer for the current year and to make the appropriate FTD's as required by the lookback analysis. These taxpayers will be allowed to remain Form 944 filers for the year because there is not a sufficient amount of time to notify them to file quarterly.

  3. Taxpayers that receive CP 250B will also receive CP 250C later in the year informing them that they will be changed to a Form 941 filer beginning January the subsequent year.

  4. Follow the chart below for inquiries from taxpayers that received CP 250B.

    If And Then
    TP received CP 250B TP states he wishes to file Form 941 for 2008 and it is April 1 or prior Allow the taxpayer to file Form 941 for 2008.

    1. Change the filing requirement to Form 941.

    2. Issue Letter 3007C to the TP for verification of filing requirement change.

    3. Inform TP of his deposit requirements and Form 941 due dates.

    4. Verify that all applicable deposits are transferred to the Form 941 account.
    TP received CP 250B TP states he wishes to file Form 941 for 2008 and it is after April 1 Instruct the TP he must file Form 944 for 2008 and for 2009 he will be switched back to a Form 941 filer. Inform TP of his deposit requirements.

    Note:

    If you receive an inquiry from a taxpayer stating he has filed his Form 944 and it exceeds the $1,000 threshold and the return has not posted, do not change the filing requirement. Allow the Form 944 to post and the taxpayer will either receive a CP 250A or CP 250B, depending on when the 944 posts. Instruct the taxpayer to respond to the notice at that time.

    Note:

    Utilize CC BMFOLE to verify the 944 ESTAB YR and F944 FINAL TAX YR to determine when the taxpayer was mandated to file Form 944 and when their final Form 944 will be filed.

21.7.2.4.14.2.3  (02-21-2007)
CP 250C

  1. CP 250C is issued to Form 944 filers who:

    • Received CP 250B earlier in the year, or

    • File Form 944 after cycle 49 of the current calendar year. These taxpayers will not receive CP 250B, only CP 250C.

  2. This notice informs the taxpayer that because they exceeded the $1,000 threshold for the Form 944 participation, they must file Form 941 for the upcoming year.

  3. This notice is generated in cycle 52.

    Example:

    Taxpayer files Form 944 after the PCD and the total employment tax liability was more than $1,000 for tax year 2007. Taxpayer is allowed to remain in the 944 program and file Form 944 for 2008, but beginning in 2009, he must file Form 941.

21.7.2.4.14.3  (07-07-2006)
Math Verified Forms 941c — 944 Filer Files 941 that Unposted Due to 944 Filing Requirements

  1. See IRM 21.7.2.4.18.6.4.3, Math Verified Forms 941c — 944 Filer Files 941 that Unposted Due to 944 Filing Requirements.

21.7.2.4.14.4  (10-01-2007)
Form 944 Adjustments

  1. If a taxpayer discovers an error on a previously filed Form 944, he is instructed to make the correction using Form 944 for the year in which he discovered the error and attach Form 941c. However, loose Forms 941c may be received and must be processed whenever possible. See IRM 21.7.2.4.18, Form 941c, Supporting Statement to Correct Information, for additional information.

  2. If a Form 944 adjustment is due to an administrative error, input TC 298 with the appropriate ascertained date. If an ascertained date is not provided, call taxpayer to obtain one and properly document the history sheet. If unable to contact the taxpayer by phone, input the increase with TC 290 and document the history sheet. See IRM 21.7.2.4.9, Interest Free Adjustments (Employment Tax Returns), for more information.

    Note:

    If you have received a corrected return (during 2008) for the current tax year (2007), it is not necessary to contact the taxpayer. If the taxpayer sends a corrected return for tax year 2007 (during 2008) input a TC 298 with an ascertained date of 01/31/2009, regardless of what his filing requirement is for 2008.

  3. Any documentation identifying the adjustment as an administrative error can be used in lieu of Form 941c for adjustment purposes.

  4. When adjusting Form 944, use the appropriate transaction codes and item reference numbers. See IRM 21.7.2.4.1, Reference Numbers (Employment Numbers).

21.7.2.4.14.5  (10-01-2007)
CR-NOMATCH Transcripts

  1. In order for deposits to be applied correctly to the taxpayer's account, an internal transcript generates to assist in determining the correct disposition of the deposit.

  2. CR-NOMATCH Transcripts generate when all the requirements below are met:

    • An FTD deposit posts to an MFT 01 (941).

    • The filing requirement is MFT 14 (944).

    • The deposit DLN does not have a Doc. Code 24/34.

    • The tax period is the first quarter of the year equal to the 944 establishment year.

  3. Transcript generates for deposits applied to the first quarter of the year equal to the 944 establishment year, regardless of the cycle. Transcripts are worked in Accounts Management and controlled with category code IRRQ.

    Note:

    Even though these transcripts are controlled with category code IRRQ, they are time sensitive. If the filing requirements need to be changed to Form 941, this must be done by April 1st. If it is after April 1st, do not change the filing requirements to Form 941, regardless of the deposit amount.

  4. If tax year 2008, destroy any transcript that is not for tax period 200803. Transcripts may erroneously generate on tax periods other than 200803.

  5. If transcript is for tax period 200X03, do the following:

    1. Verify the deposit has posted to MFT 01 and Form 944 filing requirements are established.

    2. If deposit has posted to the incorrect MFT, transfer the deposit without contacting the taxpayer.

    3. If deposit is transferred, you must input TC 59X with the appropriate closing code on the Form 941 module on which the payment originally posted, even though there are no filing requirements. (Note: This is required so that if the TP is ever returned to a 941 filer, TDI's will not be issued on the previous 941 modules.)

    4. If deposit is questionable, contact the TP or their Reporting Agent for resolution. (Note: The Form 944 total liability for the year must be $1,000 or less.)

    5. Do not generate a notification letter to the TP when transferring the deposit.

    6. If you contact the TP and determine the filing requirements need to be changed to Form 941, send Letter 3007C for confirmation of the FR change.

    7. Treat the transcript as classified waste.

21.7.2.4.15  (01-01-2005)
Form 945, Annual Return of Withheld Federal Income Tax

  1. All non-payroll items (pensions, annuities, IRA's, military retirement, gambling winnings, BUWH, Indian Gaming Profits) were removed from Form 941 beginning January 1, 1994. They are now reported on Form 945. As a general rule, all income tax and BUWH reported on Forms 1099 or W-2G must be reported on Form 945. The threshold for making deposits was raised to $2,500 beginning with 2001 Forms 945.

  2. Form 945 is an annual return due January 31 following the close of the calendar year. A taxpayer is required to file Form 945 only for a calendar year in which the taxpayer is required to withhold tax required to be reported on Form 945.

  3. Form 945 tax deposit requirements are separate from Form 941. They cannot be combined. Taxpayers follow either semi-weekly or monthly deposit schedules determined by the Form 945 lookback review. See IRM 20.1.4, Failure to Deposit Penalty.

  4. IRN's 003, 008, and 184 (periods 199512 and subsequent for IRN 184) are valid for Form 945. The MFT is 16, tax class is 1.

21.7.2.4.15.1  (01-01-2005)
Form 945 Adjustments

  1. Adjustments on Form 945 can only be made if they are the result of an administrative error.

    1. See IRM 21.7.2.4.9.1 for more information on administrative errors.

    2. Even if income tax or BUWH was erroneously withheld, it cannot be corrected in a subsequent year. This includes erroneous withholding on IRA's.

    3. The amount withheld must be reported on Form 945 under the same EIN as was actually used to do the withholding. Withholding amounts cannot be transferred or delegated to different EIN's unless such action involves a successor employer.

    Example:

    The mutual fund industry has an "industry practice" involving transfer agents where one agent has control of an account and withholds taxes for part of the year. Another agent may take control of the account and withhold taxes for the remainder of the year. The industry practice is for the agent in control of the account at the end of the year to report all taxes withheld. This CANNOT be done. Each agent must report and deposit the amount of tax withheld under its own EIN and issue a Form 1099. Any requests for adjustments involving this practice must be denied. Input TC 290 .00 in block 98 (without return) or 99 (with return) and issue Letter 105C or 106C as appropriate.

21.7.2.4.15.1.1  (10-01-2007)
Form 945 Tax Increases

  1. If the adjustment is an increase due to an administrative error:

    1. Input TC 298 and include the appropriate ascertained date. If no ascertained date is provided, call taxpayer to obtain one and properly document the history sheet. If unable to contact taxpayer by phone, input the increase with TC 290 and document the history sheet. ( See IRM 21.7.2.4.9, Interest Free Adjustments (Employment Tax Returns), for more information on interest free adjustments.)

      Note:

      If you have received a corrected/amended/supplemental return (during 2008) for the current tax year (2007), it is not necessary to contact the taxpayer. If the TP sends a corrected return for tax year 2007 (during 2008), input a TC 298 with an ascertained date of 01/31/2009.

    2. Use IRN's 003, 008, and 184 as appropriate.

    3. If there is no indication whether BUWH or income tax withheld is being adjusted, use IRN's 003 and 184.

    4. Any documentation identifying the adjustment as an administrative error can be used in lieu of Form 941c for adjustment purposes.

21.7.2.4.15.1.2  (01-01-2005)
Form 945 Tax Decreases

  1. If the adjustment is a decrease:

    1. Input TC 291 along with IRN's 003, 008, and 184 as appropriate.

    2. If there is no indication the adjustment is the result of an administrative error, attempt to contact taxpayer by phone.

    3. If taxpayer verifies the adjustment is the result of an administrative error, input the adjustment and document the history sheet accordingly.

    4. If unable to contact taxpayer by phone, correspond and suspend for 40 days.

    5. If no reply, follow no consideration procedures in IRM 21.5.3, General Claims Procedures. If taxpayer's reply indicates the adjustment is not the result of an administrative error, follow claim disallowance procedures in IRM 21.5.3.

21.7.2.4.15.1.3  (01-01-2005)
Taxpayer Reports BUWH on Form 941

  1. Upon receipt of a Form 941 with BUWH, the procedures described below are implemented.

  2. Pipeline processing:

    1. Deletes BUWH from Form 941

    2. Enters SIC (Schedule Indicator Code) 3

    3. Inputs CCC "X" if a refund is due to taxpayer (generates a '-R' freeze)

    4. Issues a notice to taxpayer informing him/her of Form 945 filing requirements and the amount of BUWH deleted from Form 941 (They also inform taxpayer further information will be received in the near future.)

    5. Photocopies the return and uses Form 3465 to send a copy to Accounts Management on an expedite basis (Form 3465 indicates "Form 941/945 BUWH" .)

  3. Upon receipt of Form 3465, on an expedite basis, in Accounts Management:

    1. Transfer the proper deposits to Form 945 if it is evident which deposit(s) is intended for BUWH and inform taxpayer of the action taken.

    2. If you cannot definitely ascertain which deposits are intended for BUWH, contact taxpayer to determine the amounts and dates of the deposits to be moved to the Form 945 account. Phone contact is preferred.

    3. If unable to contact by phone, initiate correspondence and suspend the case for 40 days.

    4. When the proper credits have been transferred, call or send taxpayer a letter advising of the payments transferred to Form 945.

    5. If there appears to be any additional deposits credited to taxpayer’s account or any deposits missing from taxpayer’s account (based on the deposits claimed on the copy of the Form 941), attempt to resolve while in contact with the taxpayer.

    6. If, after credit transfers have been completed, there is a credit balance on the account, take action to resolve the '-R' freeze. See IRM 21.5.6, Freeze Codes.

21.7.2.4.15.2  (01-01-2005)
Taxpayer Files Form 945, Reported Nonpayroll Withholding on Form 941 Previously

  1. When preparing Form 945, some taxpayers realize they have reported non-payroll withholding on Form 941 for the first three quarters of the year which should have been reported on Form 945.

  2. To resolve these cases:

    1. C&E forwards the information to Accounts Management on Form 3465 noted "Non-payroll on Form 941" .

    2. When received in Accounts Management, if there is no breakdown by quarters and it cannot be determined by information on IDRS, contact taxpayer for the necessary information.

    3. These cases must be worked within 10 working days of receipt in Accounts Management if taxpayer provides the necessary information, including a breakdown.

    4. If no breakdown is provided, resolve the case as soon as possible.

  3. To adjust tax and make the necessary credit transfers on these cases:

    1. Input TC 291 with HC 1 (do not use another HC – we want taxpayer to receive a notice) to reduce each quarter’s tax on Forms 941 as indicated from the information provided.

    2. Use IRN 003 or 111 depending on the tax year.

    3. Do not adjust any FTD penalty assessed on the Form 941 module(s) on which you input TC 291, unless the decrease brings the liability for the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Follow procedures outlined in IRM 20.1.4.11.8.3, Amended or Supplemental Return, whenever adjusting the tax.

    4. Use TC 820/700 with the correct availability date to transfer the credit to MFT 16. If unable to apply the entire amount of the TC 291, write or phone taxpayer and inform him/her of the amount applied and the reason the entire amount could not be applied (e.g., taxpayer had a balance due on the period(s) which the decrease(s) was made).

    5. Input credit transfers for deposits made on fourth quarter Forms 941 which must be transferred to Form 945. (Taxpayer should provide a breakdown if only a portion of a deposit should be moved.) Use corresponding TC's for each payment (e.g., TC 652/650, TC 672/670).

    6. Perfect the filing requirements if needed.

21.7.2.4.15.3  (01-01-2005)
Taxpayer Realizes He/She Reported Nonpayroll Withholding on Form 941, Has Not Yet Filed Form 945

  1. A taxpayer may realize during the year he has incorrectly reported non-payroll withholding on Form 941 which should be reported on Form 945.

  2. See IRM 21.7.2.4.15.2, Taxpayer Files Form 945, Reported Nonpayroll Withholding on Form 941 Previously, to make the necessary corrections when Form 945 is filed. (See procedures below and it will not be necessary for taxpayer to file amended Forms 941 for the quarters for which he has already filed.)

    1. For a quarter in which taxpayer has made deposits for his Form 941 account but has not yet filed a return, ask taxpayer to provide the date of the deposits and the portion of each deposit which should be credited to his non-payroll withholding on Form 945. Make the necessary credit transfer(s). Instruct taxpayer not to include the amount of non-payroll withholding in his tax computation when he files Form 941 for that quarter.

    2. For quarters in which taxpayer has previously filed Form 941 erroneously reporting non-payroll withholding, instruct taxpayer, when he files Form 945, to attach a letter explaining the situation. It must include a list of dates and amounts for each deposit, or portion of each deposit, which was intended for non-payroll withholding on Form 945 and a breakdown by quarters, of the amount of non-payroll withholding erroneously reported on Form 941. Instruct the taxpayer to include the entire amount of non-payroll withholding for the year on Form 945, including the amount previously erroneously reported on Form 941.

    Caution:

    Do not make tax adjustments to Form 941 for the amount erroneously reported. Do not refund the money to taxpayer. It is needed on the Form 945 account when taxpayer files his Form 945. Adjustments will be made at that time.

21.7.2.4.15.4  (01-01-2007)
Taxpayer Files Form 941 Indicating Non-Payroll Items

  1. A taxpayer may file a Form 941 reporting non-payroll items. C&E will identify these returns and correspond with the taxpayer to determine their intent.

  2. If the taxpayer's reply indicates they should have filed Form 945, C&E will forward a request to Accounts Management.

  3. To resolve these cases:

    1. C&E will forward the Form 941 to Accounts Management on Form 3465 indicating "Non-payroll on Form 941" .

    2. Delete the filing requirements for Form 941 and establish Form 945 filing requirements, if applicable.

    3. Return the Form 941 to the taxpayer using the appropriate "C" letter and inform the taxpayer of his correct filing requirements.

    4. Input the appropriate credit transfers to move the applicable credits from Form 941 to Form 945.

21.7.2.4.15.5  (01-01-2005)
BUWH Claims on Form 945

  1. For payments made from 1993 through August 6, 2001, BUWH was imposed at the rate of 31% on reportable payments of interest, dividends, patronage dividends, etc. See below for changes in rates.

    1. 30.5% for payments in 2002 that began August 7, 2001

    2. 30% for tax years 2002

    3. 28% for tax years 2003 through 2010

  2. Some payors withhold the tax from exempt recipients who are not otherwise required to file an income tax return, and advise them to secure refunds from IRS. Basically, a payor is not required to withhold on a payment made to a payee described in IRC Section 3406(g)(1), Backup Withholding.

  3. The following are exempt from withholding:

    1. An organization exempt from taxation under IRC 501(a) or an individual retirement plan

    2. The United States, its wholly owned agency or instrumentality

    3. A state, the District of Columbia, a possession of the United States, or any political subdivision

    4. A foreign government or political subdivision of a foreign government

    5. An international organization (e.g., the United Nations and the Organization of American States)

  4. If an organization is exempt under IRC 501(a) or an individual retirement plan, and has been erroneously subjected to BUWH, it must file Form 990-T, Exempt Organization Business Income Tax Return, to claim a refund of such withholding.

    Note:

    See IRM 5.19.3, IRM Backup Withholding Program and IRM 21.7.7.4.3.5, Backup Withholding, for additional information on BUWH.

21.7.2.4.15.5.1  (01-01-2005)
Form 945 BUWH Refunds for Exempt Entities

  1. The procedures listed below on issuing a refund from the employer’s Form 945 account apply only to the exempt entities listed in IRM 21.7.2.4.15.5(3) b-d above.

  2. If payor withholds on an exempt recipient, payor may treat the amount as erroneously withheld and refund it to the payee as long as the refund is made prior to the end of calendar year, and prior to the time the appropriate Form 1099, Statement for Recipient, is furnished.

    1. If payor makes a refund after having made last deposit for tax year, but before the Form 945 is filed, then only the correct amount of BUWH should be reported and the overpayment automatically refunded to taxpayer (payee).

    2. If payor makes a refund after last deposit has been made for tax year and the Form 945 has been filed, then a Form 843 claim must be filed to obtain a refund.

  3. If recipient is exempt from filing an income tax return, use the following procedure:

    1. The exempt recipient must file Form 843 or similar statement.

    2. Attach a statement to Form 843 from each payor who erroneously withheld tax, setting forth the amount of tax withheld, the date withheld, and a statement to the effect the payor did not reimburse the recipient and will not claim an adjustment for the amount on Form 945.

    3. The statement must be signed by the person authorized to sign the payor’s Form 945, and list the TIN of the account the BUWH was paid under. See the table below for processing instructions.

    If Then
    Payee files a Form 843 for tax withheld before the end of the tax year Advise payee to seek reimbursement from the payor.
    Tax year has ended and the required statement is attached Follow normal procedures to issue a manual refund to the exempt recipient from the payor’s Form 945. Include manual interest and verify posting of the manual refund.
    The tax year has ended and the required statement is not attached Advise the payee to obtain the required statement from the payor.

21.7.2.4.15.5.2  (01-01-2006)
BUWH Claims for Taxpayers Other Than Exempt Entities

  1. All other taxpayers must claim BUWH on a related income tax return. For example:

    1. An individual uses a Form 1040 series return (whether or not such individual has ever filed an income tax return).

    2. A trust uses Form 1041.

    3. A corporation uses Form 1120.

    4. An exempt organization uses Form 990-T. (Form 990-PF filers can use Form 990-PF and Form 990-C filers can use Form 990-C - Form 1120-C beginning in tax year 2006.)

    5. Form 1065 and Form 1120S filers must report their withholding when filing their Form 1040. The withholding is reported to them on their individual Schedule K-1 received from the business.

  2. The payor is required to issue a Form 1099 to the payee to substantiate the credit being claimed on the income tax return.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If a Form 843 claim is filed and an income tax return has not previously been filed for the year in which the BUWH was withheld, reject the claim and explain to taxpayer an income tax return must be filed to claim the credit.

21.7.2.4.16  (01-01-2005)
Tax Equity and Fiscal Responsibility Act (TEFRA)

  1. TEFRA requires pension trusts to report and pay withholding on pension income. This is reported and paid on Form 945. (Prior to 1994, Form 941, or 941E was used.)

  2. Taxpayers can request a separate EIN for the pension trust, however, it is not a requirement. Separate branches within a company may want a different EIN for internal purposes only.

  3. If multiple returns on pension trusts are filed, and taxpayer’s intent cannot be determined:

    1. Correspond to inform taxpayer to combine all the withholding from pension incomes on one Form 945, or to request separate EIN's for each pension trust.

    2. Inform taxpayer, if separate EIN's are assigned, they are responsible for all filing requirements and penalty assessments.


    If Then
    No reply, or taxpayer states they do not want separate EIN's Input TC 290 to assess any additional tax.
    Taxpayer requests separate EIN's Photocopy the case file and forward to Entity for assignment of EIN's. When EIN's are assigned, re-input the returns and transfer any credits to the new EIN's.
    Refunds were issued prior to the posting of the second return Contact taxpayer as stated in (3) above.

21.7.2.4.17  (01-01-2005)
Voluntary Compliance on Alien Withholding Program (VCAP)

  1. VCAP, originally scheduled to be instituted in late 1996, was not instituted until February 26, 2001. It provided a one year opportunity for certain nonprofit organizations to voluntarily come forward and identify the excise and withholding tax regulations on payments to aliens with which they (the institutions) were not in compliance. The organization must have filed its request for eligibility under VCAP by February 28, 2002.

  2. The institution (most commonly, a college or university) computes and pays any additional tax liabilities arising from such areas of compliance.

    1. Use Form 945 and Form 1042 to make corrections.

    2. When a return is received, it is established on AIMS.

    3. Route any correspondence, claims, or amended returns to the appropriate Area Office. (They must not be worked in Accounts Management. See IRM 21.7.7.4.17.1, EO Non-Refundable Credits.)

  3. For more information, see Rev. Proc. 2001-20. It can be found in IRB 2001-9.

21.7.2.4.18  (01-01-2007)
Form 941c, Supporting Statement to Correct Information

  1. Form 941c, Supporting Statement To Correct Information, is filed to correct withholding or FICA information previously reported on Forms 941, 943, 944 or 945.

    1. Form 941c should be attached to the return for the period taxpayer discovered (ascertained) the error. ( See IRM 21.7.2.4.9.2, Ascertained Date.)

    2. Form 941c is not an amended return and should not be filed separately. However, separate filed Forms 941c must be processed whenever possible.

    Note:

    The Form 941c adjustment information reflected in all the subsections under IRM 21.7.2.4.18 refers to Forms 941c not attached to original returns. Forms 941c attached to original returns are routed to Accounts Management for wage adjustments only. (See Math Verified Forms 941c, IRM 21.7.2.4.18.6.4.2 and IRM 21.7.2.4.18.6.7.5.) All other 941c adjustment information refers to Forms 941c reflecting adjustments which have not yet been assessed; e.g., loose Forms 941c, CP 193's, etc. Prior to working any loose Form 941c, always verify that it is not a response to a CP 175. See IRM 21.7.2.4.18.6.4.7 if it is a response to a CP 175.

  2. All loose Forms 941c are worked in Accounts Management, controlled as Category "941C" , and age within 45 days of the IRS received date. They are not subject to Action 61 criteria. If correspondence or Form 843 is received in addition to Form 941c, your Category Code is "TPRQ" and any necessary acknowledgement must be issued following the guidelines outlined in IRM 21.3.3, Incoming and Outgoing Correspondence/Letters.

    Note:

    See IRM 21.7.2.4.18.6.4.2, Math Verified Forms 941c (Detached), for the correct received date to use on Math Verified Forms 941c

    .

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Utilize IDRS and CFOL research capabilities to prevent unnecessary correspondence.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , there is no need to contact taxpayer for the ascertained date unless corresponding for other information.

  4. If Form 941c shows adjustment was reported on another return (as a line adjustment), disallow adjustment using TC 290 .00 in BS 98/99.

    Note:

    Use BS 99, with the TRPRT print attached, if the original return was filed electronically. Do not use BS 98.

  5. A signed fax copy of Form 941c is always acceptable to use when adjusting accounts.

21.7.2.4.18.1  (01-01-2007)
Returning Form 941c to Taxpayer

  1. IRM 21.5.3, General Claims Procedures, permits certain claims for decrease in tax to be returned to taxpayer if all of the necessary information is not provided.

  2. A Form 941c filed with a return (indicating a line item adjustment), cannot be returned to taxpayer for any reason.

    Exception:

    See IRM 21.7.2.4.18.6.4.3, Math Verified Forms 941c – 944 Filer Files 941 that Unposted Due to 944 Filing Requirements.

  3. A separate filed Form 941c requesting a decrease in tax can only be returned when it is impossible to make the necessary adjustment without the missing information.

  4. No Form 941c can be returned to taxpayer without an attempt to contact taxpayer by phone to obtain the missing information.

    Note:

    If the TP failed to sign the return, attempt to contact the TP by phone for faxed copy of the signed return.

  5. Verify the taxpayer is not responding to a CP 175 prior to returning the Form 941c. If it is a response to a CP 175, see IRM 21.7.2.4.18.6.4.7.

21.7.2.4.18.2  (01-01-2005)
Form 941c Tax Decreases

  1. These tax decreases involve income tax withholding and/or FICA. ( See IRM 21.7.2.4.18.5, and IRM 21.7.2.4.18.6 respectively.)

  2. Tax decreases ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ cannot be processed for prior year returns unless one of the certification boxes on Form 941c is checked, or taxpayer provides a statement with the necessary information contained in the appropriate box.

  3. If a certification block is not checked, contact taxpayer by phone to verify all necessary actions have been taken.

    1. On history sheet, note the date, time, name of individual contacted, and information obtained from the individual.

    2. Individual contacted must be authorized to prepare taxpayer’s employment tax returns.

21.7.2.4.18.2.1  (04-27-2007)
Action Required for Form 941c Tax Decreases

  1. Verify all required items on Form 941c are complete, such as:

    • Name, address, and EIN

    • Type of form being adjusted

    • Type of tax being adjusted (withholding, social security, Medicare)

    • Explanation of adjustment box is completed

    • Certification box is checked (if prior year) and signed

  2. A decrease in tax may meet examination criteria. See IRM 21.5.3–2, Examination Criteria (CAT-A), for additional information.

  3. Math verify adjustments to income tax, BUWH, social security tax, and Medicare tax.

  4. Input TC 291 with the appropriate IRN's for the amount of decrease.

    If Then
    Form 941c is attached to a return where taxpayer is taking a line item adjustment Add all decreases and input TC 291 for the total amount of decrease on the period for which return is being filed. Adjust FICA wages on appropriate year(s). ( See IRM 21.7.2.4.18.6.4.2, Math Verified Forms 941c.)
    Form 941c is filed separately, or there is an indication taxpayer wants refunds issued from individual periods Input separate TC's 291 for amount of decrease to each individual period.

  5. Do not process a corresponding decrease to FTD penalty, unless the tax decrease pertains to the period actually being adjusted. (See IRM 20.1.4, Failure to Deposit Penalty.)

    Example:

    If taxpayer takes a line item adjustment on 200712 which is correcting 200703, and taxpayer was assessed an FTD penalty on 200703, do not adjust the 200703 penalty since the adjustment is being taken on 200712.

21.7.2.4.18.3  (01-01-2005)
Form 941c Tax Increases

  1. This subsection contains information on tax increases on Form 941c. For specific information on increases involving withholding and FICA, see IRM 21.7.2.4.18.5 and IRM 21.7.2.4.18.6, respectively.

  2. See IRM 21.7.2.4.9.1 for information on administrative errors, and IRM 21.7.2.4.9.2 for information on ascertained dates.

21.7.2.4.18.3.1  (10-01-2007)
Action Required for Form 941c Tax Increases

  1. Verify all required items are complete.

  2. Check for a date in Box C labeled "Enter the date you discovered the error(s) reported on this form" to determine the ascertained date.

    Note:

    Always check Part V for any indication of when they discovered their error, if Box C is not completed. If the Form 941c is received indicating an increase to tax in the quarter immediately following the quarter being corrected, input the adjustment using a TC 298.

  3. Use the table below to make your adjustment(s).

    If Then
    Return is filed by the ascertained date (≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ), see IRM 21.5.1.4.2.5, Received Date — Grace Periods. Add all increases and assess on latest quarter involved. Use TC 298 with the ascertained date as the interest date. (See Note below.)
    Return is not filed by the ascertained date Input TC 290 on each individual period.

    Note:

    If taxpayer attaches Form 941c to a return for which a line item adjustment is being taken, assess the tax (with TC 298, if timely filed) on the period for which the return is being filed. Adjust FICA following Math Verified procedures. See IRM 21.7.2.4.18.6.4.2, Math Verified Forms 941c.

  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Be sure any payments are credited to period(s) where the tax is being assessed.

21.7.2.4.18.4  (01-01-2005)
Form 941c Reflecting Both Increases and Decreases