21.7.2  Employment and Railroad Tax Returns (Cont. 1)

21.7.2.4 
Employment Tax Returns Procedures

21.7.2.4.6 
Adjusted Employer's Federal Tax Return or Claim for Refund

21.7.2.4.6.7 
Exception Processing — Incorrect Filing, Including Forms Routed to AM from SP

21.7.2.4.6.7.1  (10-01-2011)
Form 94X (2009 or subsequent revision) with Form 94XX Attached

  1. These procedures apply to Form 941-X, 943-X, 944-X, 945-X and/or CT-1X.

  2. Form 941 and Form 941-X received in SP. SP will verify the adjustment on Form 941-X is not being claimed on the original Form 941.

  3. If adjustment is taken on the original, Submission Processing (SP) will:

    • Enter CCC "X" on the original return

    • Send CP 102 to TP explaining adjustment request sent to Accounts Management (AM), and

    • Prepare Form 3465 and route Form 941-X and copy of Form 941 to AM with a notation "941X to AM" and adjustment not processed.

  4. If adjustment is not taken on the original, SP will prepare Form 3465 and route Form 941-X and a copy of Form 941 to AM with a notation "941X to AM" and adjustment not processed.

  5. Once received, follow the general procedures in IRM 21.7.2.4.6 and the specific procedures applicable to the type of Form 94XX filed (e.g., if the 941-X received is a tax decrease - claim for refund, follow IRM 21.7.2.4.7.6.2) to make any necessary account corrections.

  6. Send the TP Letter 4384C informing them the Form 941-X should be filed separately from their original 941.

21.7.2.4.6.7.2  (10-01-2008)
Original 200812 (or prior year return) Return Received with no Form 941c

  1. These procedures apply to original returns for tax year 200812 (or prior) received April 2009 (or subsequent) with the prior period adjustment lines filled in but no Form 941c attached.

  2. Both tax increases and tax decreases will be worked in SP. These will not be received in Accounts Management.

  3. Tax increase, SP will process with line adjustments.

  4. Tax decrease, SP will:

    • Enter CCC "X" on the original return.

    • Send CP 102 to TP explaining adjustment not allowed during original processing and they must file the applicable "X" return.

    Note:

    Prior to this process, SP would have input CCC "C" which generated CP 175. See IRM 21.7.2.4.5.2 for additional information.

21.7.2.4.6.7.3  (10-01-2011)
Form 94X (prior version) for TY2009 or Later with Form 941c Attached

  1. These procedures apply to Form 941, 943, 944, 945 and/or CT-1.

  2. Form 941 and attached Form 941c received in SP and adjustment is taken on the original, SP will:

    • Enter CCC "X" on the original return

    • Send CP 102 to TP explaining adjustment request sent to AM, and

    • Prepare Form 3465 and route Form 941c and copy of Form 941 to AM with a notation "941c to AM" and adjustment not processed.

  3. If adjustment is not taken on the original, SP will prepare Form 3465 and route Form 941c and copy of Form 941 to AM with a notation "941c to AM" and adjustment not processed.

  4. When received, adjust the period being corrected on Form 941c. If multiple periods, adjust each period. For processing instructions, see the general procedures in IRM 21.7.2.4.6 and the specific procedures applicable to the type of Form 94XX which should have been filed (e.g., if the 941c reports a tax increase for a Form 941 account, follow IRM 21.7.2.4.7.6.3).

    Exception:

    When a taxpayer files a tax year 2009 or subsequent Form 941 with a Form 941c attached, transfer any credit to the Form 941 tax period rather than the period in which the Form 941c was filed.

    Example:

    Form 941c attached to second quarter 2009 Form 941, received July 2009. TP wishes credit to be applied to 200906. Based on TD 9405, the credit should be applied to 200909 (period in which the taxpayer filed the adjustment form). However, since the taxpayer intended the credit to be applied to the 200906 period (reduced FTD etc.), we will attempt to apply the credit to the period the taxpayer intended (200906).

    Note:

    If you cannot determine to which period the taxpayer wants the credit applied, attempt to contact by phone. If unable to contact, apply credit to period that contains postmark date of envelope. If envelope not attached, credit to period of IRS received date. Any time you cannot definitely ascertain to which period the taxpayer wishes the credit applied, send applicable C letter and advise to which period credit was applied.

  5. Send Letter 4384C to TP informing them Form 941-X should be filed to correct errors discovered on a previously filed Form 941.

21.7.2.4.6.7.4  (10-01-2011)
Form 94X (prior version) for TY2009 or later with no Form 941c

  1. These procedures apply to Form 941, 943, 944, 945 and/or CT-1.

  2. Form 941 received in SP with no Form 941c. If the line item adjustment is an increase, C&E will:

    • Enter CCC "X" on the original return

    • Send CP 102 to TP explaining adjustment request sent to AM

    • Process the original return without line item adjustments, and

    • Prepare Form 3465 and route a copy of Form 941 to AM with a notation that adjustment not processed.

  3. When received, adjust the tax period of the Form 94X based on the line item adjustments present. For processing instructions, see the general procedures in IRM 21.7.2.4.6 and the specific procedures applicable to the type of Form 94XX which should have been filed (e.g., a line adjustment increasing tax on Form 941, follow IRM 21.7.2.4.7.6.3).

    Example:

    Taxpayer uses 2008 version of Form 941 and crosses out 2008 and inputs 2009. Adjust the 2009XX period.

    Note:

    Only tax increases will be sent to AM. Tax decreases will be disallowed during original processing and the taxpayer will be advised to file Form 941-X.

21.7.2.4.6.7.5  (10-01-2011)
Stand Alone Form 941c (including incorrectly filed Form 843)

  1. These procedures apply to stand alone Forms 941c adjusting the following forms: Form 941, 943, 944, 945 and/or CT-1.

  2. Tax increase, see the general procedures in IRM 21.7.2.4.6 and the specific procedures applicable to the type of Form 94XX which should have been filed (e.g., if the 941c reports a tax increase for a Form 941 account, follow IRM 21.7.2.4.7.6.3). Send Letter 4384C explaining that the adjustment indicated on Form 941c has been made, but in the future they must file one of the new "X" forms (specify the specific new form to use) to make the adjustment.

    Reminder:

    Adjust the tax period(s) on the Form 941c.

  3. Tax decrease, reject the return using Letter 4384C and inform the taxpayer he must file his correction using the applicable "X" return. See IRM 21.7.2.4.6.1 for additional information. When rejecting the return, follow IRM 21.5.3.4.2(3) , Tax Decrease or Credit Increase Processing, and IRM 21.5.1.5.6(4), Incomplete CIS claims, for the correct input of TC 971-270 and release of the applicable freeze code.

    Note:

    Extreme care must be taken to ensure that only the material relative to the taxpayer(s) to which the correspondence is addressed is enclosed in the envelope. See IRM 21.3.3.4.26, Breaches of Personally Identifiable Information (PII) Caused by Manual Stuffing Errors, for additional information.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. With the implementation of these new "X" forms, an employer must file the applicable form to request a claim for refund of employment taxes. If an employer submits Form 843, follow paragraph 3 above.

21.7.2.4.6.7.6  (03-30-2010)
"Amended" /"Supplemental" Form 94X with or without Form 941c

  1. These procedures apply to unnumbered Forms 941, 943, 944, 945 and/or CT-1 received on or after January 1, 2009. These forms may be marked "amended" , "supplemental" , etc. with or without Form 941c attached.

  2. Tax increase, see the general procedures in IRM 21.7.2.4.6 and the specific procedures applicable to the type of Form 94XX which should have been filed (e.g., if an amended or supplemental Form 941 is received reporting a tax increase, follow IRM 21.7.2.4.7.6.3). Send Letter 4384C explaining that the adjustment indicated on amended/supplemental return has been made, but in the future they must file one of the new "X" forms (specify the specific new form to use) to make the adjustment.

    Reminder:

    Adjust the tax period of the Form 941.

  3. Tax decrease, reject the return (claim) using Letter 4384C and inform the taxpayer he must file his correction using the applicable "X" return. See IRM 21.7.2.4.6.1 for additional information. When rejecting the return, follow IRM 21.5.3.4.2(3) , Tax Decrease or Credit Increase Processing, and IRM 21.5.1.5.6(4), Incomplete CIS claims, for the correct input of TC 971-270 and release of the applicable freeze code.

    Note:

    Extreme care must be taken to ensure that only the material relative to the taxpayer(s) to which the correspondence is addressed is enclosed in the envelope. See IRM 21.3.3.4.26, Breaches of Personally Identifiable Information (PII) Caused by Manual Stuffing Errors, for additional information.

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. With the implementation of these new "X" forms, an employer must file the applicable form to request a claim for refund of employment taxes. If an employer submits Form 843, follow paragraph 3 above.

21.7.2.4.6.7.7  (10-01-2011)
Electronically Filed Form 94X for TY 2009 Claiming Line Adjustments

  1. These procedures apply to Form 941 or 944.

  2. Electronically filed returns containing line item adjustments will be accepted by e-file for tax year 2009; however, they will error out to SP. SP will:

    • Enter CCC "X" ,

    • Send CP 102 explaining adjustment request sent to AM

    • Process the original return without line item adjustments, and

    • Prepare Form 3465 and route copy of Form 941 and Form 941c efiled data to AM (CC TRDBV print).

    Note:

    E-file programming will not be changed until 2010. It is too difficult for the Service and software providers to have 2 schemas at the same time.

  3. When received, adjust the period being corrected on Form 941c (CC TRDBV print). If multiple periods, adjust each period. For processing instructions, see the general procedures in IRM 21.7.2.4.6 and the specific Form 94XX procedures applicable to the type of employment tax return filed (e.g., if the 941c reports a tax increase for a Form 941 account, follow IRM 21.7.2.4.7.6.3).

    Exception:

    When a taxpayer files a tax year 2009 or subsequent Form 941 with a Form 941c attached, transfer any credit to the Form 941 tax period, rather than the period in which the Form 941c was filed.

21.7.2.4.6.7.8  (10-01-2008)
Form 94X (current version) with Form 941c attached

  1. These procedures apply to Form 941, 943, 944, 945 and/or CT-1.

  2. Form 941 and Form 941c received in SP. SP will verify the adjustment on Form 941c is not being claimed on the original Form 941.

  3. If adjustment is taken on the original, SP will:

    • Enter CCC "X" on the original return,

    • Send CP 102 to TP explaining adjustment request sent to AM, and

    • Prepare Form 3465 and route Form 941c and copy of Form 941 to AM with a notation "941c to AM"

  4. If adjustment is not taken on the original, SP will prepare Form 3465 and route Form 941c and a copy of Form 941 to AM with a notation "941c to AM" .

  5. When received, adjust the period being corrected on Form 941c. If multiple periods, adjust each period. For processing instructions, see the general procedures in IRM 21.7.2.4.6 and the specific procedures applicable to the type of Form 94XX which should have been filed (e.g., if the 941c reports a tax increase for a Form 941 account, follow IRM 21.7.2.4.7.6.3).

    Exception:

    When a taxpayer files a tax year 2009 or subsequent Form 941 with a Form 941c attached, transfer any credit to the Form 941 tax period, rather than the period in which the Form 941c was filed.

    Example:

    Form 941c attached to second quarter 2009 Form 941, received July 2009, correcting 200712. TP wishes credit to be applied to 200906. Based on TD 9405, the credit should be applied to 200909 (period in which the taxpayer filed the adjustment form). However, since the taxpayer intended the credit to be applied to the 200906 period (reduced FTD etc.), we will attempt to apply the credit to the period the taxpayer intended (200906).

    Note:

    If you cannot determine to which period the taxpayer wants the credit applied, attempt to contact by phone. If unable to contact, apply credit to period that contains postmark date of envelope. If envelope not attached, credit to period of IRS received date. Any time you cannot definitely ascertain to which period the taxpayer wishes the credit applied, send applicable C letter and advise to which period credit was applied.

21.7.2.4.6.7.9  (10-01-2011)
Incorrect Form 94XX Version Filed for TY 2009 and Subsequent

  1. Forms 941-X, 943-X and 944-X have undergone a series of successive modifications due to legislative changes. However, prior versions of Forms 941-X, 943-X and 944-X will continue to be available to the public, and Accounts Management will occasionally receive adjustment requests submitted on prior versions of Forms 94XX. Do not reject adjustment requests filed on prior versions of Form 94XX unless it is not possible to determine the correct adjustment action. Process as follows:

    If And Then
    The Form 94XX does not include corrections to the COBRA credit or HIRE exemption amounts claimed   Make the requested correction using procedures in the applicable section in IRM 21.7.2.4.6 , Adjusted Employer's Federal Tax Return or Claim for Refund.
    The Form 94XX reflects changes to the COBRA credit claimed or HIRE exemption amounts claimed

    Note:

    This applies to both increases and decreases.

    Information needed to make the requested adjustment was not included with the Form 94XX Make two attempts to contact the taxpayer by phone to obtain the missing information.

    Caution:

    Before contacting the taxpayer, review page 2 of Form 94XX, Part 4 of Form 94XX, and any attachments to determine if the missing information was provided in written form.

  2. If the taxpayer provides the missing information needed to make the requested adjustment, or the information was provided in written form on page 2 of Form 94XX, on Part 4 of Form 94XX, or in an attachment, follow the instructions below:

    If Then
    The Form 94XX reflects changes to the COBRA credit or HIRE exemption amounts claimed

    Note:

    This applies to both increases and decreases.

    • Make the requested adjustment using procedures in the applicable section in IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund . Also see IRM 21.7.2.5.19.3, Adjusting the Account — COBRA, and IRM 21.7.2.5.20.1, Adjusting the Account – HIRE.

    • Send Letter 4384C explaining that the adjustment indicated on Form 94XX (specify form used) has been made, but that in the future they must file using the most current Form 94XX (specify form) version available.

    Note:

    It is acceptable to provide this information to the taxpayer orally when the request for missing information is made via phone contact.

  3. If you are unable to obtain the missing information needed to make the requested adjustment, follow the instructions below:

    If And Then
    The Form 94XX reflects net increases to the COBRA credit or HIRE exemption amounts claimed, or the net change in COBRA credit or HIRE exemption amounts claimed cannot be determined The only corrections requested on the Form 94XX are to COBRA credit or HIRE exemption amounts claimed Reject the Form 94XX using Letter 4384C and inform the taxpayer they must file their correction using the most current form version available. When rejecting the return, follow IRM 21.5.3.4.2(3), Tax Decrease or Credit Increase Processing and IRM 21.5.1.5.6(4), Incomplete CIS claims, for the correct input of TC 971-270 and release of the applicable freeze code.
    The Form 94XX reflects net decreases to the COBRA credit or HIRE exemption amounts claimed The only correction requested on the Form 94XX are to COBRA credit claimed or HIRE exemption amounts claimed
    • Decrease the COBRA credit and/or HIRE exemption amounts as can best be determined based on the available information. If the amounts of the COBRA credit or HIRE exemption decreases reported on the Form 94XX exceed the previously posted COBRA credit or HIRE exemption amounts, assess any difference as withholding as per procedures in IRM 21.7.2.4.6.3.2, Withholding Tax Adjustment When Unable to Determine Proper Tax Correction.

    • Send Letter 4384C explaining the adjustment made. Inform the taxpayer that we were unable to verify the correct adjustment to be made to their COBRA credit and HIRE exemption based on their Form 94XX (specify form). Advise the taxpayer to file a new Form 94XX (specify form) using the most current form version available if corrections to the adjustment made are needed.

    The Form 94XX reflects increases to the COBRA credit or HIRE exemption amounts claimed The Form 94XX includes non-COBRA/non-HIRE related corrections
    • Make any non-COBRA/non-HIRE related corrections requested on the Form 94XX using procedures in the applicable section in IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund.

    • Send Letter 4384C explaining that the non-COBRA/non-HIRE adjustment indicated on the Form 94XX (specify form used) has been made, but that we were unable to make the COBRA credit or HIRE exemption corrections requested. Advise the taxpayer they must file a new Form 94XX (specify form) using the most current form version available in order to make COBRA or HIRE adjustment requests.

    The Form 94XX reflects decreases to the COBRA credit or HIRE exemption amounts claimed The Form 94XX includes non-COBRA/non-HIRE related corrections
    • Make any non-COBRA/non-HIRE related corrections requested on the Form 94XX using procedures in the applicable section in IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund .

    • Decrease the COBRA credit and/or HIRE exemption amounts as can be best determined based on the available information. If the amounts of the COBRA credit or HIRE exemption decreases reported on the Form 94XX exceed the previously posted COBRA credit or HIRE exemption amounts, treat any difference as withholding as per procedures in IRM 21.7.2.4.6.3.2, Withholding Tax Adjustment When Unable to Determine Proper Tax Correction, and consider this amount in conjunction with the adjustments needed for the non-COBRA/non-HIRE corrections.

    • Send Letter 4384C explaining the adjustment made and that we were unable to verify the correct adjustment to be made to their COBRA credit and HIRE exemption based on their Form 94XX (specify form). Advise the taxpayer to file a new Form 94XX (specify form) using the most current form version available if corrections to the adjustment made are needed.

    Caution:

    When rejecting Forms 94XX, extreme care must be taken to ensure that only the material relative to the taxpayer(s) to which the correspondence is addressed is enclosed in the envelope. See IRM 21.3.3.4.26, Breaches of Personally Identifiable Information (PII) Caused by Manual Stuffing Errors, for additional information.

21.7.2.4.6.8  (10-01-2012)
Adjustment Credit Claimed — Refunded in Error

  1. Sometimes a taxpayer claims a credit on a current employment tax form based on a prior tax period adjustment and overpayment.

  2. For example:

    1. An adjustment was made to a prior quarter Form 941 which resulted in an overpayment.

    2. The taxpayer filed a Form 941 for the current quarter taking the overpayment as a credit.

    3. The current quarter Form 941 posted after a refund had been issued from the prior tax period.

    4. The taxpayer returned the refund check and requested it be applied to the balance due on the current tax period.

  3. The table below provides guidance for handling most situations where an employer returns a refund check issued from an employment tax account and requests reapplication of the credit:

    If And Then
    The overpayment was created by the filing of a Form 94XX (filed either as a claim or as an adjusted return) The credit is being applied to the tax period in which the Form 94XX was filed Apply the credit to the account designated by the taxpayer using a TC 830/710 as per the appropriate adjusted return procedures. For example, if Form 941-X was filed, follow the directions in Step 2 of IRM 21.7.2.4.7.6.1 (7) to determine the appropriate credit availability date.
    The overpayment was created by the filing of a Form 94XX (filed either as a claim or as an adjusted return) The credit is being applied to a tax period earlier than that in which the Form 94XX was filed Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.
    The overpayment was created by the filing of a Form 94XX as a claim The credit is being applied to a tax period later than that in which the Form 94XX was filed
    1. Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.

    2. Manually calculate and allow overpayment interest with a TC 770 and transfer the overpayment interest using TC 850/730 if appropriate. See IRM 20.2.4.6.1, Interest on Offsets, for more information.

    The overpayment was created by the filing of a Form 94XX as an adjusted return The credit is being applied to a tax period later than that in which the Form 94XX was filed
    1. Follow the directions in the first row of this table to apply the overpayment to the tax period in which the Form 94XX was filed except freeze the credit on the receiving module.

    2. Follow the directions in the last row of this table to apply the credit (if available) from the module the credit was applied to in Step 1 above to the account designated by the taxpayer.

    The overpayment was created by any issue other than the filing of a Form 94XX (missed credit elect, penalty abatement, simple tax overpayment, etc.) The credit is being applied to the same tax period or an earlier tax period Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.
    The overpayment was created by any issue other than the filing of a Form 94XX (missed credit elect, penalty abatement, simple tax overpayment, etc.) The credit is being applied to the immediately following tax period for the same MFT Apply the credit using a TC 830/710. See (3) of IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, for more information.
    The overpayment was created by any issue other than the filing of a Form 94XX (missed credit elect, penalty abatement, simple tax overpayment, etc.) The credit is being applied to a tax period later than that on which the overpayment exists but not to the immediately following tax period for the same MFT
    1. Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.

    2. Manually calculate and allow overpayment interest with a TC 770 and transfer the overpayment interest using TC 850/730 if appropriate. See IRM 20.2.4.6.1, Interest on Offsets, for more information.

    Exception:

    Normal offset rules apply to overpayments addressed in the table above. If there is an outstanding balance due on a tax period earlier than that to which the taxpayer is requesting an overpayment to be applied, apply the credit to the earliest outstanding balance due(s) instead and inform the taxpayer of the action taken.

    Reminder:

    Credit must be available on the module to complete a credit transfer with a debit TC 820 or TC 830 transaction code. Otherwise, the credit transfer will unpost.

21.7.2.4.7  (02-27-2013)
Form 941, Employer’s QUARTERLY Federal Tax Return

  1. Employers who are required to withhold income tax on wages, social security tax, Medicare tax, or Additional Medicare Tax (for tax periods ending after December 31, 2012) must file Form 941 quarterly to report both the employer's and employee share of such taxes.

    Exception:

    Beginning with tax year 2006, certain eligible taxpayers report employment taxes annually on Form 944, Employer's ANNUAL Federal Tax Return, instead of quarterly on Form 941. See IRM 21.7.2.4.9, Form 944, Employer's ANNUAL Federal Tax Return, for more information.

  2. The taxable period and due dates for Form 941 are always the same. (See below.)

    Quarter Covered Quarter Ending Due Date
    January, February, March March 31 April 30
    April, May, June June 30 July 31
    July, August, September September 30 October 31
    October, November, December December 31 January 31

    Note:

    The return due date for Form 941 is extended 10 days, if timely deposits are made which full pay the amount of tax reported.

  3. The redesigned Form 941 has the tax year in the title. Taxpayers must be encouraged to use the correct form to ensure proper processing.

21.7.2.4.7.1  (11-21-2011)
Seasonal Employers

  1. Seasonal employers are Form 941 filers who do not report a tax liability every quarter because they do not pay wages every quarter. They are relieved from filing tax returns for the quarters in which they have no liability.

  2. Taxpayers who meet this criteria must check the seasonal employer box on Form 941 to establish or maintain this status.

  3. At least one return must be filed each year.

  4. Many seasonal employers also meet the criteria for filing Form 944, Employer's ANNUAL Federal Tax Return. However, seasonal employers not eligible to participate in the Form 944 program, or who have opted out of the Form 944 program, must continue to follow the instructions above. See IRM 21.7.2.4.9, Form 944, Employer's ANNUAL Federal Tax Return, for more information on Form 944 eligibility criteria and participation requirements.

21.7.2.4.7.2  (11-21-2011)
Line 2, Form 941

  1. The amount from Line 2, Form 941, Total wages and tips plus other compensation, is identified on MF by the field name "TOTAL-COMP" . It is:

    • Not an adjustable field.

    • For research purposes only.

    • May be used to verify whether a taxpayer mistakenly entered this amount on Form 941-X for the purpose of computing adjustments to taxable wages.

21.7.2.4.7.3  (10-01-2012)
Multiple Quarters Filed on Form 941

  1. Sometimes an employer combines the wages for two or more quarters and reports them on a single Form 941.

    Example:

    An employer files a Form 941 for the 201212 quarter with full payment. Attached to the Form 941 is a breakdown for the 201203, 201206, 201209, and 201212 quarters which indicates the employer is reporting wages and tax for the entire year.

  2. Take the following actions to resolve this situation:

    1. Based on the information on the quarter by quarter breakdown, prepare "dummy" Forms 941 for each quarter except the one for which the multiple quarter Form 941 was filed.

    2. Route the "dummy" returns for processing as non-remittance using the same received date as shown on multiple quarter Form 941 that was filed.

    3. Input a TC 291 and the appropriate IRN's to the quarter for which the multiple quarter Form 941 was filed to reduce the wages and tax now reflected on the dummy returns. Use the appropriate Hold Code and adjust penalties if necessary.

    4. Input credit transfers to move credits as appropriate based on the quarter by quarter breakdown provided.

    5. Notify the employer of the appropriate returns to file in the future.

    Note:

    Process all documents in the same cycle, if possible.

  3. If no attachment was received explaining the quarter by quarter breakdown of wages and tax, contact the employer for that information and then process as per instructions in (2) above. Faxed copies are acceptable.

21.7.2.4.7.4  (11-21-2011)
Negative Tax Liability on Form 941

  1. For errors discovered prior to January 1, 2009, taxpayers were instructed to adjust a prior period on a current period's return. Therefore, taxpayers could submit a tax return reporting a credit that reduced the net tax liability below zero. This would result in the current period's tax liability being recorded as a negative amount (i.e. the TC 150 posted with a negative figure).

  2. Current programming allows for a tax adjustment to be input to reduce an existing liability below zero. However, if the tax liability is being reduced to a negative amount, any FTD penalty must be manually adjusted. See IRM 20.1.4.23, Manual Adjustments.

    Caution:

    Do not reduce net module tax (sum of TC 150 and all TC 29X/30X transactions) to a negative amount on any tax period beginning on or after January 1, 2009.

21.7.2.4.7.5  (10-01-2013)
Form 941 Discrepancy — Taxpayer Files Form 941-X

  1. A taxpayer may disagree with a notice of additional tax assessment due to an error or discrepancy on Form 941 citing any of the following as possible cause(s):

    • Transposition of figures

    • Entry made on wrong line

    • Omission of allowable adjustment

    • Error in computation of tax

    • Erroneous withholding tax or wages reported on Form 941

  2. A Form 941-X is required to correct information previously reported on Form 941 unless the taxpayer's response meets oral statement authority for BMF as described in (1) of IRM 21.7.1.4, BMF/NMF Adjustment Procedures.

21.7.2.4.7.6  (10-01-2013)
Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund (including Form 941-X (PR))

  1. Form 941-X (or Form 941-X (PR)) is filed to correct income tax withholding and/or FICA tax information (including Additional Medicare Tax for tax periods beginning after December 31, 2012) previously reported on Form 941 or Form 941-SS (or Form 941-PR). Taxpayers can choose to file either:

    • An adjusted employment tax return, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 941-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, verify which set of certification box(es) were checked. If the taxpayer checked the adjustment certification(s) or checked both the adjustment certification(s) and the claim certification(s), process as an adjusted employment tax return. If the taxpayer checked only the claim certification(s), process as a claim for refund.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3.

  2. Taxpayers are required to certify on Form 941-X that they have filed or will file Forms W-2, or Forms W-2c, as required. They must also complete the applicable certification box based on their selection in Part 1 of Form 941-X.

    Example:

    If TP checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If TP checks box 2 in Part 1, then they must check the applicable certification box(es) in line 5.

    Note:

    If the certification box checked in Part 2 is inconsistent with the process selected in Part 1, continue processing the Form 941-X based on the information provided in Part 1.

  3. Use the applicable reference numbers to adjust tax, wages, and advance earned income tax credit (AEITC) on employment tax returns. The following table shows the valid reference numbers for Form 941-X.

    Item Reference Number (IRN) Explanation
    111 Income tax withheld from wages, tips, and other compensation (line 7 of Form 941-X - column 4).
    004 Taxable social security wages (line 8 of Form 941-X - column 3 plus line 15 of Form 941-X - column 3).
    005 Taxable social security tips (line 9 of Form 941-X - column 3).
    073 Taxable Medicare wages and tips (line 10 of Form 941-X - column 3 plus line 16 of Form 941-X - column 3).
    074 Taxable Wages & tips subject to Additional Medicare Tax withholding (valid for tax periods beginning after December 31, 2012).
    112 Total social security, Medicare tax, and Additional Medicare Tax (for tax periods beginning after December 31, 2012.
    114 Section 3121(q) Notice and Demand — Tax due on unreported tips (line 11 of Form 941-X - column 4). Only for MFT 01 tax periods 201103 and after.
    115 Exempt wages/tips paid to qualified employees this quarter (line 12c of Form 941-X - column 3). For MFT 01, tax periods 201006, 201009, and 201012 only.
    116 Taxes on exempt wages/tips paid to qualified employees this quarter (line 12c of Form 941-X - column 4). For MFT 01, tax periods 201006, 201009, and 201012 only.
    104 Income tax withheld figured at IRC Section 3509 tax rate on Special addition to wages for federal income tax (line 14 of Form 941-X - column 4).
    105 Social security and Medicare taxes figured at IRC Section 3509 tax rates on Special addition to wages for social security taxes and Special addition to wages for Medicare taxes (total of lines 15 and 16 from Form 941-X - column 4).
    106/107/108 Tax adjustments (line 13 of Form 941-X - column 4). See IRN 113 and Note below table.
    113 Total adjustments (total of lines 13, 14, 15, and 16 of Form 941-X - column 4). See IRN 106/107/108 above and Note below table.

    Reminder:

    IRN 113 must be used when adjusting IRNs 104 through 108.

    117 Exempt wages/tips paid to qualified employees March 19 - 31 (line 19d of Form 941-X - column 3).

    Note:

    For MFT 01, this credit can only be claimed on tax period 201006.

    Credit Reference Number (CRN)
    766/767 Advance earned income tax credit (AEITC) (line 18 of Form 941-X - column 4).

    Note:

    AEITC has been legislatively eliminated for tax periods after 201012.

    299 COBRA premium assistance payments (line 19a of Form 941-X - column 4).
    296 Refundable tax credit on exempt wages/tips paid to qualified employees March 19 - 31 (line 19d of Form 941-X - column 4).

    Note:

    For MFT 01, this credit can only be claimed on tax period 201006.

    Note:

    Use Item reference numbers 106, 107, and 108 to adjust any corrections a taxpayer may have for lines 7, 8, and 9 on Form 941. If Form 941-X does not specify what is actually being corrected, use IRN 107 for total amount on line 11 - column 4. See IRM 21.7.2.4.1 for additional information on IRN's.

    Caution:

    Although CRN 290 is valid for MFT 01, this credit cannot be claimed or adjusted by filing a Form 941-X. This credit is only allowed during the processing of Forms 5884-C. See IRM 21.7.2.5.22, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for more information.

21.7.2.4.7.6.1  (10-01-2013)
Form 941-X Tax Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

  2. Verify all required items on Form 941-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Quarter being corrected

    • Calendar year being corrected

    • Part 1 Box 1 is checked

    • Applicable certification is checked on line 4a, 4b or 4c

    • Detailed explanation

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

  4. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified.

    1. To convert an adjustment to a claim, notate the following remarks on the Form 941-X:
      "90 day - Claim."

    2. Generate Letter 4384C to the TP explaining the adjustment has been converted to a claim.

    Note:

    See IRM 21.7.2.4.7.6.2 to process a claim as a refund and refer to IRM 21.7.2.4.6.5 for additional information on 90 day - Claims.

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

  6. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

  7. Do the following:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

    2. Transfer the applicable overpayment using TC 830/710 to the period in which the Form 941-X was filed.

      Caution:

      To prevent debit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not allowable (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

  8. If the taxpayer's filing requirement has changed from Form 944 to Form 941 or vice versa, the credit will be transferred to the filing requirement that was active for the period in which the adjusted return was filed.

21.7.2.4.7.6.2  (02-27-2013)
Form 941-X Tax Decrease — Claim

  1. These tax decreases involve income tax withholding, FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012), and/or AEITC.

    Note:

    AEITC has been legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 941-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Quarter being corrected

    • Calendar year being corrected

    • Part 1 Box 2 is checked

    • Applicable certification is checked on line 5a, 5b, 5c or 5d

    • Detailed explanation

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

    Exception:

    Claims filed without consent. If taxpayer has not checked a box on line 5 and states (in the explanation or in response to our contact) they are not required to obtain the consents prior to filing the claim and the claim is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send claim CAT-A. Exam will correspond with the taxpayer to secure applicable certifications. In certain situations, taxpayers may not have repaid or reimbursed their employees or obtained their consents prior to filing a claim (Form 941-X). However, they must certify they have repaid or reimbursed their employees or obtained consents before the Service can accept the claim. See Instructions for Form 941-X for more information.

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

  5. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

  6. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

  7. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.7.6.3  (02-27-2013)
Form 941-X Tax Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

  2. Verify all required items on Form 941-X are complete.

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation to see if it was entered there.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 941-X for the immediately preceding quarter prior to the due date for the current quarter (for example, a Form 941-X reporting a tax increase for the second quarter of 2011 received on or before October 31, 2011), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest Free Adjustments (Employment Tax Returns), for more information.

  4. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

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

    If Then
    The Form 941-X was filed by the ascertained date (due date of the return for the period in which the taxpayer discovered the reporting error) Input TC 298 and BS 20 with the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    The Form 941-X was not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20.

    Example:

    An employer discovers an error on February 1, 2013 and files a Form 941-X which is received by the IRS on March 1, 2013 for the 01/201112 tax period. The interest computation date would be March 1, 2013.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3) or a TC 298 (see IRM 20.1.4.21.5).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 291 and an amended ROFTL was provided with the adjusted return.

  7. If payment for the additional tax reported on the Form 941-X is not reflected on the tax period being adjusted, research the taxpayer's account for the missing credit and, if located, transfer the payment as appropriate.

21.7.2.4.8  (02-27-2013)
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees

  1. Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, must be filed to report income tax withheld and employer and employee FICA taxes (including Additional Medicare Tax for tax periods beginning after December 31, 2012) on farm workers.

  2. Agricultural employers with household employees who work in a private home on a farm operated for profit can either:

    1. File Schedule H with their Form 1040 series return and report the household employees portion of wages and taxes, or

    2. Include the wages and taxes with farm employees on Form 943.

  3. Form 943 is an annual return due on or before January 31 following the close of the calendar year.

    Exception:

    The return due date for Form 943 is extended 10 days if timely deposits are made which full pay the amount of tax reported.

  4. The Form 943 threshold for making deposits is $2,500. Taxpayers follow either semi-weekly or monthly deposit schedules determined by the Form 943 lookback period. See IRM 20.1.4, Failure to Deposit Penalty.

  5. Forms 943 are recorded on MFT 11 and the tax class is 1.

  6. See (2) and (3) of IRM 21.7.2.4.8.3 for valid IRN's and CRN's used to adjust Form 943 accounts. Also see (5) and (6) of IRM 21.7.2.4.1.1 for valid Form 943 adjustment formulas.

21.7.2.4.8.1  (10-01-2013)
Wages Subject to FICA and Income Tax Withholding

  1. All cash wages paid to farm workers are subject to FICA (including Additional Medicare Tax to the extent wages and tips paid to an employee exceed $200,000 for a calendar year beginning after December 31, 2012) and income tax withholding during the year, if either of the two tests below are met:

    1. Cash and non-cash wages paid during the year to all employees totals $2,500 or more.

    2. Annual cash wages of $150 or more are paid to an employee (this test is applied separately to each farm worker).

  2. Cash wages paid to a farm worker who receives less than $150 during the year are not subject to FICA and income tax withholding, even if the total paid to all employees exceeds $2,500 or more, if the farm worker:

    1. Is employed as a hand-harvest laborer

    2. Is paid piece-rates in an operation usually paid on a piece-rate basis in the region of employment

    3. Commutes daily from his/her permanent home to the farm, and

    4. Had been employed in agriculture less than 13 weeks in the preceding calendar year

    Note:

    Amounts paid to these farm workers, however, count toward the $2,500 or more test for determining the social security and Medicare liability regarding other farm workers.

  3. Cash wages paid to a household worker are not counted in the $2,500 test and are not subject to FICA taxes unless the worker is paid cash wages at least equal to the threshold established by the Social Security Domestic Employment Reform Act of 1994 (SSDERA) for that particular year:

    • For tax years 2012 and 2013, the threshold was $1,800.

    • For tax years 2009 through 2011, the threshold was $1,700.

    • Thresholds for prior years may be found in IRM 21.7.4.4.1.11.1(3) or in the Pub 926, Household Employer's Tax Guide, for the year in question.

  4. Foreign agricultural workers may be temporarily admitted into the United States on H-2A visas:

    • Compensation paid to H-2A agricultural workers are not subject to social security or Medicare taxes. However, compensation paid to H-2A agricultural workers is counted towards the tests discussed in (1) and (2) above.

    • Employers are not required to withhold federal income tax from compensation paid to an H-2A visa agricultural worker. However, if both the employer and employee agree, federal income tax may be withheld from compensation and those amounts would be reportable on Form 943.

    • H-2A agricultural workers are eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA) and should provide that information to the agricultural employer. An H-2A agricultural worker who fails to provide the employer with their Taxpayer Identification Number (TIN) may be subject to backup withholding (BUWH) which would be reportable on Form 945.

    • Beginning in 2011, an employer must report compensation of $600 or more paid to an H-2A agricultural worker in a calendar year for agricultural labor on Form W-2, Wage and Tax Statement.

    • Additional information may be found on the IRS website at:Foreign Agricultural Workers.

21.7.2.4.8.2  (10-01-2011)
Incorrect Type of Return Filed — Forms 941 and 943

  1. There are instances where taxpayer files one type of employment tax return but should file another. The most common cases are agricultural employers who file Forms 941, but should file Form 943.

  2. When a taxpayer files Forms 941 for one or more quarters of a tax year but should have filed an annual Form 943, take the following actions to resolve the accounts:

    1. Research taxpayer’s account to locate all deposits claimed.

    2. When necessary, contact taxpayer to determine which return must be filed.

    3. Adjust the quarterly Form 941 accounts to remove tax using TC 291 and the appropriate IRN's.

    4. Input credit transfers to move FTD's or other credits from Form 941 accounts to the Form 943 account as appropriate.

    5. Input CC BNCHG to delete the Form 941 filing requirement.

    6. If you have the taxpayer's Form 943 and it is not already on file, route it for processing. Otherwise, instruct the taxpayer to file a Form 943 (if not already on file) when closing the case.

    Example:

    A taxpayer files Form 941 for the 201003, 201006, and 201009 quarters and makes deposits for these accounts. At the end of the year, the taxpayer files Form 943 for 201012 and claims deposits made during the year which triggers a balance due notice. The taxpayer responds to the notice and verifies they are an agricultural employer. In that situation, we would back the tax off the 201003, 201006, and 201009 Form 941 accounts, transfer all credits on MFT 01 for 2010 to MFT 11, and correct the filing requirements as necessary.

21.7.2.4.8.3  (02-27-2013)
Form 943-X, Adjusted Employer's Annual Tax Return for Agricultural Employees or Claim for Refund (including Form 943-X (PR))

  1. Form 943-X (or Form 943-X (PR)) is filed to correct income tax withholding and/or FICA tax information (including Additional Medicare Tax for tax periods beginning after December 31, 2012) previously reported on Form 943 or Form 943-PR. Taxpayers can choose to either file:

    • An adjusted employment tax return, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 943-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, verify which set of certification box(es) were checked. If the taxpayer checked the adjustment certification(s) or checked both the adjustment certification(s) and the claim certification(s), process as an adjusted employment tax return. If the taxpayer checked only the claim certification(s), process as a claim for refund.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3.

  2. Taxpayers are required to certify on Form 943-X that they have filed or will file Forms W-2, or Forms W-2c, as required. They must also complete the applicable certification box based on their selection in Part 1 of Form 943-X.

    Example:

    If TP checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If TP checks box 2 in Part 1, then they must check the applicable certification box(es) in line 5.

    Note:

    If the certification box checked in Part 2 is inconsistent with the process selected in Part 1, continue processing the Form 943-X based on the information provided in Part 1.

  3. Item Reference Numbers (IRNs) valid for Form 943-X are: 003, 004, 007, 073, 074 (tax periods after December 31, 2012), 184 (tax periods through 200812 only), and 185. Also, IRNs 115, 116, and 117 are valid for tax period 201012 HIRE credit related adjustments.

    Caution:

    For tax periods after 200812, IRN 185 is only used on Form 943 adjustments for fractions of cents and third party sick pay.

    Note:

    IRN 074 will be used to adjust Taxable Wages & tips subject to Additional Medicare Tax withholding for tax periods beginning after December 31, 2012. IRN 007 will be used to make adjustments to Additional Medicare Tax on Form 943 accounts.

  4. Credit Reference Numbers (CRNs) valid for Form 943 are: 766/767 (AEITC increase/decrease), valid for tax periods 201012 and prior; CRN 299 (COBRA refundable credit), valid for tax periods 200912 and subsequent; and CRN 296 (HIRE refundable credit), valid for Form 943 tax period 201012 only.

    Caution:

    Although CRN 290 is valid for MFT 11, this credit cannot be claimed or adjusted by filing a Form 943-X. This credit is only allowed during the processing of Forms 5884-C. See IRM 21.7.2.5.22, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for more information.

21.7.2.4.8.3.1  (02-27-2013)
Form 943-X Tax Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

  2. Verify all required items on Form 943-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Part 1 Box 1 is checked

    • Applicable certification is checked on line 4a, 4b or 4c

    • Detailed explanation

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

  4. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified.

    1. To convert an adjustment to a claim, notate the following remarks on the Form 943-X:
      "90 day - Claim."

    2. Generate Letter 4384C to the TP explaining the adjustment has been converted to a claim.

    Note:

    See IRM 21.7.2.4.8.3.2 to process claim as a refund and refer to IRM 21.7.2.4.6.5 for additional information on 90 day - Claims.

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

  6. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

  7. Do the following:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

    2. Transfer the applicable overpayment using TC 830/710 to the period in which the Form 943-X was filed.

      Caution:

      To prevent debit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.8.3.2  (02-27-2013)
Form 943-X Tax Decreases — Claim

  1. These tax decreases involve income tax withholding, FICA (including Additional Medicare Tax for tax periods beginning after December 31, 2012), and/or AEITC.

    Note:

    AEITC has been legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 943-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Part 1 Box 2 is checked

    • Applicable certification is checked on line 5a, 5b, 5c or 5d

    • Detailed explanation

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

    Exception:

    Claims filed without consent. If taxpayer has not checked a box on line 5 and states (in the explanation or in response to our contact) they are not required to obtain the consents prior to filing the claim and the claim is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send claim CAT-A. Exam will correspond with the taxpayer to secure applicable certifications. In certain situations, taxpayers may not have repaid or reimbursed their employees or obtained their consents prior to filing a claim (Form 943-X). However, they must certify they have repaid or reimbursed their employees or obtained consents before the Service can accept the claim. See Instructions for Form 943-X for more information.

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

  5. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

  6. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

  7. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer explaining the discrepancy.

21.7.2.4.8.3.3  (02-27-2013)
Form 943-X Tax Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

  2. Verify all required items on Form 943-X are complete.

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation to see if it was entered there.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 943-X for the immediately preceding tax year prior to the due date for the current tax year (for example, a Form 943-X reporting a tax increase for tax year 2009 received on or before January 31, 2011), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest Free Adjustments (Employment Tax Returns), for more information.

  4. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

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

    If Then
    The Form 943-X was filed by the due date of the return for the period in which the taxpayer discovered the reporting error Input TC 298 and BS 20 with the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    The Form 943-X was not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20.

    Example:

    An employer discovers an error on February 1, 2013 and files a Form 943-X which is received by the IRS on March 1, 2013 for the 11/201112 tax period. The interest computation date would be March 1, 2013.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3) or a TC 298 (see IRM 20.1.4.21.5).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 291 and an amended ROFTL was provided with the adjusted return.

  7. If payment for the additional tax reported on the Form 943-X is not reflected on the tax period being adjusted, research the taxpayer's account for the missing credit and, if located, transfer the payment as appropriate.

21.7.2.4.9  (10-01-2013)
Form 944, Employer's ANNUAL Federal Tax Return

  1. Form 944 is the annual employment tax return for small employers. Instead of filing quarterly tax returns (Form 941), certain employers now file an annual tax return (Form 944). To qualify for the program one of the following must apply:

    • The taxpayer is a new employer who expects to have $1,000 or less in employment tax liability for the calendar year.

    • The taxpayer is an existing employer who expects to have $1,000 or less in employment tax liability for the calendar year, contacts the Service to request to file Form 944 (rather than Form 941), and receives written notice from the Service to file Form 944.

    • The taxpayer was required to file Form 944 for the prior year and reported $1,000 or less in total tax liability.

  2. If the Service determined an employer was qualified, it would send a notification letter to the employer. If an employer received notification to file Form 944, the employer must file Form 944 to report its social security, Medicare, and withheld federal income taxes for the calendar year unless the employer timely contacted the Service to request to file Form 941 quarterly instead (to opt out) and received written confirmation that its filing requirement was changed

    Reminder:

    For employers in the U.S. possessions, generally if you pay $6,536 or less in wages subject to social security and Medicare taxes, you are likely to pay $1,000 or less in employment taxes.

    Note:

    For tax years 2006 thru 2008, Form 944 taxpayers were identified via an eligibility extract. Beginning with tax year 2009 and subsequent, the eligibility extract will no longer be run to identify eligible Form 944 taxpayers. For these tax years, taxpayers will either self-identify during EIN assignment or contact the Service directly inquiring about the Form 944 program.

  3. Beginning with tax year 2010, employers that would otherwise be required to file Form 944 can notify the Service if they want to file quarterly Forms 941 instead of annual Form 944. See Rev. Proc. 2009-51. Previously, the Form 944 program was mandatory and taxpayers could only opt out for very limited reasons. For tax years beginning January 1, 2010, Rev. Proc. 2009-51 expands the opt-out eligibility by allowing employers to opt out of the Form 944 program for any reason. Under the prior rules for tax years 2006, 2007, 2008, and 2009, employers who were qualified to file Form 944 could only opt out (i.e., request to file Form 941 instead) if they estimated that their employment tax liability would exceed the $1,000 threshold or if they wanted to e-file Forms 941 quarterly instead.

  4. MFT 14 was established for this form. Payments can be processed using all methods now available to pay Form 941 taxes. An electronic filing option is available. See IRM 3.42.4, IRS e-file for Business Tax Returns. The tax class for Form 944 is "1" as it is for Form 941. The first Forms 944 were filed January 31, 2007.

    Note:

    MFT 14 is also the MFT for Non-Master File (NMF) Form 8613, Return of Excise Tax on Undistributed Income of Regulated Investment Companies. Form 944 is on MF and Form 8613 is on NMF. When generating a "C" letter from a Form 944 account, make sure the letter contains the correct form number.

  5. All penalties and interest applicable to Form 941 also apply to Form 944. Form 944 filers who report tax of $2,500 or more may be assessed an FTD penalty if they do not make timely federal tax deposits as required. If the TP discovers during the year that their liability is going to exceed the $1,000 threshold, advise the TP of their deposit requirement (monthly/semiweekly). More information on penalties for Form 944 can be found in IRM 20.1, Penalty Handbook.

  6. Form 944 filing requirements are recorded and controlled by data contained in the "Form 944 Cache" . The Form 944 Cache is researched on the second page of CC BMFOLE and consists of a row of calendar years and a row of Cache values corresponding to each calendar year. Valid Form 944 Cache values are as follows:

    • "blank" : The employer is required to file Forms 941 for the calendar year, or no filing requirement determination has yet been made for the calendar year in question.

    • "1" : The employer is required to file Form 944 for the calendar year in question.

    • "2" : The employer is required to file Form 944 for current calendar year but will be required to file Form 941 in the following calendar year. A Cache value of "2" automatically updates to a cache value of "1" at the end of the current calendar year.

    Example:

    If CC BMFOLE for an employer reflects a F944 CACHE YRS: 2009 = "blank" , 2010 = "1" , 2011 = "1" , and 2012 = "2" , then the employer was required to file Forms 941 for 2009, Forms 944 for 2010 through 2012, and will be required to file Forms 941 for 2013.

  7. Forms 941 will not post to a calendar year for which the Form 944 Cache reflects a value of "1" or "2" . Conversely, a Form 944 will not post to a calendar year for which the Form 944 Cache reflects a "blank" value. This is true regardless of the filing requirement displayed on CC ENMOD or CC BMFOLE which should reflect current filing requirements. It is therefore imperative that the Form 944 Cache on page 2 of BMFOLE be researched any time a taxpayer inquiry is received regarding Form 944 versus Form 941 filing requirements.

    Note:

    Form 944 Cache data is also displayed on CC ENMOD. However, it is not recommended that CC ENMOD be used for research purposes because the data is displayed as a string of values without a clear indication of corresponding calendar years.

  8. Throughout the following subsections there are instructions to change filing requirements when appropriate. Those references are in regards to changing Form 944 Cache values to reflect a Form 944 filing requirement or Form 941 filing requirement (as appropriate) for a particular calendar year via CC BNCHG rather than changing the separate filing requirement indicators which will display on CC ENMOD and CC BMFOLE. Changing filing requirement indicators without changing the Form 944 Cache value will have no impact on what type of return, Form 941 or Form 944, that the computer will allow to post to a given calendar year.

    • See the description of CC BNCHG element "F944-YR/IND" in Exhibit 2.4.9-13, BMF CC BNCHG General Format, for the input format of Form 944 Cache value changes.

    • The year for which the Form 944 Cache value is being changed must be input along with an indicator of "1" to turn on Form 944 requirements or "9" to turn off Form 944 requirements (as appropriate).

    • If the Form 944 Cache value of more than one year needs to be corrected, separate CC BNCHG inputs must be completed for each year.

21.7.2.4.9.1  (10-01-2013)
Form 944 Letters/Inquiries

  1. For tax years 2006 - 2008, notification letters were issued yearly on or around February 1st to newly eligible taxpayers. Those taxpayers that were already notified they were Form 944 filers, did not receive another notification letter. The table below describes the different types of notification letters:

    Description of notice Notice number (TY 2006-2008)
    Form 944 notification letter Notice 01345
    Form 944PR notification letter Notice 01347
    Form 944SS notification letter Notice 01348

  2. Beginning with tax year 2009 and subsequent, the eligibility extract will no longer be run to identify eligible Form 944 taxpayers. Even though eligible Form 944 filers will not be systemically identified (mailed a notification letter), taxpayers may still inquire to "opt in" the 944 program.

  3. The notification letter instructs the taxpayer to call us with any questions, or if he wishes to "opt out" of the program. For tax years 2006 - 2009, the taxpayer could only "opt out" for the two allowable reasons:

    1. Taxpayer wishes to file Form 941 electronically, and/or

    2. Taxpayer will exceed $1,000 in total tax liability

    Note:

    Beginning with tax year 2010, Form 944 filers can "opt out" of the Form 944 program for any reason. See Rev. Proc. 2009-51 for more information.

  4. The taxpayer must call us by April 1st of the year or send a written request postmarked by March 15th (or following Monday if March 15th falls on a Saturday or Sunday) of the year to change their filing requirement for the current year. If filing requirements are changed on request of the TP, a letter of acknowledgement must be issued.

    Example:

    TP states he will exceed the $1,000 threshold. Change filing requirements as indicated and either fax an acknowledgement indicating the filing requirements have been changed, or generate Letter 3007C and acknowledge the change in an open paragraph clearly stating their filing requirements have been changed.

    Note:

    If faxing an acknowledgement, refer to IRM 11.3.1.11 for proper faxing guidance.

  5. The chart below provides procedures for handling most of these inquiries (keeping in mind the April 1st deadline).

    If And Then
    TP states they will exceed $4,000 in wages, and/or $1,000 in taxes ENMOD indicates TP filing requirement is Form 944 Change filing requirement from Form 944 to Form 941 and issue Letter 3007C to confirm filing requirement change.
    TP states they filed a Final Form 941 for the third or fourth quarter of previous year Return has or has not posted for the period specified, and ENMOD indicates open filing requirements for Form 944 Close Form 944 filing requirement.
    TP states he wishes to file Form 941 electronically, even though he will not exceed $1,000 in tax Research indicates TP is e-filing Form 941 or not (not required as TP may wish to e-file for the first time) Change filing requirement from Form 944 to Form 941 and issue Letter 3007C.
    TP states they are not liable for an employment tax return (no employees, etc.) An employment tax filing requirement is open Close the open employment tax filing requirement.

    Note:

    You must verify the date the last wages were paid.

    TP states they believe their liability will not exceed $1,000 for the year Account indicates liability is decreasing
    Example: Third and/or fourth quarter Form 941 accounts indicate little or no liability, or amounts of deposits have decreased recently. Or, TP was a seasonal employer whose total tax liability for the periods July 1, 2009 through June 30, 2010, indicates a liability slightly over $1,000
    Change filing requirements to Form 944 and close filing requirement for Form 941 and issue Letter 3007C to the taxpayer.

    Note:

    Use caution when considering this action. Remind the TP if their liability exceeds $1,000 for the year, they will not be eligible to file Form 944 the following year. Also advise the TP that they may be liable for FTD payments during the year if they owe $2,500 or more for the year. FTD penalties could possibly be assessed.

    TP states they are a new employer and believe their liability will not exceed $1,000 for the year (any time during the year) ENMOD shows no filing requirement prior to the current year Establish filing requirements for Form 944 and delete Form 941 filing requirements, if applicable and issue 3007C letter to taxpayer.
    TP states they are an existing employer with no prior employment tax filing history and believe their liability will not exceed $1,000 for the year (any time during the year) ENMOD shows no filing requirement prior to the current year Establish filing requirements for Form 944 and delete Form 941 filing requirements, if applicable, and issue 3007C letter to taxpayer.
    TP is a new employer and received CP 575 stating that he has Form 944 filing requirements TP states he is expecting to exceed the $1,000 threshold Delete the Form 944 filing requirement and establish filing requirements for Form 941. This can be done throughout the year.

    Note:

    Make sure the TP is, in fact, a new employer and has not filed any returns (941/944) for the year in question.

    Caution:

    Any time the filing requirements are changed per the above instructions, it is necessary to consider all payments previously made for the current tax year. If payments have been applied to MFT 01 for tax that will be reported on MFT 14, or if payments have been applied to MFT 14 for tax that will be reported on MFT 01, transfer those payments to the appropriate tax account and tax period.

    Reminder:

    Taxpayers who currently file monthly Forms 941 (filing requirement codes 09 or 10) and/or any taxpayer who has an account (in the eligibility period) in TDI (Taxpayer Delinquency Investigation) status (MF status 02 or 03) are not eligible for the Form 944 program and should not be established as a Form 944 filer.

    Note:

    If TP will accept hand written faxed document, notate on approved IRS fax cover sheet and sign statement stating TP's request for filing requirement change has been made. Make sure the filing requirement change is made prior to closing the call.

  6. Several CP notices will be issued after Form 944 is filed and the TP's total tax exceeds $1,000, and is no longer eligible to remain in the program. See IRM 21.7.2.4.9.3, Form 944 CP Notices, for additional information.

  7. At this time, Chief Counsel has determined that Reporting Agents (RA) are not permitted to respond to "opt out" of the program on behalf of their clients. The RA's must have a valid Power of Attorney (POA) (either on file, or that can be faxed to us) to act on behalf of their clients. RA's most likely will wish to keep their clients filing quarterly Forms 941, but caution must be exercised when speaking with the RA's and filing requirements cannot be changed for their clients, unless the RA has a valid POA.

21.7.2.4.9.2  (01-09-2009)
Form 944 Filer Files Form 941 — Letter 4148C Inquiries

  1. If a taxpayer files a Form 941 in a calendar year in which they are designated as a Form 944 filer, the Form 941 unposts.

  2. If it is April 1st or prior, Entity Unpostables makes contact with the taxpayer to determine his intent and changes the filing requirement, as appropriate.

  3. If it is after April 1st, Entity Unpostables processes the return as a Reject and issues Letter 4148C to the taxpayer instructing him that he is a Form 944 filer and must file Form 944 annually.

    Note:

    Prior to 01-01-2007, Letter 4086C was issued instead of 4148C.

  4. If you receive an inquiry concerning Letter 4148C, follow the procedures below:

    If And Then
    Taxpayer states that he opted out of the Form 944 program by the April 1st deadline

    Note:

    Taxpayer must have submitted a written request and/or made contact via phone and the request was not processed. Accept the taxpayer's word.

    The filing requirement was not changed to Form 941 and the 944 cache is set to the current year and request is received in the current year

    Example:

    TP is mandated to file Form 944 in 2007 and the request is received in 2007.

    Allow the taxpayer to continue to file Form 941.
    1. Request the originally filed return from Files using the DLN (Document Locator Number) of the unpostable/Rejected TC 150. If you are not able to secure the originally filed return, request a signed copy of the originally filed Form 941 from the taxpayer, via fax. (See NOTE below table.)

    2. Change the filing requirement to Form 941.

    3. Send Letter 3007C to confirm filing requirement change, even if resulting from a phone call.

    4. Transfer all applicable deposits to the Form 941 account.

    5. Send Form 941, secured from Files, for processing as the original. (If you are unable to secure the original return from Files and must use a faxed return, edit the received date on faxed forms to reflect a timely filed return. See Note below table.)

    Exception:

    If you are staffing the toll-free telephone lines at a remote call site, do not follow steps 1-5 above; instead complete Form 4442/e-4442 and route to the Campus AM account paper function within your Directorate or designated campus. Include the DLN of the unpostable/Rejected TC 150 on the Form 4442.

    Taxpayer states he opted out of the 944 program by the April 1st deadline The filing requirement was not changed to Form 941 and the 944 cache is set to the current year and request is received in a subsequent year

    Example:

    TP is mandated to file Form 944 in 2007 and a request is received in 2008.

    DO NOT change the filing requirement. Explain to the taxpayer he is still liable for a Form 944 because we are unable to change the 944 filing requirement in a subsequent year.
    Taxpayer did not opt out of the 944 program by April 1st   DO NOT change the taxpayer's filing requirement to Form 941.
    1. Instruct the taxpayer that he must file Form 944 and deposit accordingly.

    2. Input history items (via CC ACTON) to document that the taxpayer did not opt out and must file Form 944.

    3. Ensure all applicable deposits are applied to the 944 account.

    4. Advise taxpayer that if he files a timely Form 944 and exceeds the $1,000 annual threshold, he will be returned to a Form 941 filer next year.

    Taxpayer states any other extenuating circumstances   Refer to your manager/lead for approval.

    Note:

    If the unpostable/Rejected DLN is not available on IDRS, the Letter 4148C contains the DLN of the unprocessed return and can be used to request the return from Files. If you secure the originally filed return from Files and are forwarding to be processed as the original, cross out the DLN and make sure the received date is on the return.

    Reminder:

    Only the taxpayer or their authorized representatives may "opt out" of the Form 944 program. Chief Counsel has determined that Reporting Agents are not permitted to "opt out" of the program on behalf of their clients. The RA must have a valid POA (either on file or that can be faxed) to act on behalf of their clients. Third Party PIN designees are also not authorized to "opt out" of the Form 944 program for the taxpayer.

    Reminder:

    If the taxpayer's filing requirement is changed based on a 4148C reply, be sure to secure any missing returns (not already filed) that need to be filed. If the taxpayer has missing Forms 941, secure the returns, preferably by fax. Once returns are received, forward for processing with the actual received date.

21.7.2.4.9.3  (02-21-2007)
Form 944 CP Notices

  1. There are three new CP notices that may be issued to Form 944 filers.

    • CP 250A

    • CP 250B

    • CP 250C

21.7.2.4.9.3.1  (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. CP 250A notices are only issued for 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 2010 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 2011

    Note:

    Verify with the taxpayer that he will, in fact, have a total tax liability of $1,000 or less for 2011. 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 2010 that they don't expect to have in 2011.)

    TP files Form 944 for 2010 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.

21.7.2.4.9.3.2  (07-10-2009)
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 Then
    TP states he wishes to file Form 941 for 2011 and it is April 1 or prior Allow the taxpayer to file Form 941 for 2011.
    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 states he wishes to file Form 941 for 2011 and it is after April 1 Instruct the TP he must file Form 944 for 2011 and for 2012 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 cache to determine when the taxpayer was mandated to file Form 944 and when their final Form 944 will be filed. If Form 941 filing requirements appear on CC ENMOD, verify CC BMFOLE for the correct filing requirements. See Exhibit 2.3.59-13, Command Code BMFOL Entity Display - Address Information, for more information on the applicable values for the Form 944 cache.

    Example:

    If TP's F944 CACHE YR 2007 = 1 and F944 CACHE YR 2008 = 1, then TP would be required to file Form 944 for 2007 and 2008 and Form 941's for 2009, if applicable.

  5. The valid characters for the 944 cache on CC BMFOLE are "blank" , "1" or "2" . The value of "2" is set in the 944 cache year when the taxpayer is going to be reverted from a 944 filer to a 941 filer the following year based on the filing of a Form 944 which exceeded the $1000 threshold. This code allows MF to correctly identify the CP 250C recipients at the end of the year.

    Example:

    TP files Form 944 for 200912 which posted after cycle 09 (in 2010) and exceeded $1,000 (CP 250B recipient). Form 944 cache for TY 2010 is set to "2" when the return posts and will remain until the end of the year when MF generates the CP 250C. At that time, the "2" will revert to a "1" and the TP's FR will be switched to Form 941 for TY 2011.

21.7.2.4.9.3.3  (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 2009. Taxpayer is allowed to remain in the 944 program and file Form 944 for 2010, but beginning in 2011, he must file Form 941.

21.7.2.4.9.4  (02-27-2013)
Form 944-X — Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund (including Form 944-X (PR) and 944-X (SP))

  1. Form 944-X (Form 944-X (PR)) is filed to correct income tax withholding and/or FICA tax information (including Additional Medicare Tax for tax periods beginning after December 31, 2012) previously reported on Form 944, Form 944-SS, Form 944(SP), or Form 944-PR. Taxpayers can choose to either file:

    • An adjusted employment tax return, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 944-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, verify which set of certification box(es) were checked. If the taxpayer checked the adjustment certification(s) or checked both the adjustment certification(s) and the claim certification(s), process as an adjusted employment tax return. If the taxpayer checked only the claim certification(s), process as a claim for refund.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3.

  2. Taxpayers are required to certify on Form 944-X that they have filed or will file Forms W-2, or Forms W-2c, as required. They must also complete the applicable certification box based on their selection in Part 1 of Form 944-X.

    Example:

    If TP checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If TP checks box 2 in Part 1, then they must check the applicable certification box(es) in line 5.

    Note:

    If the certification box checked in Part 2 is inconsistent with the process selected in Part 1, continue processing the Form 944-X based on the information provided in Part 1.

  3. Refer to the table below for valid item reference numbers for Form 944-X.

    Item Reference Number Explanation
    111 Income tax withheld from wages, tips, and other compensation (line 7 of Form 944-X - column 4).
    004 Taxable social security wages (line 8 of Form 944-X - column 3 plus line 14 of Form 944-X - column 3).
    005 Taxable social security tips (line 9 of Form 944-X - column 3).
    073 Taxable Medicare wages and tips (line 10 of Form 944-X - column 3 plus line 15 of Form 944-X - column 3).
    074 Taxable Wages & tips subject to Additional Medicare Tax withholding (valid for tax periods beginning after December 31, 2012)
    112 Total social security, Medicare tax, and Additional Medicare Tax (for tax periods beginning after December 31, 2012).
    115 Exempt wages/tips paid to qualified employees after March 31 (line 11b of Form 944-X - column 3). For MFT 14, only valid for tax period 14/201012.
    116 Taxes on exempt wages/tips paid to qualified employees after March 31 (line 11b of Form 944-X - column 4). For MFT 14, only valid for tax period 14/201012.
    106 Tax adjustments (line 12 of Form 944-X - column 4).
    104 Income tax withheld figured at IRC Section 3509 tax rate on Special addition to wages for federal income tax (line 13 of Form 944-X - column 4).
    105 Social security and Medicare taxes figured at IRC Section 3509 tax rates on Special addition to wages for social security taxes and Special addition to wages for Medicare taxes (lines 14 and 15 of Form 944-X - column 4).
    113 Total adjustments (total of lines 12, 13, 14, and 15 of Form 944-X - column 4).

    Reminder:

    IRN 113 must be used when adjusting IRNs 104 through 106.

    117 Exempt wages/tips paid to qualified employees March 19 - 31 (line 18d of Form 941-X - column 3).

    Note:

    For MFT 14, this credit can only be claimed on tax period 14/201012.

    Credit Reference Numbers (CRN)
    766/767 Advance Earned Income Tax Credit (AEITC) (line 17 of Form 944-X - column 4).

    Note:

    AEITC has been legislatively eliminated for tax periods after 201012.

    299 COBRA premium assistance payments (line 18a of Form 944-X - column 4).
    296 Refundable tax credit on exempt wages/tips paid to qualified employees March 19 - 31 (line 18d of Form 944-X - column 4).

    Note:

    For MFT 14, this credit can only be claimed on tax period 14/201012.

    Note:

    See IRM 21.7.2.4.1 for additional requirements with specific item reference numbers.

    Caution:

    Although CRN 290 is valid for MFT 14, this credit cannot be claimed or adjusted by filing a Form 944-X. This credit is only allowed during the processing of Forms 5884-C. See IRM 21.7.2.5.22, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for more information.

21.7.2.4.9.4.1  (02-27-2013)
Form 944-X Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or FICA (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

  2. Verify all required items on Form 944-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Calendar year being corrected

    • Part 1 Box 1 is checked

    • Applicable certification is checked on line 4a, 4b or 4c

    • Detailed explanation

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

  4. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified.

    1. To convert an adjustment to a claim, notate the following remarks on the Form 944-X:
      "90 day - Claim."

    2. Generate Letter 4384C to the TP explaining the adjustment has been converted to a claim.

    Note:

    See IRM 21.7.2.4.9.4.2 to process claim as a refund and refer to IRM 21.7.2.4.6.5 for additional information on 90 day - Claims.

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

  6. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

  7. Do the following:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

    2. Transfer the applicable overpayment using TC 830/TC 710 to the period in which the Form 944-X was filed.

      Caution:

      To prevent debit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

  8. If the taxpayer's filing requirement has changed from Form 944 to Form 941 or vice versa, the credit will be transferred to the filing requirement that was active for the period in which the adjusted return was filed.

21.7.2.4.9.4.2  (02-27-2013)
Form 944-X Decreases — Claim

  1. These tax decreases involve income tax withholding, FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012), and/or AEITC.

    Note:

    AEITC has been legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 944-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Calendar year being corrected

    • Part 1 Box 2 is checked

    • Applicable certification is checked on line 5a, 5b, 5c or 5d

    • Detailed explanation

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

    Exception:

    Claims filed without consent. If taxpayer has not checked a box on line 5 and states (in the explanation or in response to our contact) they are not required to obtain the consents prior to filing the claim and the claim is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send claim CAT-A. Exam will correspond with the taxpayer to secure applicable certifications. In certain situations, taxpayers may not have repaid or reimbursed their employees or obtained their consents prior to filing a claim (Form 944-X). However, they must certify they have repaid or reimbursed their employees or obtained consents before the Service can accept the claim. See Instructions for Form 944-X for more information.

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

  5. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

  6. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

  7. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer explaining the discrepancy.

21.7.2.4.9.4.3  (02-27-2013)
Form 944-X Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

  2. Verify all required items on Form 944-X are complete.

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 944-X for the immediately preceding tax year prior to the due date for the current tax year (for example, a Form 944-X reporting a tax increase for tax year 2009 received on or before January 31, 2011), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest Free Adjustments (Employment Tax Returns), for more information.

  4. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).

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

    If Then
    Return is filed by the due date of the return for the period in which the taxpayer discovered the reporting error Input TC 298, BS 20 and the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    Return is not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20.

    Example:

    An employer discovers an error on February 1, 2013 and files a Form 944-X which is received by the IRS on March 1, 2013 for the 14/201112 tax period. The interest computation date would be March 1, 2013.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3) or a TC 298 (see IRM 20.1.4.21.5).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 291 and an amended ROFTL was provided with the adjusted return.

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

21.7.2.4.10  (10-01-2012)
Form 945, Annual Return of Withheld Federal Income Tax

  1. Form 945, Annual Return of Withheld Federal Income Tax, must be filed to report backup withholding (BUWH) and income tax withheld from non-payroll items, such as:

    • Pensions

    • Annuities

    • IRA's

    • Military retirement

    • Gambling winnings

    • Indian Gaming Profits

    Note:

    As a general rule, all income tax withholding and BUWH (backup withholding) reported on Forms 1099 or W-2G must be reported on Form 945.

  2. Form 945 is an annual return due January 31 following the close of the calendar year.

    Exception:

    The return due date for Form 945 is extended 10 days if timely deposits are made which full pay the amount of tax reported.

  3. 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.

  4. The threshold for making deposits for Form 945 is $2,500. 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 period. See IRM 20.1.4, Failure to Deposit Penalty.

  5. Forms 945 are recorded on MFT 16 and the tax class is 1.

  6. Valid IRN's for Form 945 are 003 (federal income tax withheld) and 008 (BUWH).

    Note:

    IRN 184 (adjustment of withheld income tax) was valid for Form 945 for tax periods 199512 through 200812.

21.7.2.4.10.1  (10-01-2011)
Form 945-X — Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund

  1. Form 945-X is filed to correct income tax withholding and/or BUWH information previously reported on Form 945. Taxpayers can choose to either file:

    • An adjusted return of withheld federal income tax, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 945-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether the they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, process as an adjusted employment tax return.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3.

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

    1. See IRM 21.7.2.4.6.3.1 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-X 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.

  3. Item reference numbers valid for Form 945-X are 003 and/or 008.

21.7.2.4.10.1.1  (11-08-2010)
Form 945-X Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or BUWH.

  2. Verify all required items on Form 945-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Part 1 Box 1 is checked

    • Detailed explanation

    • Signature

  3. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified.

    1. To convert an adjustment to a claim, notate the following remarks on the Form 945-X:
      "90 day - Claim."

    2. Generate Letter 4384C to the TP explaining the adjustment has been converted to a claim.

    Note:

    See IRM 21.7.2.4.10.1.2 to process a claim and refer to IRM 21.7.2.4.6.5 for additional information on 90 day - Claims.

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

  5. Math verify adjustments to income tax and/or BUWH.

  6. Do the following:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

    2. Transfer the applicable overpayment using TC 830/710 to the period in which the Form 945-X was filed.

      Caution:

      To prevent debit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.10.1.2  (10-01-2012)
Form 945-X Decreases — Claim

  1. These tax decreases involve income tax withholding and/or BUWH.

  2. Verify all required items on Form 945-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Part 1 Box 2 is checked

    • Detailed explanation

    • Signature

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

  4. Math verify adjustments to income tax and/or BUWH.

  5. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see IRM 20.1.4.21.5.

  6. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.10.1.3  (10-01-2012)
Form 945-X Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or BUWH.

  2. Verify all required items on Form 945-X are complete.

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 945-X for the immediately preceding tax year prior to the due date for the current tax year (for example, a Form 945-X reporting a tax increase for tax year 2010 received on or before January 31, 2012), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest Free Adjustments (Employment Tax Returns), for more information.

  4. Math verify adjustments to income tax and/or BUWH.

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

    If Then
    The Form 945-X was filed by the due date of the return for the period in which the taxpayer discovered the reporting error Input TC 298, BS 20 and the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    The Form 945-X was not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20.

    Example:

    An employer discovers an error on February 1, 2013 and files a Form 945-X which is received by the IRS on March 1, 2013 for the 16/201112 tax period. The interest computation date would be March 1, 2013.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3) or a TC 298 (see IRM 20.1.4.21.5).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 291 and an amended ROFTL was provided with the adjusted return.

  7. If payment for the additional tax reported on the Form 945-X is not reflected on the tax period being adjusted, research the taxpayer's account for the missing credit and, if located, transfer the payment as appropriate.

21.7.2.4.10.2  (10-01-2011)
Taxpayer Reports Non-Payroll Income Tax or BUWH on Incorrect Form

  1. The following subsections provide procedures to be followed when a taxpayer reports non-payroll income tax withholding or backup withholding (BUWH) on an incorrect employment tax return.

21.7.2.4.10.2.1  (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 expedited basis (Form 3465 indicates "Form 941/945 BUWH" .)

  3. Upon receipt of Form 3465, on an expedited 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.

21.7.2.4.10.2.2  (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. Code & Edit 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 20.1.4.21.3, Amended or Supplemental Return (Tax Decrease or Non-Interest Free Tax Increase), 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.


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