21.7.2  Employment and Railroad Tax Returns

Manual Transmittal

September 09, 2014

Purpose

(1) This transmits revised IRM 21.7.2, Business Tax Returns and Non-Master File Accounts, Employment and Railroad Tax Returns.

Material Changes

(1) This IRM was revised to reflect the following changes:

SUBSECTION CHANGE
IRM 21.7.2 Editorial changes made throughout.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.3.3(2) Updated table to add social security wage limit for 2014 and delete information for 2004.
IPU 13U1555 issued 10-22-2013 IRM 21.7.2.3.3(8) Deleted technical content which is being moved into new IRM section 21.7.2.5.23 and added cross-reference to that new IRM section.
IPU 13U1555 issued 10-22-2013 IRM 21.7.2.3.3.1(1) Added note with cross-reference in regards to definition of spouse which now includes same sex married individuals for federal tax purposes.
IRM 21.7.2.3.3.2 Revised text in (2) and (3) per Counsel feedback.
IRM 21.7.2.3.3.3.1 Revised text per Counsel feedback.
IRM 21.7.2.3.4(1) Deleted outdated data in the table, added updated data in the table, and added note with a cross-reference to another source for the information deleted.
IRM 21.7.2.3.5 Revised title. Completely revised subsection to eliminate outdated content, add current information, cross-reference to pertinent resources, and consolidate content formerly found in subsections 21.7.2.3.5.1, 21.7.2.3.5.2, and 21.7.2.3.5.3 which have been deleted.
IRM 21.7.2.3.5.1 Subsection deleted. Former content incorporated in revised IRM 21.7.2.3.5.
IRM 21.7.2.3.5.2 Subsection deleted. Revised IRM 21.7.2.3.5 includes a reference to the obsolete form previously discussed in this subsection.
IRM 21.7.2.3.5.3 Subsection deleted. Former content has been replaced with a cross-reference in revised IRM 21.7.2.3.5 to equivalent information in IRM 3.42.4.
IRM 21.7.2.3.6(1) Clarified data contained in Reporting Agent File (RAF), the filing of Form 8655, and possible Reporting Agent authorities.
IRM 21.7.2.4.1 Added new (3) with cross references to IRN and CRN information for forms not discussed in the table in (2).
IRM 21.7.2.4.5 Content for obsolete Form 941c revised and clarified.
IRM 21.7.2.4.5.1 Subsection deleted. Former content condensed and moved to revised IRM 21.7.2.4.5.
IRM 21.7.2.4.5.2 Subsection deleted. Former content condensed and moved to revised IRM 21.7.2.4.5.
IRM 21.7.2.4.6 Updated, revised, and clarified content throughout subsection.
IRM 21.7.2.4.6.1(1) Added note after the table with regards to discontinuance of Form 944(PR) and Form 944(SS).
IRM 21.7.2.4.6.3 Revised title to more closely align with content. Revised (3) and added table with guidance on processing Forms 94XX requesting corrections to income tax withheld, backup withholding, and Additional Medicare Tax withheld.
IRM 21.7.2.4.6.3.2(2) Converted alpha list to a step list.
IRM 21.7.2.4.6.4.2 Content clarified throughout based on feedback comments from Counsel and SBSE Exam Policy.
IPU 13U1555 issued 10-22-2013 IRM 21.7.2.4.6.4.2(3) Added reminder and cross-reference with regards to DOMA (United States v. Windsor) related employee FICA claims.
IRM 21.7.2.4.6.5(1) Revised dates in table.
IRM 21.7.2.4.6.7 Clarified and condensed previous content. Listed subsection topics being deleted with this IRM revision and added directions to research archived IRM files if information is needed on procedures that are being deleted.
IRM 21.7.2.4.6.7.1 Clarified language throughout.
IRM 21.7.2.4.6.7.2 Deleted previous IRM 21.7.2.4.6.7.2 subsection containing outdated procedural information. Topic deleted is identified in list in revised IRM 21.7.2.4.6.7. Subsequent subsections renumbered.
IRM 21.7.2.4.6.7.2 Previous IRM subsection 21.7.2.4.6.7.3 is now IRM 21.7.2.4.6.7.2 due to renumbering. Revised title and procedures due to changes in related Submission Processing handling.
IRM 21.7.2.4.6.7.3 Previous IRM subsection 21.7.2.4.6.7.5 is now IRM 21.7.2.4.6.7.3 due to renumbering. Deleted existing (4) and incorporated the important concept of that paragraph in (1). Clarified language throughout.
IRM 21.7.2.4.6.7.4. Deleted previous IRM 21.7.2.4.6.7.4 subsection containing outdated procedural information. Topic deleted is identified in list in revised IRM 21.7.2.4.6.7. Subsequent subsections renumbered.
IRM 21.7.2.4.6.7.4 Previous IRM subsection 21.7.2.4.6.7.6 is now IRM 21.7.2.4.6.7.4 due to renumbering. Deleted existing (4) as it was not applicable to the filing situation discussed in this subsection. Clarified language throughout.
IRM 21.7.2.4.6.7.5 Previous IRM subsection 21.7.2.4.6.7.9 is now IRM 21.7.2.4.6.7.5 due to renumbering. Retitled to match revised content. Outdated content deleted and procedures added for current handling requirements.
IRM 21.7.2.4.6.7.7 Deleted previous IRM 21.7.2.4.6.7.7 subsection containing outdated procedural information. Topic deleted is identified in list in revised IRM 21.7.2.4.6.7. Subsequent subsections renumbered.
IRM 21.7.2.4.6.7.8 Deleted previous IRM 21.7.2.4.6.7.8 subsection due to changes in related Submission Processing handling. Guidance for cases previously addressed in this subsection are now incorporated in revised IRM 21.7.2.4.6.7.2. Subsequent subsections renumbered.
IRM 21.7.2.4.7.3 Complete revision of procedures for multiple tax period Form 941 situations to account for requirement to file Form 941-X to correct previous reporting errors and to revise other outdated handling.
IRM 21.7.2.4.7.6(3) Revised information throughout table to account for changes in Form 941-X layout. Added caution indicating employees are responsible for correct adjustment action when taxpayer submits prior version Forms 941-X.
IRM 21.7.2.4.7.6.1(4) Reformatted directions for converting and processing certain Forms 941-X to claims.
IRM 21.7.2.4.8.1(3) Added bullet for 2014 wage threshold. Deleted bullet regarding wage thresholds for 2009 through 2011.
IRM 21.7.2.4.8.3.1(4) Reformatted directions for converting and processing certain Forms 943-X to claims.
IRM 21.7.2.4.9 Revised content throughout for clarity. Paragraphs (6), (7), and (8) transferred to revised IRM 21.7.2.4.9.3.1.
IRM 21.7.2.4.9.1 Retitled. Content formerly in paragraphs (6), (7), and (8) of IRM 21.7.2.4.9.3 has been placed in this section. Former IRM 21.7.2.4.9.3.1 content is now found in revised IRM 21.7.2.4.9.3.2.
IRM 21.7.2.4.9.2 Retitled. Content formerly in IRM 21.7.2.4.9.1 has been placed here and updated throughout for clarity and accuracy.
IRM 21.7.2.4.9.3 Retitled. Expanded existing content to address information formerly in IRM 21.7.2.4.9.2 which has been moved to subsection IRM 21.7.2.4.9.3.4. Added cross references.
IRM 21.7.2.4.9.3.1 Updated and reorganized content for clarity and accuracy.
IRM 21.7.2.4.9.3.2 Updated and reorganized content for clarity and accuracy.
IRM 21.7.2.4.9.3.3 Updated and reorganized content for clarity and accuracy.
IRM 21.7.2.4.9.3.4 Content formerly contained in IRM 21.7.2.4.9.2 has been placed in new IRM 21.7.2.4.9.3.4. Updated and reorganized content for clarity and accuracy.
IRM 21.7.2.4.9.4(3) Revised information throughout table to account for changes in Form 944-X layout. Added caution indicating employees are responsible for correct adjustment action when taxpayer submits prior version Forms 944-X.
IRM 21.7.2.4.9.4.1(4) Reformatted directions for converting and processing certain Forms 944-X to claims.
IRM 21.7.2.4.10.1.2(3) Reformatted directions for converting and processing certain Forms 945-X to claims.
IRM 21.7.2.4.10.2 Retitled subsection and clarified existing content to more closely align with topic. Added new table with current procedures for processing situations previously addressed in IRM 21.7.2.4.10.2.1, IRM 21.7.2.4.10.2.2, IRM 21.7.2.4.10.2.3, and IRM 21.7.2.4.10.2.4 which have been deleted.
IRM 21.7.2.4.10.2.1 Deleted subsection. Content was out of date and no longer in agreement with related Submission Processing procedures. Applicable current procedural requirements incorporated in new table in IRM 21.7.2.4.10.2.
IRM 21.7.2.4.10.2.2 Deleted subsection. Former content incorporated in new table in IRM 21.7.2.4.10.2.
IRM 21.7.2.4.10.2.3 Deleted subsection. Former content incorporated in new table in IRM 21.7.2.4.10.2.
IRM 21.7.2.4.10.2.4 Deleted subsection. Former content incorporated in new table in IRM 21.7.2.4.10.2.
IRM 21.7.2.4.10.3(3) Revised text per Counsel feedback.
IPU 14U0067 issued 01-08-2014 IRM 21.7.2.4.11.2(1) Added note at end of table with cross-reference to IRM specifying CSR duties due to changes in responsibility for responding to tax law inquiries.
IRM 21.7.11.3 Revised title and content per Counsel feedback.
IRM 21.7.11.3.1 Revised text per Counsel feedback.
IRM 21.7.11.3.2 Deleted subsection on subagents per Counsel feedback.
IRM 21.7.2.5.3 Revised title per Counsel feedback. Also, deleted outdated information in (6) and added direction to research archived IRM files if information is needed on procedures that are being deleted.
IPU 13U1560 issued 10-24-2013 IRM 21.7.2.5.4 Updated line numbers for IRC 3509 related corrections.
IRM 21.7.2.5.4(6) Updated line numbers for IRC 3509 related corrections.
IRM 21.7.2.5.6 Updated dates in tables in both (4) and (5).
IRM 21.7.2.5.7.2.1(6) Added direction to send Letter 134c to the address showing on ENMOD/BMFOLE.
IRM 21.7.2.5.7.2.3(1) Added direction to send Letter 134c to the address showing on ENMOD/BMFOLE.
IRM 21.7.2.5.7.2.6(2) Added note with directions to use Letter 134C or other appropriate "C" letter when rejecting documents back to the initiating federal agency. Also indicated that agency addresses may be found in the text of Letter 134C.
IRM 21.7.2.5.8 Edits made throughout per Counsel feedback.
IRM 21.7.2.5.8.1 Edits made throughout per Counsel feedback.
IRM 21.7.2.5.13.1(5) Deleted outdated information and added direction to research archived IRM files if information is needed on procedures that are being deleted.
IPU 14U0971 issued 06-06-2014 IRM 21.7.2.5.16 Updated claims handling procedures to account for the Supreme Court decision in United States v. Quality Stores Inc. Also, direction added to hold cases citing Rev. Rul. 90-72 pending development of revised procedural guidance.
IPU 14U1167 issued 07-21-2014 IRM 21.7.2.5.16(4) Revised IDRS number for cases being suspended at Ogden.
IPU 14U0971 issued 06-06-2014 IRM 21.7.2.5.16.1 Subsection deleted. The procedures previously provided in this subsection are obsolete as the result of the Supreme Court decision in United States v. Quality Stores Inc.
IPU 14U0971 issued 06-06-2014 IRM 21.7.2.5.16.2 Subsection deleted. The procedures previously provided in this subsection are obsolete as the result of the Supreme Court decision in United States v. Quality Stores Inc.
IRM 21.7.2.5.19 Reorganized content for clarity and updated for changes in required method of filing claims for COBRA premium assistance credits. Also incorporated content formerly in IRM 21.7.2.5.19.2 which has been deleted.
IRM 21.7.2.5.19.1 Updated content for changes in required method of filing claims for COBRA premium assistance credits. Also incorporated information previously contained in IRM 21.7.2.5.19.1.1 which has been deleted.
IRM 21.7.2.5.19.1.1 Subsection deleted. Previous content incorporated in revised IRM 21.7.2.5.19.1.
IRM 21.7.2.5.19.2 Subsection deleted and subsequent subsection renumbered. Previous content incorporated in revised IRM 21.7.2.5.19.
IRM 21.7.2.5.19.2 Previous IRM subsection 21.7.2.5.19.3 is now IRM 21.7.2.5.19.2 due to renumbering. Revised and reorganized content for clarity. Updated content for changes in required method of filing claims for COBRA premium assistance credits.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.5.19.3 (now renumbered as IRM 21.7.2.5.19.2) Revised CAT-A criteria for COBRA claims as per request by SB/SE Employment Tax Policy: instructions in (7) updated and (8) deleted.
IPU 13U1815 issued 12-31-2013 IRM 21.7.2.5.20.1 Removed references to line numbers throughout and added Caution after (3) to address changes to applicable line numbers through successive form revisions.
IRM 21.7.2.5.20.1(3). Revised caution to reflect expiration of normal statute for 2010 employment tax returns, removal of HIRE related lines from Forms 94XX and to add a cross-reference to the IRM 25.6.1.
IPU 14U1208 issued 08-05-2014 IRM 21.7.2.5.22(6) Revised name and IDRS number for case transfers.
IPU 13U1555 issued 10-22-2013 IRM 21.7.2.5.23 Added new subsection with technical content regarding retroactive increase to the monthly transit benefit exclusion under IRC Section 132(f)(2)(A) and Notice 2013-8 which provided for a special administrative procedure employers could use to make related tax corrections. This information was previously found in IRM 21.7.2.3.3(8) and IRM 21.7.2.6.4.2(11).
IPU 13U1555 issued 10-22-2013 IRM 21.7.2.5.24 through IRM 21.7.2.5.24.5 Added new subsections with procedures for DOMA (United States v. Windsor) related employment tax claims.
IRM 21.7.2.5.24 Added new (5) to clarify that taxpayers can combine a DOMA related claims issue with other adjustment issues on the same Form 94XX if the taxpayer is not filing under a special administrative procedure in Notice 2013-61. Renumbered subsequent paragraphs.
IRM 21.7.2.5.24(3) Clarified impact of the United States v. Windsor decision for employment taxes and added reference to the term "imputed wages" .
IRM 21.7.2.5.24(7) Added reminder to clarify that taxpayers can combine a DOMA related claims issue with other adjustment issues on the same Form 94XX if the taxpayer is not filing under a special administrative procedure in Notice 2013-61.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.5.24.1 Added new (5) to address a special process implemented by Exam for perfecting certain DOMA (United States v. Windsor) related protective claims.
IPU 13U1591 issued 10-28-2013 IRM 21.7.2.5.24.1(4) As requested by Employment Tax Policy, added coding requirement for Exam referrals of cases discussed and added procedure for rejection of certain protective claims.
IPU 13U1815 issued 12-31-2013 IRM 21.7.2.5.24.1(4) As requested by Employment Tax Policy, revised criteria for rejection of certain protective claims.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.5.24.3 Added new (3) to clarify processing of DOMA (United States v. Windsor) related claims.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.5.24.4(3) Added new (3) to clarify processing of DOMA (United States v. Windsor) related claims.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.5.24.4(4) Added new (4) to explain a special process implemented by Exam for perfecting certain protective claims.
21.7.2.6.2 Revised text per Counsel feedback.
IRM 21.7.2.6.4.1(1) Added note with handling instructions for Forms CT-1 in debit status that are being rerouted. This content was formerly in IRM 21.7.2.6.5(1).
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.6.4.2(3) Updated table to add Tier I wage limit for 2014 and deleted information for 2004.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.6.4.2(8) Updated table to add Tier II rates and wage limit for 2014. Deleted information in table for 2004.
IPU 13U1555 issued 10-22-2013 IRM 21.7.2.6.4.2(10) Deleted technical content which is being moved into new IRM section 21.7.2.5.23 and added cross-reference to that new IRM section.
IRM 21.7.2.6.5(1) Previous content is now placed in a new note in IRM 21.7.2.6.4.1(1). Replaced text with new lead in statement for the subsection.
IRM 21.7.2.6.5.6 Removed outdated information and condensed content.
IRM 21.7.2.6.5.7 Retitled subsection to more closely align with content. Revised and reorganized content to clarify routing requirements.
IPU 13U1756 issued 12-20-2013 IRM 21.7.2.6.5.7(1) Revised for new CAT-A routing instructions as requested by SB/SE Employment Tax Policy.
IRM 21.7.2.6.5.8(2) Deleted information about Chief Counsel determination letters based on feedback from Counsel that they no longer issue such letters relative to the topic discussed.
IRM 21.7.2.6.5.10.1(3) Reformatted directions for converting and processing certain Forms CT-1X to claims.

Effect on Other Documents

IRM 21.7.2 dated September 3, 2013 (effective October 1, 2013) is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs) - 13U1555 (dated October 22, 2013), 13U1560 (dated October 24, 2013), 13U1591 (dated October 28, 2013), 13U1756 (dated December 20, 2013), 13U1815 (dated December 31, 2013), 14U0067 (dated January 8, 2014), 14U0971 (dated June 6, 2014), IPU 14U1167 (dated 07-21-2014), and IPU 12U1208 (dated August 5, 2014).

Audience

The primary users of this IRM are Wage and Investment employees. The IRM is intended for Customer Account Service issues involving employment tax returns.

Effective Date

(10-01-2014)

James P. Clifford
Director, Accounts Management
Wage and Investment Division

21.7.2.1  (10-01-2012)
Employment and Railroad Tax Returns Overview

  1. This section provides general information and procedures for correcting employment tax returns, including railroad tax returns. Both telephone inquiries and paper correspondence can be worked using this information. Included is information for items reported on current forms:

    • Form 941, Employer's QUARTERLY Federal Tax Return

    • Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund

    • Form 943, Employer's Annual Tax Return for Agricultural Employees

    • Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund

    • Form 944, Employer's ANNUAL Federal Tax Return

    • Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund

    • Form 945, Annual Return of Withheld Federal Income Tax

    • Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund

    • Form CT-1, Employer's Annual Railroad Retirement Tax Return

    • Form CT-1 X, Adjusted Employer's Annual Railroad Retirement Tax Return or Claim for Refund

    • Form CT-2, Employee Representative's Quarterly Railroad Tax Return

21.7.2.2  (02-27-2013)
What Are Employment Tax Returns?

  1. Form 941, Form 943 and Form 944 are filed by employers of individuals to report:

    • The amount of federal income tax withheld from the employees’ wages

    • The employer’s and employees' shares of social security and Medicare taxes, also known as FICA (Federal Insurance Contributions Act) tax

    • The amount of Additional Medicare Tax (AdMT) withheld from employees' wages (for tax periods after December 31, 2012)

    • Certain refundable credits

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

    • Pensions

    • Annuities

    • IRA's (Individual Retirement Accounts)

    • Gambling winnings

  3. Form CT-1, Employer's Annual Railroad Retirement Tax Return, is filed to report both the employer's and employees' shares of Railroad Retirement Tax Act (RRTA) tax including Additional Medicare Tax (AdMT) withheld from employees' wages (for tax periods after December 31, 2012).

  4. Forms 94XX are used by employers to correct errors discovered on or after January 1, 2009. These forms include Form 941-X, Form 943-X, Form 944-X, Form 945-X and Form CT-1X.

    Note:

    These "X" forms replaced Form 941c, Supporting Statement to Correct Information and Form 843, Claim for Refund or Request for Abatement, for employers.

21.7.2.3  (10-01-2013)
Employment Tax Returns Research

  1. This section contains general research information applicable to employment taxes. Additional form and issue specific research information and procedures are contained throughout IRM 21.7.2.

  2. Refer to the appropriate reference material to research technical issues.

  3. Prior versions of this IRM may be researched on SERP as needed for obsolete procedures and issues. Prior year versions of IRM 21.7.2 not retained on SERP may be researched on the IRS Publishing site.

21.7.2.3.1  (10-01-2011)
Employment Tax Publications

  1. See Publication 51(Circular A), Agricultural Employer’s Tax Guide, for information on agricultural employees, including types of agricultural work subject to social security and Medicare taxes.

  2. See Publication 15(Circular E), Employer’s Tax Guide, Publication 15-A, Employer’s Supplemental Tax Guide, and Publication 15-B, Employer's Tax Guide to Fringe Benefits, for classes of employment and types of payments subject to social security and Medicare taxes.

  3. See Publication 926, Household Employer's Tax Guide, for information on household employment taxes.

  4. See Publication 80, (Circular SS), Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands which summarizes responsibilities to collect, pay and report social security and Medicare taxes for employers whose principal place of business is in - or who have employees who are subject to income tax withholding for - the U.S. Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands.

21.7.2.3.2  (10-01-2011)
Income Tax Withholding (Employment Tax Returns)

  1. The amount of income tax withheld from wages is based on the following information shown on Form W-4, Employee’s Withholding Allowance Certificate:

    • Marital Status

    • Number of allowances to be used in computing the income tax withheld

    • Any additional amount the employee requests to be withheld

    • Exempt status

  2. With certain exceptions (such as household employment wages), all wages which are subject to FICA tax are also generally subject to income tax withholding. An employer is not required to withhold federal income tax from wages paid to a household employee. An employer should withhold federal income tax only if the household employee asks the employer to withhold it and the employer agrees. (See IRM 21.7.4.4.1.11, Social Security Domestic Employment Reform Act and BMF Schedules H .)

  3. When unable to determine the proper tax correction on employment tax returns, see IRM 21.7.2.4.6.3.2.

21.7.2.3.3  (12-20-2013)
FICA Taxes (including Additional Medicare Tax)

  1. The taxes under the Federal Insurance Contributions Act (FICA) are social security and Medicare.

  2. Social security taxes are withheld at a combined tax rate of 12.4% (6.2% contributed by the employer and 6.2% contributed by the employee) except as modified by legislation for particular tax years (2010, 2011, and 2012) as described in (3), (4), and (5) below. However, social security taxes are withheld from wages and tips only up to a wage limit. The table below shows the social security wage limits from year to year.

    Year Maximum Amount of Wages
    2005 90,000
    2006 94,200
    2007 97,500
    2008 102,000
    2009 — 2011 106,800
    2012 110,100
    2013 113,700
    2014 117,000
  3. Section 101 of the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, created a payroll tax exemption for the employer's share of social security taxes on wages paid to certain previously unemployed workers from March 19, 2010 through December 31, 2010. The employee's 6.2% share of social security tax (figured up to the wage limit), and the employer and employee's shares of Medicare tax still applied to all wages. See IRM 21.7.2.5.20, HIRE — Payroll Tax Exemption, for more information.

  4. Section 601 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced the employee tax rate for social security taxes from 6.2% to 4.2% for wages paid January 1, 2011 through December 31, 2011. The employer's social security tax rate remained 6.2% and the employer and employee Medicare tax rates remained unchanged. Due to late passage of the legislation, employers may have had difficulty in promptly implementing the reduced employee social security tax rate. Employers were instructed to implement the new 4.2% employee social security tax rate as soon as possible but not later than January 31, 2011. Employers were further instructed to correct any over withholding of social security taxes on a subsequent pay period but not later than March 31, 2011. Employment tax returns for calendar year 2011 reflected a combined employer/employee social security tax rate of 10.4% (the reduced employee tax rate of 4.2% plus the unchanged employer tax rate of 6.2%) and no special adjustment procedures were needed to account for the tax rate reduction.

  5. Section 101 of the Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extended the two percentage point payroll tax cut for employees discussed in (4) above through February 29, 2012. Subsequently, Section 1001 of the Middle Class Tax Relief and Job Creation Act of 2012 further extended the two percentage point payroll tax cut for employees discussed in (4) above through December 31, 2012. Employment tax returns for calendar year 2012 reflected a combined employer/employee tax rate of 10.4%.

  6. Medicare taxes are withheld on all wages and tips. There is no wage limit for Medicare taxes. The combined tax rate is 2.9% (1.45% contributed by employer and 1.45% contributed by employee).

  7. Due to expiration of the reduced employee social security tax rates described in (4) and (5) above, the employee tax rate for social security for 2013 (and thereafter) reverted to 6.2%. Notice 1036 (Rev. January 2013) provided that employers were to implement the 6.2% employee social security tax rate as soon as possible, but not later than February 15, 2013. After implementing the 6.2% rate, employers were to make an adjustment in a subsequent pay period to correct any underwithholding of social security tax as soon as possible, but not later than March 31, 2013.

  8. Section 203 of the American Tax Relief Act of 2012 (ATRA 2012) retroactively increased the monthly transit benefit exclusion under IRC Section 132(f)(2)(A) from $125 to $240 per participating employee for the period of January 1 through December 31, 2012. See IRM 21.7.2.5.23, FICA Claims for Calendar Year 2012 Transit Benefit Exclusion, for more information.

  9. An Additional Medicare Tax (AdMT) is effective for tax periods beginning after December 31, 2012:

    • The AdMT tax rate is 0.9%.

    • Employers are required to withhold AdMT at the 0.9% tax rate from wages and tips paid to an employee in excess of $200,000 for a calendar year beginning with the payroll period in which the threshold is exceeded and continuing each pay period until the end of the calendar year.

    • AdMT is in addition to the 1.45% Medicare tax rate withheld from employee wages and tips.

    • AdMT is only imposed on the employee. There is no employer share of AdMT.

    • Amounts of AdMT withheld by the employer will be included on the employee's Form W-2.

    • While employers will begin withholding the AdMT as soon as wages paid to an employee exceed the $200,000 threshold, the final amount owed or refunded will be calculated as part of the individual's income tax return. Employers may not increase or decrease amounts of AdMT withheld from wages/tips paid to an employee based on an employee’s expectation that they will owe more or less tax when filing their individual income tax return. Employees who expect to owe more AdMT than is withheld from their wages should make estimated tax payments and/or use Form W-4, Employee's Withholding Allowance Certificate, to request additional income tax withholding which will be applied against taxes shown on their individual tax return, including any AdMT liability.

    • New lines were added to 2013 (and subsequent) employment tax returns for the purpose of reporting amounts of AdMT withheld by employers.

    • IRN 074 was validated for Form 941, Form 943, and Form 944 to record adjustments to Taxable Wages & tips subject to Additional Medicare Tax withholding.

    • IRN 112 is to be used to record adjustments to Additional Medicare Tax (along with other FICA tax corrections).

    • Although employers are required to calculate, withhold and report Additional Medicare Tax in a manner similar to other FICA taxes, the tax treatment closely follows income tax withholding procedures. AdMT cannot be corrected after the close of a tax year unless the issue constitutes an administrative error, IRC Section 3509 rates are being applied, or as the result of an Examination. This is true even if AdMT was erroneously withheld. See IRM 21.7.2.4.6.3, Income Tax Withholding, Backup Withholding, and Additional Medicare Tax Adjustments, IRM 21.7.2.4.6.3.1, Administrative Errors, and IRM 21.7.2.5.4, IRC Section 3509, for more information.

    • Information on AdMT is found throughout this IRM, in Publication 15, and instructions for employment tax forms. Additional information, including a "questions and answers" link to Frequently Asked Questions (FAQs), may also be found on the IRS website under the “Additional Medicare Tax” topic heading at: Employment Taxes.

21.7.2.3.3.1  (10-22-2013)
Individuals Employed by Parent or Spouse

  1. FICA must be paid on services performed by:

    • A child who is 18 or older employed by a parent in the course of the parent’s business.

    • A spouse in the course of the employer spouse's trade or business.

    • A child who is 21 or older employed by a parent, whether or not in the course of the parent's business.

    Note:

    For federal tax purposes, the term “spouse” includes individuals of the same sex who are lawfully married under the laws of a state which authorize the marriage of two individuals of the same sex. See IRM 21.7.2.5.24, DOMA (United States v. Windsor) Related Employment Tax Claims, for more information.

21.7.2.3.3.2  (10-01-2014)
Employees Receiving or Paid Tips

  1. Employees must report to their employer all cash, check, and debit and credit card tips received each month if their total tips for any 1 month from any one employer equals or exceeds $20. The report to the employer is due by the 10th of the month following receipt of the tips.

    Note:

    See Publication 531, Reporting Tip Income, and Publication 1244, Employee's Daily Record of Tips and Report of Tips to Employer. Publication 1244 includes Form 4070, Employee’s Report of Tips to Employer, and Form 4070A, Employee's Daily Record of Tips, which may be used for reporting purposes (substitute reporting forms are acceptable).

  2. Employers must withhold income tax and the employee share of FICA taxes (or railroad retirement tax) on tips reported by employees from any non-tip wages or other funds made available by the employee for this purpose. Tips are also subject to Additional Medicare Tax, if, in combination with other wages or compensation paid by the employer, the total exceeds the $200,000 withholding threshold. Employers must also pay the employer portion of FICA on all tips reported to them by employees.

  3. Some employees may not have sufficient additional wages available to cover their share of the FICA tax on tips. In this case, adjustments to the portion uncollected from the employee must be reported on line 9, Form 941 or line 6, Form 944. The employer is still liable for the employer portion of FICA on the tips reported. The employer is not required to have supporting documentation for this reduction in tax. Also, employers must enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B”.

    Note:

    Employers do not withhold income tax or the employee share of FICA from allocated tips. Allocated tips are not reported on Form 941. Rather, allocated tips must be added to income on the employee's tax return.

21.7.2.3.3.3  (02-27-2013)
Reporting FICA to SSA

  1. FICA information, including Additional Medicare Tax (AdMT) for calendar years beginning after December 31, 2012, is reported directly to the Social Security Administration (SSA) at the end of the year by the employer on Form W-3 along with Copy A of all Forms W-2 (or on the equivalent electronically filed forms).

21.7.2.3.3.3.1  (10-01-2014)
Agents — Filing Forms W-2

  1. An employer may request that the IRS authorize an agent under IRC Section 3504 (Section 3504 Authorized Agent) to withhold, report and pay Federal employment taxes on behalf of the employer by filing a Form 2678, Employer/Payer Appointment of Agent. See IRM 21.7.2.3.7, Section 3504 Agents, for more information on agents.

  2. The 3504 Authorized Agent can act as an agent for two or more employers, or can be an employer and act as an agent for another employer. If either situation applies, the agent has special reporting procedures on Form W-2.

    1. The agent is instructed to enter its EIN in box b of Form W-2.

    2. The agent files separate Forms W-2 reflecting the wages paid by each employer. However, each Form W-2 will have the agent’s EIN in box b.

    3. In box c of Forms W-2, the agent should enter its name and address and "agent for" .

    4. Even though agent’s EIN is shown in box b of Form W-2, the Forms W-2 are considered as being issued from separate employers and the employee may be eligible for a refund of excess FICA.

    5. In addition, the employer’s EIN should be entered in box h of Form W-3.

21.7.2.3.4  (10-01-2014)
Deposits

  1. Taxpayers who file Form 941, Form 943, Form 944, or Form 945 are required to pay the tax on these returns by making Federal Tax Deposits (FTD's) if the liability equals or exceeds a designated threshold amount during the tax period for which the return is filed. See the table below for the applicable thresholds:

    FTD Liability Thresholds
    Form Tax Period Ending Dollar Threshold
    941 201003 and subsequent $2,500

    Exception:

    See (2) below.

    941 200103 through 200912 $2,500
    943 200112 and subsequent $2,500
    944 200612 and subsequent $2,500
    945 200112 and subsequent $2,500

    Note:

    See IRM 20.1.4.6, De Minimis Exception to Deposit Requirements, if information is needed for deposit thresholds for years prior to those shown above. Also see IRM 21.7.2.6.5.4, CT-1 Deposits, for deposit requirements for railroad retirement taxes reported on Form CT-1.

  2. Beginning January 2010, employers who file Form 941 are not required to make deposits during a quarter if all the following requirements are met:

    • Their total tax liability for either the current quarter or the prior quarter is less than $2,500, and

    • They did not incur a $100,000 next-day deposit obligation during the current quarter, and

    • They fully pay the amount due with a timely filed return for the current quarter.

  3. Beginning January 1, 2011, all federal tax deposits are required to be made by means of Electronic Funds Transfer (EFT). See IRM 20.1.4.2.1, Electronic Funds Transfer (EFT), for more information. Prior to January 1, 2011, many employers were permitted to make their federal tax deposits at an authorized financial institution accompanied by an FTD coupon.

  4. Penalties are imposed if deposits are made late, not made in sufficient amounts, made directly to the IRS (e.g. sending a check with a tax return or paying by credit card), or not made using EFT. See IRM 20.1.4, Failure to Deposit Penalty, for more information.

  5. Input Computer Condition Code "J" if you are reprocessing a document and no FTD penalty is to be assessed. Edit the "J" in the bottom middle margin of the return. Do not "J" code the re-input document, unless IDRS is unable to correctly figure the penalty, or if reasonable cause is being allowed.

  6. Research IDRS to determine if a CP 194, CP 207, or CP 207L was generated whenever tax or periodic liability information is being adjusted. If so, coordinate with the FTD Penalty Function, if necessary, to prevent erroneous FTD penalty assessments.

  7. For more information on deposits and penalties, see:

    • Publication 15(Circular E), Employer's Tax Guide

    • Publication 51(Circular A), Agricultural Employer's Tax Guide

    • IRM 20.1.4, Failure to Deposit Penalty

  8. Balance due payments for Form 941, Form 943, Form 945 (including balances that are up to ten years past due) and Form 944 (including two prior years) can be made over the phone or by internet using a credit card. These payments can be made through one of three authorized third-party service providers who will obtain card authorization during the transaction and provide a confirmation number as proof of payment. Taxpayers currently required to make FTD's, must still make deposits via EFT. FTD's cannot be paid by credit card. For specific information on business payments made by credit card, see IRM 21.2.1.48.5, Credit or Debit Card Payments (Pay by Phone or Internet).

    Note:

    Beginning January 2009, adjusted return payments may be made by credit card for the Form 941-X, Form 943-X, Form 944-X and Form 945-X (includes current year and two prior years).

21.7.2.3.5  (10-01-2014)
Electronic Filing (e-File) for Employment Tax Returns

  1. See IRM 3.42.4 , IRS e-file for Business Tax Returns for detailed information on electronic filing methods for business tax returns including employment tax returns.

  2. As of January 2014, employment tax returns can be filed electronically on two platforms:

    • The Employment Tax e-file System which supports the 94x e-file Program and the 94x OnLine Filing Program

    • Modernized e-File (MeF)

  3. The Employment Tax e-file System supports electronic filing of the following forms (only) for processing year 2014:

    Employment Tax e-file System Tax Forms and Schedules
    Parent Form Attachment to Parent Form
    Form 940/Form 940-PR Schedule A (Form 940)
    Schedule R (Form 940)
    Form 941/Form 941-SS/Form 941-PR Schedule B (Form 941)
    Anexo B (Formulario 941-PR)
    Schedule D (Form 941)
    Schedule R (Form 941)
    Form 944 N/A
  4. The following employment tax returns can be filed via MeF as of January 2014:

    MeF Employment Tax Forms and Schedules
    Parent Form Attachment to Parent Form
    Form 940/Form 940-PR Schedule A (Form 940)
    Schedule R (Form 940)
    Form 941/Form 941-SS/Form 941-PR Schedule B (Form 941)
    Anexo B (Formulario 941-PR)
    Schedule D (Form 941)
    Schedule R (Form 941)
    Form 943/Form 943-PR Form 943-A
    Form 944 Form 945-A
    Form 945 Form 945-A
  5. Previous e-file programs which are now obsolete for employment tax returns include:

    • 941 TeleFile — Obsolete after the second quarter of 2005.

    • 941 e-file Program (Legacy). — Obsolete as of November 13, 2006.

  6. See IRM 3.42.4.4.2.1, Researching e-file BMF Identification Codes, if Filing Location Code (FLC), Document Code, or other coding information is needed for electronically filed employment tax returns.

21.7.2.3.6  (10-01-2014)
Reporting Agents File (RAF)

  1. The Reporting Agent File (RAF) is a database of taxpayers who have contracted with a Reporting Agent to perform certain actions on their behalf with regards to filing employment tax returns and/or paying taxes. The taxpayer signs Form 8655, Reporting Agent Authorization, (or a Service approved substitute form) which authorizes the Reporting Agent to take all or some of the following actions on behalf of their client:

    • File their Form 940, Form 941, and/or Form 944 electronically.

    • Make EFTPS (Electronic Federal Tax Payment System) payments for them.

    • File other forms on paper or electronically.

    • Receive notices/correspondence and to discuss matters with the IRS associated with the tax returns/tax payments they made.

    Note:

    Prior to January 1, 2014, Forms 945 and Form 943 could not be filed electronically, but the reporting agent may have the authority to file the return on paper for the taxpayer. The reporting agent also has the authority to file amended forms on paper for any form they filed electronically for the taxpayer.

  2. See IRM 21.3.9, Processing Reporting Agents File Authorizations, and IRM 21.1.3.5, Reporting Agents File (RAF) and Form 8655, Reporting Agent Authorization, for more information.

21.7.2.3.7  (10-01-2012)
Section 3504 Agents

  1. An employer may request that the IRS authorize an agent under IRC Section 3504 (Section 3504 Authorized Agent) to withhold, report and pay Federal employment taxes on its behalf. All provisions of law applicable to an employer apply jointly to both the agent and the employer. For example, a corporation may designate another entity to handle its Federal employment tax obligations. For claims for refund of employment taxes made by the agent, treat the agent as an employer for purposes of employment tax deposits and payments made by the agent.

    Note:

    Agents cannot obtain refunds of taxes paid for periods for which the agent was not authorized and therefore the taxes were paid under the employer's (or another agent's) EIN.

  2. To request approval to act as a Section 3504 Authorized Agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS.

    Note:

    Processing information may be found in IRM 3.13.2.16, Form 2678, Employer/Payer Appointment of Agent.

  3. Specific rules apply to an Section 3504 Authorized Agent acting on behalf of disabled and elderly welfare recipients who hire persons to provide home care services (home care service recipients). See IRM 21.7.2.4.11.3, Household Employment Taxes and Section 3504 Agents, for more information.

  4. Under Treasury Regulations Section 31.3504-2, effective for wages paid after March 31, 2014, the IRS may designate a payer to perform acts of an employer (Section 3504 Designated Agent). A Section 3504 Designated Agent does not file Form 2678 with the IRS. Instead, the IRS may designate a payer as agent on behalf of an employer if the payer enters into a service agreement with the employer. All provisions of law applicable to an employer apply to both the Section 3504 Designated Agent and the employer.

    Example:

    A corporation enters into a service agreement to perform an employer’s Federal employment tax obligations, including the payment of wages and filing of employment tax returns but does not file a Form 2678 to become a Section 3504 Authorized Agent. The IRS may designate the corporation to perform acts of employer.

    Note:

    A service agreement is an agreement between the payer and its client/employer in which the payer: 1) asserts it is the employer of individuals performing services for the client; 2) pays wages to the individuals that perform services for the client; and 3) assumes responsibility to withhold, report and pay Federal employment taxes with respect to the wages it pays to the individuals that perform services for the client.

  5. For claims for refund of employment taxes made by a Section 3504 Authorized Agent or Section 3504 Designated Agent, treat the agent as an employer for purposes of employment tax deposits and payments made by the agent. However, Section 3504 Authorized Agents and Section 3504 Designated Agents cannot obtain refunds of taxes paid for periods for which the agent was not authorized.

21.7.2.3.8  (10-01-2011)
Attributed Tip Income Program (ATIP)

  1. Attributed Tip Income Program (ATIP) was a voluntary tip reporting program that promoted tip income reporting and reduced record keeping burden. This program was an expansion of the Service's Tip Rate Determination and Education Program (TRD/EP) and was administered through Rev. Proc. 2006-30.

  2. This reporting alternative for employers in the food and beverage industry was designed to promote tip income reporting and provide benefits to employers and employees similar to those offered under previous tip reporting agreements without requiring one-on-one meetings with IRS to determine tip rates or eligibility.

  3. ATIP expired as of December 31, 2011 pursuant to Rev. Proc. 2009–53.

21.7.2.3.9  (10-01-2013)
Voluntary Classification Settlement Program (VCSP)

  1. The Voluntary Classification Settlement Program (VCSP) is a voluntary program described in Announcement 2011-64 (updated in Announcement 2012-45) that provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes.

  2. To participate in this voluntary program, the taxpayer must meet certain eligibility requirements, apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program (VCSP), and enter into a closing agreement with the IRS.

    • Form 8952 includes a computation by the taxpayer of the settlement amount which is based in part on IRC 3509 tax rates. However this amount is not a tax and will not be assessed on any tax account.

    • The Instructions for Form 8952 caution the taxpayer against submitting payment with Form 8952. The amount determined to be due under VCSP is to be paid with their signed closing agreement and that will take place after their application for participation in the VCSP is considered and accepted. Payments received from taxpayers accepted in the VCSP are not payments of tax and will not be posted to any tax account.

  3. Additional information, including Frequently Asked Questions (FAQs), may be found on the IRS website at:Voluntary Classification Settlement Program.

  4. Telephone assistors should not attempt to assist callers with questions regarding this program. Instead, direct any caller making inquiries regarding the VCSP to the IRS website information which may be located by searching for “Voluntary Classification Settlement Program” or "VCSP" on irs.gov.

21.7.2.4  (10-01-2011)
Employment Tax Returns Procedures

  1. This section contains procedures for working common employment tax issues.

21.7.2.4.1  (10-01-2014)
Item Reference Numbers (IRN's) and Credit Reference Numbers (CRN's) — Employment Taxes

  1. Use Item Reference Numbers (IRN's) to adjust tax, wages, and Credit Reference Numbers (CRN's) to adjust applicable credits on employment tax returns.

  2. The valid reference numbers for 2004 and prior Form 941 accounts and 2005 and subsequent are listed below, including Form 944.

    Item Reference Number Returns processed 2004 and prior Returns processed 2005 and subsequent Explanation
    003 X   Adjusted total of income tax withheld
    004 X X Taxable social security wages
    005 X X Taxable social security tips
    007 X   Adjusted total social security/Medicare tax
    072 X X Tips deemed to be wages (IRC Section 3121 (q))

    Caution:

    Should not be used for tax periods after 201012.

    073 X X Taxable Medicare wages & tips
    074   X Taxable Wages & tips subject to Additional Medicare Tax withholding (valid for Forms 941/943/944 for tax periods beginning after December 31, 2012)
    104   X Special rates for federal income tax (IRC Section 3509)
    105   X Special rates for social security, Medicare tax, and Additional Medicare Tax (IRC Section 3509)
    106   X Current quarter's fractions of cents (Form 941)/Current year's adjustments (Form 944)
    107   X Current quarter's sick pay (N/A for Form 944)
    108   X Current quarter's adjustment for tips and group life insurance (N/A for Form 944)
    109   X Current year's income tax withholding (Form 941)/Prior year's income tax withholding (Form 944)

    Caution:

    IRN 109 is not valid for tax periods after 200812.

    110   X Prior quarter's social security and Medicare taxes (Form 941)/Prior year's social security and Medicare taxes (Form 944)

    Caution:

    IRN 110 is not valid for tax periods after 200812 except for adjustments related to federal agency wage payments as discussed in IRM 21.7.2.5.7.2.1, Return Posted (TC 150), Account Not in TDA (Taxpayer Delinquent Account) Status (Wage Payments Made by Federal Agencies).

    111   X Total income tax withheld
    112   X Total social security and Medicare tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012)
    113   X Total adjustments

    Reminder:

    (must equal the sum of any IRN 104 through 110 changes)

    114   X Section 3121(q) Notice and Demand - Tax due on unreported tips

    Caution:

    IRN 114 is only valid for Forms 941 and only for tax periods 201103 and subsequent.

    115   X Exempt wages/tips paid to qualified employees this quarter (HIRE Act).

    Caution:

    IRN 115 is only valid for tax periods 201006 through 201012.

    116   X Tax credit on exempt wages/tips paid to qualified employees this quarter (HIRE Act).

    Caution:

    IRN 116 is only valid for tax periods 201006 through 201012.

    117   X Exempt wages/tips paid to qualified employees March 19 - 31 (HIRE Act).

    Caution:

    IRN 117 is valid for 01/201006, 11/201012, and 14/201012 only.

    184 X   Total adjustments to income tax withholding
    185 X   Total adjustments to social security/Medicare taxes
    CREDIT REFERENCE NUMBER (CRN)
    766/767 X X Advanced earned income credit (increase/decrease).

    Caution:

    AEITC has been legislatively eliminated for tax periods after 201012.

    296   X Refundable tax credit on exempt wages/tips paid to qualified employees March 19 - 31 (HIRE Act).

    Caution:

    CRN 296 is valid for 01/201006, 11/201012, and 14/201012 only.

    299   X COBRA premium assistance payments.

    Caution:

    CRN 299 is only valid for tax periods after 200812.

    290   X Work Opportunity Credit for qualified tax-exempt organizations hiring qualified veterans.

    Caution:

    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.

    Note:

    When adjusting an account, research any Computer Condition Codes (CCC "E" or "S" ) which may indicate a taxpayer's intent to receive a refund or credit elect. See Section 3 of Document 6209, IRS Processing Codes and Information.

  3. See the following references for IRNs and CRNs applicable to other employment tax forms discussed in this IRM:

    • For Form 943, see (3) and (4) in IRM 21.7.2.4.8.3.

    • For Form 945, see (6) in IRM 21.7.2.4.10.

    • For Form CT-1, see IRM 21.7.2.6.5.1.

21.7.2.4.1.1  (03-30-2011)
TC 29X / Item Reference Number (IRN) Valid Adjustment Formulas — Employment Taxes

  1. For Forms 941 posting in 2004 and earlier, any 29X adjustment amount must equal the sum of IRNs 003 and 007.

  2. For Forms 941 posting after 2004 and through the 200912 tax period (and Forms 944 through the 200912 tax period), any 29X adjustment amount must equal the sum of IRNs 111, 112, and 113.

    Note:

    IRN 113 must equal the sum of IRNs 104 through 110.

  3. For 2010 Forms 941 and Forms 944, any 29X adjustment amount must equal the sum of IRNs 111, 112, 116, and 113.

    Note:

    IRN 113 must equal the sum of IRNs 104 through 110.

  4. For Forms 941 and Forms 944 after the 201012 tax period, any 29X adjustment amount must equal the sum of IRNs 111, 112, 114, and 113.

    Note:

    IRN 113 must equal the sum of IRNs 104 through 110.

  5. For all Forms 943 other than for tax period 201012 any 29X adjustment amount must equal the sum of IRNs 003 and 007.

  6. For 2010 Forms 943, any 29X adjustment amount must equal the sum of IRNs 003, 007, and 116.

  7. For all Forms 945, regardless of tax period, any 29X adjustment amount must equal the sum of IRNs 003 and 008.

21.7.2.4.1.2  (02-17-2011)
IRN 184/109 — Income Tax Withholding Adjustments

  1. For Forms 941 posting in 2004 and earlier, IRN 184 was used to record withholding corrections for prior quarter errors and prior year administrative errors in conjunction with Form 941c.

  2. For Forms 941 posting after 2004 and through the 200812 tax period (and Forms 944 through the 200812 tax period), IRN 109 was used with IRN 113 to record withholding corrections for prior quarter errors and prior year administrative errors in conjunction with Form 941c.

  3. For Forms 941 and Forms 944 filed for tax periods after 200812, IRN 109 ceased to be valid because it was no longer permitted for employers to make corrections on current tax returns for prior tax period errors via line adjustments due to the introduction of Forms 94XX.

  4. For Form 943 filed through the 200812 tax period, IRN 184 was used to record withholding corrections for prior year administrative errors in conjunction with Form 941c.

  5. For Forms 943 filed for tax periods after 200812, it is no longer permitted for employers to make withholding corrections on current tax returns for prior year administrative errors via line adjustments due to the introduction of Forms 94XX. So, IRN 184 can no longer be used for that purpose.

  6. For Form 945 filed through the 200812 tax period, IRN 184 was used to record withholding corrections for prior year administrative errors in conjunction with Form 941c.

  7. For Forms 945 filed for tax periods after 200812, it is no longer permitted for employers to make withholding corrections on current tax returns for prior year administrative errors via line adjustments due to the introduction of Forms 94XX. So, IRN 184 can no longer be used for that purpose.

    Note:

    With the implementation of the new "X" forms, see the applicable section in IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund, for the correct Item Reference Numbers to use.

21.7.2.4.1.3  (02-17-2011)
IRN 185/110 — FICA Tax Adjustments

  1. For Forms 941 posting in 2004 and earlier, IRN 185 was used to record corrections to social security and Medicare taxes for prior quarter errors (in conjunction with Form 941c), for fractions of cents, and for third party sick pay adjustments.

  2. For Forms 941 posting after 2004 and through the 200812 tax period (and Forms 944 through the 200812 tax period), IRN 110 was used with IRN 113 to record corrections to social security and Medicare taxes for prior quarter errors in conjunction with Form 941c. Also with IRN 113, IRN 106 was used for fractions of cents and IRN 107 was used for third party sick pay adjustments.

  3. For Forms 941 and Forms 944 filed for tax periods after 200812, IRN 110 ceased to be valid (except for adjustments related to federal agency wage payments as discussed in IRM 21.7.2.5.7.2.1, Return Posted (TC 150), Account Not in TDA (Taxpayer Delinquent Account) Status (Wage Payments Made by Federal Agencies)) because it was no longer permitted for employers to make corrections to social security and Medicare taxes on current tax returns for prior tax period errors via line adjustments due to the introduction of Forms 94XX. IRNs 106 and 107 remain valid (with IRN 113) for fractions of cents and third party sick pay adjustments.

  4. For Forms 943 filed through the 200812 tax period, IRN 185 was used to record corrections to social security and Medicare taxes for prior quarter errors (in conjunction with Form 941c), for fractions of cents, and for third party sick pay adjustments.

  5. For Forms 943 filed for tax periods after 200812, it was no longer permitted for employers to make corrections to social security and Medicare taxes on current tax returns for prior tax period errors via line adjustments due to the introduction of Forms 94XX. So, IRN 185 can no longer be used for that purpose. However, IRN 185 remains valid for Forms 943 to record adjustments for third party sick pay and for fractions of cents.

    Note:

    With the implementation of the new "X" forms, see the applicable section in IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund, for the correct Item Reference Numbers to use.

21.7.2.4.1.4  (10-01-2012)
IRN's Do Not Equal TC 150

  1. If IRN amounts do not equal the TC 150 on an employment tax account, process as below:

    1. Input TC 290 .00 and correct the IRN amounts to agree with the posted TC 150. Use the appropriate Hold Code (usually Hold Code 4) with the adjustment to prevent any incorrect notices from being issued or to hold credit as needed.

    2. Input any corrections necessary to complete required account actions with a second adjustment using a post delay code of one cycle.

    Example:

    An employer files a Form 941-X reflecting a FICA tax decrease of $500 for the second quarter of 2014. The TC 150 posted for $1,000.00 (all FICA tax) but the FICA reference line posted as $1,040.00. First, input a TC 290 .00 with a $40.00 decrease to IRN 112 and Hold Code 4. Then, on a second adjustment, input a $500 decrease with TC 291 and IRN 112 along with a post delay code of one cycle.

    Exception:

    Adjustments can be made without correcting the IRN(s) if the total of the IRN's are ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the posted TC 150 or if the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the posted amount (unpostable check is bypassed). However, the IRN's must equal the TC 29X input on IDRS.

    Example:

    If TC 150 posted as $39.00 (all FICA tax) and the FICA posted as $35.00, input TC 291 for $39.00 and IRN 007 for $39.00 for all Form 943 accounts and Form 941 accounts posted prior to 2005. On Form 941 accounts posting 2005 and subsequent, input a TC 291 for $39.00 and IRN 112 for $39.00.

21.7.2.4.2  (10-01-2013)
Sick Pay

  1. Generally, sick pay is any amount paid under a plan to an employee-participant because of the employee's temporary absence from work due to disability, sickness, or injury. This plan may be paid by the employer or a third party, such as an insurance company.

  2. Generally, sick pay is subject to:

    • FICA taxes or railroad retirement taxes (including Additional Medicare Tax to the extent wages/tips (or RRTA compensation) paid to an employee exceed $200,000 for a calendar year beginning after December 31, 2012)

    • Federal unemployment taxes

    • Income tax withholding (unless paid by a third party who is not the employer's agent)

  3. Employers include total sick pay in taxable social security and Medicare wages (as well as wages/tips subject to Additional Medicare Tax when appropriate) paid on Form 941, on Form 944, or (rarely) on Form 943 as appropriate:

    • If payments are made by a third party payor (e.g., an insurance company) and the third party payor transfers the liability for the employer's share of tax back to the employer as provided in the regulations, the employer reports the sick pay as wages but then deducts the employee’s share of social security and Medicare taxes paid by the third party on the appropriate adjustment line of Form 941, Form 944, or Form 943.

    • If the return is being filed by the third party payor, the third party payor reports the payments as wages but the employer’s share of social security and Medicare taxes on the sick pay is deducted on the appropriate adjustment line of Form 941, Form 944, or Form 943.

  4. See Publication 15-A, Employer's Supplemental Tax Guide, for more information on sick pay.

  5. Although sick pay can be reported on original employment tax returns, employers and reporting agents often choose to file an adjusted Form 94XX to report sick pay and the associated taxes and adjustment amounts. See the appropriate form specific processing instructions found later in this IRM when addressing a Form 94XX reporting a correction to sick pay amounts.

  6. Substantiation is not required for sick pay adjustments reported on the appropriate adjustment line of an original employment tax return or a related Form 94XX adjusted return.

  7. The appropriate Item Reference Numbers (IRNs) must be used when completing corrections to sick pay reporting:

    Form Filed Use IRNs
    Form 941 (or Form 941-X) posted in 2005 and earlier 004, 073, 007, and 185
    Form 941 (or Form 941-X) posting in 2006 and later 004, 073, 074 (as appropriate), 112, 107 and 113
    Form 944 (or Form 944-X) 004, 073, 074 (as appropriate), 112, 106 and 113
    Form 943 (or Form 943-X) 004, 073, 074 (as appropriate), 007, and 185

    Note:

    If appropriate, also use IRNs 003 or 111 (as applicable) to record corrections to federal income tax withheld on sick pay.

  8. In some situations, employers may believe a Third Party Payor (Insurance Company) has made payment of the employer's share of FICA taxes for them and they may request the third party's payment of the employee's share to be applied to the employer's tax account. In that situation:

    • Provide the employer with Publication 15-A.

    • Explain to the employer how the Third Party Payor (Insurance Company) reports the employee's share of FICA (and any federal income tax) withheld from the employees' sick pay on their own employment tax return.

    • Explain to the employer that they remain liable to report and pay the employer's share of FICA taxes by including the wages on their employment tax return and deducting the employee's share of FICA reported and paid by Third Party Payor on the appropriate adjustment line.

21.7.2.4.3  (10-01-2011)
Advance Earned Income Tax Credit (AEITC) — Form 941, Form 943, Form 944, and Schedule H

  1. Advance Earned Income Tax Credit (AEITC) was legislatively eliminated for tax periods after December 31, 2010.

  2. Prior to January 1, 2011, employees who expected to be eligible to claim EITC (Earned Income Tax Credit) could choose to receive advance payments (AEITC) during the year from their employer.

    1. The employer paid the EITC directly to the employees from income tax and FICA taxes withheld.

    2. The employer then claimed a credit for these payments on Form 941, Form 943, Form 944 or Schedule H.

  3. If AEITC is claimed on amended returns, and:

    • Employer made no FTD's (verify payments), and

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡

  4. Do not allow a credit for payments which exceed ≡ ≡ ≡ ≡ ≡ of the total cash wages for 1994 and ≡ ≡ ≡ ≡ for 1995 through 2010.

    Reminder:

    Do not allow any credit for AEITC payments for tax years after 2010.

  5. If the adjustment to AEITC is allowable:

    1. Calculate the correction by comparing posted AEITC to amount claimed on amended return.

    2. Input TC 290 .00 with CRN 766 to increase credit or CRN 767 to decrease credit.

      Note:

      TC 290 or TC 291 with a significant amount can be used in addition to CRN 766/767, if other tax items are also being adjusted.

      Note:

      MF programming does not recognize the reversal of an AEITC credit as an interest-free adjustment under the provisions of IRC 6205. If a qualifying interest-free AEITC reversal adjustment is input, a TC 340 .00 and a TC 270 .00 must be input along with the reversal adjustment to allow for a completely interest-free adjustment. If the taxpayer timely paid the additional amount due, the date input as the Debit Interest To Date (DB-INT-TO DT field) will be the same date used for the Interest Computation Date (INTCMP-DT field) with the TC 298: the Form 94XX received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . However, in cases where the taxpayer timely filed the Form 94XX and qualified for a TC 298 adjustment but did not pay the balance by the Form 94XX received date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , it may be necessary to manually calculate underpayment interest from the Interest Computation Date to the payment date, assess that amount with the TC 340, and the date of payment would then be the Debit Interest To Date used with the TC 340. In that situation, it may also be necessary to compute and assess a Failure to Pay (FTP) penalty.

21.7.2.4.4  (10-01-2012)
Loose Employment Tax Schedules

  1. Loose schedules are those that have inadvertently been detached from a return or received from taxpayers without sufficient information to indicate why they have been sent or to allow them to be associated with the proper return. These include, but are not limited to, Schedule B (Form 941), Form 945-A, Schedule D (Form 941) and Schedule R (Form 941). See the subsections which follow for guidance on handling the most common loose employment tax schedule situations.

21.7.2.4.4.1  (10-01-2012)
Loose Schedule B (Form 941) or Other Record of Federal Tax Liability (ROFTL)

  1. Upon receipt of a loose Schedule B (Form 941) or other loose ROFTL (such as Form 943-A or Form 945-A):

    If And Then
    The correct tax period cannot be determined   Attempt to contact taxpayer to determine the correct tax period:
    • If the correct tax period can be determined, continue to process per the instructions in the following rows of this table.

    • If unable to contact the taxpayer, return the schedule and instruct the taxpayer to refile it with a newly signed copy of the related employment tax return.

    The tax return for which the loose schedule was filed has not posted Normal processing time for the original return has elapsed Return the schedule and instruct the taxpayer to refile it with a newly signed copy of the related employment tax return.
    The tax return for which the loose schedule was filed has not posted Normal processing time for the original return has not elapsed Suspend the case and allow for normal processing time. When the return posts, continue to process per the instructions in the following rows of this table.
    The tax return for which the loose schedule was filed has posted IDRS research indicates the loose schedule is a duplication or is unnecessary Treat the loose schedule as classified waste.
    The tax return for which the loose schedule was filed has posted IDRS research indicates the loose schedule changes originally reported liability data Follow procedures in IRM 20.1.4.21.2, Revised Record of Federal Tax Liability (ROFTL) Provided.

21.7.2.4.4.2  (10-01-2012)
Loose Schedule D (Form 941)

  1. Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, was introduced in 2005. Refer any loose forms received in Accounts Management to the CAWR (Combined Annual Wage Reporting) unit at the Philadelphia Compliance Campus, Drop Point 4-G08.151. Refer any questions that cannot be answered on the toll-free line to CAWR on Form 4442/e-4442.

21.7.2.4.4.3  (10-01-2012)
Loose Schedule R (Form 941): Allocation Schedule for Aggregate Form 941 Filers

  1. Beginning with the first quarter of 2010, a Schedule R (Form 941): Allocation Schedule for Aggregate Form 941 Filers (and continuation sheets as needed), must be completed and attached each time an aggregate Form 941 is filed by an approved agent (as defined by IRC 3504).

    Note:

    To request authorization to act as a Section 3504 Authorized Agent for an employer, Form 2678, Employer/Payer Appointment of Agent, must be filed with the Service. See IRM 21.7.2.3.7, Section 3504 Agents, IRM 21.7.2.4.11.3, Household Employment Taxes and Section 3504 Agents, and IRM 3.13.2.16, Form 2678, Employer/Payer Appointment of Agent, for more information.

  2. Schedule R (Form 941) is used to allocate the aggregate information reported on Form 941 to each client. If there are more than 15 clients, continuation pages should be completed as necessary. Schedule R (Form 941) and any continuation pages must be attached to the aggregate Form 941, when filed. When a Form 941 is processed and a Schedule R (Form 941) is attached, a Schedule R Indicator (SRI) will be posted to MF.

  3. If a taxpayer filed a Schedule R (Form 941) with their original return and needs to correct the previously filed Form 941, then a revised Schedule R (Form 941) should be submitted with the Form 941-X. However, when processing a Form 941-X for an aggregately filed Form 941 (regardless of whether a Schedule R indicator is present), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    Note:

    If a taxpayer is required to file a Schedule R (Form 941) and does not do so with their original return, they may submit another Form 941 with a Schedule R (Form 941) attached which may create a TRNS 193. If so, follow existing procedures in IRM 21.7.9, BMF Duplicate Filing Conditions.

  4. The chart below indicates procedures for most Schedule R inquiries:

    If And Then
    Loose Schedule R is received The original return has posted (regardless if a Schedule R indicator is present) No additional action is needed.

    Note:

    If working a CIS case, add a case note to identify what was received and close the CIS case.

    Loose Schedule R is received The original return has not posted and the original processing time for Form 941 has not elapsed Suspend loose schedule pending posting of original return.
    Loose Schedule R is received The original return has not posted and the original processing time for Form 941 has elapsed Contact taxpayer, preferably by phone, to obtain a signed copy of the original return and suspend case for 40 days.
    1. If taxpayer replies with a copy of the original return, process accordingly.

    2. If the taxpayer does not reply, reject the Schedule R back to the taxpayer requesting the original Form 941 (and accompanying Schedule R) be filed.

21.7.2.4.5  (10-01-2014)
Form 941c (Obsolete)

  1. Form 941c was formerly used by employers to support corrections made to previously reported employment taxes.

  2. Form 941c was made obsolete with the implementation of Form 941-X, 943-X, 944-X, 945-X, and CT-1X for use in correcting errors in reporting of employment taxes. Employers must use the appropriate "X" form for correcting errors ascertained on or after January 1, 2009. See IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund, for more information.

    Note:

    Although Form 843 continues to be used for other purposes (e.g., claims for interest and penalties), it can no longer be used to claim refunds of employment taxes.

  3. See the appropriate subsection of IRM 21.7.2.4.6.7, Exception Processing — Incorrect Filing, Including Forms Routed to AM from SP, for information on handling a Form 941c filed in error by a taxpayer (e.g. see IRM 21.7.2.4.6.7.3, Stand Alone Form 941c (including incorrectly filed Form 843), for handling instructions if an employer files using one of these forms instead of the required Form 94XX).

  4. See archived files of this IRM if previous Form 941c procedures need to be researched, including obsolete procedures for Math Verified Form 941c issues and handling of CP 175/875 cases (no longer generated).

21.7.2.4.6  (10-01-2014)
Adjusted Employer's Federal Tax Return or Claim for Refund

  1. Requests for adjustments or claims for refund of previously reported employment taxes (for errors ascertained on or after January 1, 2009) must be filed on the appropriate adjusted employer's federal tax return or claim for refund. These forms include:

    • Form 941-X

    • Form 943-X

    • Form 944-X

    • Form 945-X

    • Form CT-1X

    Note:

    These forms are collectively referred to as "Forms 94XX" throughout this IRM.

    Exception:

    For errors ascertained during January 2009, employers could either make corrections using the appropriate Form 94XX or report the correction on the current return filed for the fourth quarter (or annual return) of 2008 by January 31, 2009 since the adjustment lines were on the fourth quarter 2008 Form 941.

  2. Category codes for these forms are shown in the following table.

    Form Filed Category Code
    941-X or 941-X (PR) 941X
    943-X or 943-X (PR) 943X
    944-X, 944-X (PR) or 944X (SP) 944X
    945-X 945X
    CT-1 X CT1X

    Note:

    These forms age 45 days from the IRS received date and are not subject to Policy Statement P-6-12 criteria.

  3. Previously, employers could use Form 941c to substantiate adjustment requests on current employment tax returns and use Form 843 (generally with Form 941c attached) to file claims for refund or abatement of employment taxes. Introduction of Forms 94XX had the following impact on the filing of Forms 941c and Forms 843:

    • Form 941c: Obsolete for tax periods ending after December 31, 2008. See the appropriate subsection in IRM 21.7.2.4.6.7, Exception Processing — Incorrect Filing, Including Forms Routed to AM from SP, for handling instructions if a Form 941c is received (e.g. see IRM 21.7.2.4.6.7.3, Stand Alone Form 941c (including incorrectly filed Form 843), for handling instructions if an employer files using one of these forms instead of the required Form 94XX).

    • Form 843: Employers are no longer permitted to use Form 843 to submit a claim for refund of employment taxes. Employers may still use Form 843 to request an abatement of penalties and/or interest.

      Note:

      Employees who are unable to obtain reimbursement of over withheld social security and Medicare taxes from their employer may file Form 843, Claim for Refund and Request for Abatement, to obtain a refund. See IRM 21.7.2.4.6.4.2, Excess FICA Tax Withheld — Employee Claims for Refund, for additional information.

  4. Procedures and requirements for use of Forms 94XX were published in Treasury Decision (T.D.) 9405 which provided revised regulations. Employers may use either a claim process or an adjustment process to make corrections:

    • The adjustment process must be used by the employer to report all corrections for underreported amounts.

    • The adjustment process may be used by the employer to report corrections for overreported amounts unless the correction request is made within 90 days of the expiration of the period of limitations on credit or refund (meaning the Refund Statute Expiration Date or RSED).

    • The claim process may be used to report corrections for overreported amounts if the employer is requesting a refund or abatement and must be used when a correction request for overreported amounts is made within 90 days of the RSED.

    Note:

    To assist taxpayers in deciding which process they should use (adjustment or claim for refund), a flowchart was developed and is part of the Forms 94XX or instructions.

  5. If the employer selects the adjustment process by checking Box 1 in Part 1 of Form 94XX, the amount of any resulting overpayment will be applied as a credit to the tax period in which the adjustment form was filed.

    Example:

    If an employer files a Form 941-X in February 2015 for an adjustment to their 201309 Form 941, the credit will be applied to their 201503 account.

    Example:

    If an employer files a Form 943-X in February 2015 for an adjustment to their 201312 Form 943, the credit will be applied to their 201512 account.

    Note:

    Overpayments arising from adjustments made under these procedures are subject to offset.

  6. If the employer selects the claim process by checking Box 2 in Part 1 of Form 94XX, the amount of any resulting overpayment will be refunded to the employer from the period being adjusted along with any allowable overpayment interest.

    Example:

    If an employer files a Form 941-X in March 2015 claiming a refund for an overpayment on their 201309 Form 941, the overpayment will be refunded from the 201309 account.

    Example:

    If an employer files a Form 943-X in March 2015 claiming a refund for an overpayment on their 201312 Form 943, the overpayment will be refunded from the 201312 account.

    Note:

    Overpayments arising from adjustments made under these procedures are subject to offset.

  7. Per the regulations, employers who are making a correction for overreported amounts within 90 days of the expiration of the period of limitations on credit or refund (RSED) on the period being corrected, must submit a claim instead of an adjustment request. See IRM 21.7.2.4.6.5, 90 Day — Claim, for more information on when to convert adjustment requests to claims and the form specific procedures found later in this IRM for handling instructions.

    Example:

    If wages were paid on June 6, 2011, and an original employment tax return reporting those wages was filed on or by July 31, 2011, and the reported taxes were timely paid, then the period of limitations for assessment or for credit or refund would expire April 15, 2015. An adjusted return reporting an overpayment must be filed by January 15, 2015, the date which is 90 days before the expiration of the period of limitations on credit or refund. In this example, if the Form 94XX requesting correction via the adjustment process was filed after January 15, 2015 , we would convert the adjustment request to a claim and inform the employer of that action.

  8. Employers who need to make corrections for both underreported and overreported amounts on the same tax period have two filing options:

    • Use the adjustment process and report both the underreported and overreported amounts on one Form 94XX. If this option is selected, the employer may net the corrections and either pay the net balance due with the Form 94XX or have the net overpayment applied to the tax period in which the correction was filed.

    • Use the adjustment process to report the correction for underreported amounts and use the claim process to report the correction for overreported amounts. In this situation, the employer must file separate Forms 94XX to report the underreported amounts and the overreported amounts. The entire underreported amount must be paid by the time they file the Form 94XX. It cannot be netted with the overreported amount reported on the separate Form 94XX.

    Note:

    Employers making corrections for both underreported and overreported amounts on the same tax period within 90 days of the RSED must file separate Forms 94XX as discussed in the second bulleted item above. They do not have the option of filing one Form 94XX.

    Exception:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Caution:

    Extreme care must be exercised to prevent barred assessments or erroneous abatements from occurring when employers file Forms 94XX reporting both underreported amounts and overreported amounts. Unique statute of limitations issues may be encountered. It may be necessary in some circumstances to have a Statute function initiate a manual assessment of the underreported amount before processing the adjustment for the overreported amount. It should be particularly noted that a Refund Statute Expiration Date (RSED) for a tax account may remain open after the Assessment Statute Expiration Date (ASED) has expired. See IRM 25.6.1, Statute of Limitations Processes and Procedures, for additional guidance on handling statute imminent cases.

  9. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  10. A set of certifications is included on Forms 94XX. Employers are required to certify that they have filed, or will file, Forms W-2, or Forms W-2c, as required. In addition, employers must complete all certifications that apply to the type of return they are filing and the corrections being made.

    Exception:

    See IRM 21.7.2.5.19.2, Adjusting the Account — COBRA.

  11. Treasury regulations require the employer to explain in detail the grounds and facts relied upon to support each correction. The taxpayer is instructed to describe the events that caused the underreported or overreported wages, administrative errors or payroll errors.

    Note:

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

  12. A TC 971 AC 010 systemically generates when any Form 94XX is scanned into the Correspondence Imaging System (CIS). The generation of this transaction code sets either a -A or an E- freeze on the tax module which must be addressed:

    • -A freeze: Released with a 29X (or 30X) adjustment. See IRM 21.5.6.4.2, -A Freeze, and the appropriate Form 94XX processing instructions found later in this IRM for more information.

    • E- freeze: Released by posting of TC 150 or TC 971 transaction. See IRM 21.5.6.4.9, E- Freeze, and IRM 21.7.2.4.6.6, Adjusted Employer's Tax Return or Claim for Refund Return Filed — No TC 150 Posted, for more information.

    Note:

    Also see the fourth paragraph of IRM 21.5.3.4.2, Tax Decrease or Credit Increase, when rejecting a Form 94XX.

  13. Blocking series "20" must be used when adjusting an account as a result of a Form 941-X, 943-X, 944-X, 945-X or CT-1X being filed.

    Reminder:

    This also applies to the Exception Processing, IRM 21.7.2.4.6.7.

    Exception:

    The appropriate blocking series must be used when a Form 94XX is being disallowing or "no considered" a Form 94XX. See IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns, for additional information.

  14. The AM clerical function (or other campus designated function or employees) should review any Form 94XX received during the last month of a tax period to identify those that are requesting overpayments be applied to the current tax period. Processing of these Forms 94XX should be expedited to prevent the issuance of an incorrect balance due notice to the taxpayer as a result of the original return posting for the current period before the credit arising from the Form 94XX can be applied

    Note:

    The Instructions for the "X" forms encourage employers requesting an overpayment to be credited to a current tax period using the adjustment process to file their Form 94XX prior to the last month of the current tax period.

  15. For claims involving IRC 6020(b), see IRM 21.7.9.4.1.6 , Duplicate Filing Conditions Involving Returns Prepared Under IRC Section 6020(b).

21.7.2.4.6.1  (10-01-2014)
Employment Tax Returns — Stand Alone Forms

  1. Employers must file the appropriate adjusted employer's federal tax return or claim for refund to request an adjustment or claim a refund of previously reported employment taxes. The following table shows which form must be filed based on the original employment tax return filed and provides a cross-reference to specific processing information.

    Return originally filed Form to File to make corrections Cross-Reference
    Form 941 or Form 941-SS Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund IRM 21.7.2.4.7.6
    Form 943 Form 943-X, Adjusted Employer's Annual Tax Return for Agricultural Employees or Claim for Refund IRM 21.7.2.4.8.3
    Form 944 and Form 944-SS Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund IRM 21.7.2.4.9.4
    Form 945 Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund IRM 21.7.2.4.10.1
    Form 941-PR Form 941-X (PR), Adjusted QUARTERLY Federal Tax Return or Claim for Refund (Puerto Rican Version) IRM 21.7.2.4.7.6
    Form 943-PR Form 943-X (PR), Adjusted Employer's Annual Tax Return for Agricultural Employees or Claim for Refund (Puerto Rican Version) IRM 21.7.2.4.8.3
    Form 944-PR Form 944-X (PR), Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund (Puerto Rican Version) IRM 21.7.2.4.9.4
    Form 944(SP) Form 944-X (SP), Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund (Spanish Version) IRM 21.7.2.4.9.4
    Form CT-1 Form CT-1X, Adjusted Employer's Annual Railroad Retirement Tax Return or Claim for Refund IRM 21.7.2.6.5.10

    Note:

    Form 944-PR and Form 944-SS were discontinued beginning with tax year 2012. Taxpayers who previously filed those forms now file one of the following employment tax returns: Form 944, Form 944(SP), Form 941-PR, or Form 941-SS.

  2. Taxpayers must use the applicable form that corresponds to the return type they originally filed for the tax period they are correcting.

    Example:

    Taxpayer was a Form 944 filer for 2013 but became a Form 941 filer for 2014. If the taxpayer is correcting tax period 2013, they must file a Form 944-X to make the correction, not a Form 941-X.

21.7.2.4.6.2  (02-27-2013)
Interest-Free Adjustments (Employment Tax Returns)

  1. Employers who discover (ascertain) they have reported and paid less FICA tax, income tax withholding, or railroad retirement tax (RRTA) than was due on an original tax return may qualify for an interest-free tax adjustment under IRC 6205 and Regulation 26 CFR 31.6205-1 provisions. For tax periods beginning after December 31, 2012. FICA and RRTA taxes include Additional Medicare Tax (AdMT) withheld from employees' wages and compensation.

    Note:

    These interest-free adjustment rules do not apply to the employee representative tax reported on Form CT-2.

    Caution:

    Income tax withholding and Additional Medicare Tax (for tax periods beginning after December 31, 2012) can only be corrected for prior calendar years if there was an administrative error, IRC Section 3509 rates are being applied, or as the result of an Examination. See IRM 21.7.2.4.6.3.1, Administrative Errors and IRM 21.7.2.5.4, IRC Section 3509.

  2. An error is considered ascertained when the employer has sufficient knowledge of the error to be able to correct it.

  3. To qualify for an interest-free tax adjustment, the employer must file the appropriate Form 94XX reporting the correction by the due date of the tax return for the tax period in which the error was ascertained. The due date is determined based on the type of tax return the employer is correcting.

    Example:

    On August 12, 2014, an employer discovers an error with the Form 941 they filed for the 201403 tax period. They must file a Form 941-X reporting the correction by October 31, 2014 in order to qualify for an interest-free tax adjustment.

    Example:

    On June 7, 2014, an employer discovers an error with the Form 943 they filed for the 201212 tax period. They must file a Form 943-X reporting the correction by January 31, 2015 in order to qualify for an interest-free tax adjustment.

    Example:

    On February 18, 2014, an employer who is currently a Form 944 filer for 2014 discovers an error on a Form 941 they filed for the 201209 tax period. They must file a Form 941-X by April 30, 2014 in order to qualify for an interest-free tax adjustment. Although they are currently a Form 944 filer, it is the original tax form which must be corrected that controls the type of adjusted form they must file and its due date. The employer in this situation cannot file a Form 944-X to make the correction and does not have until January 31, 2015 to file the adjusted tax return.

  4. Although employers have until the due date of the tax return for the tax period in which an error was ascertained to file the applicable Form 94XX reporting an underpayment adjustment, regulations require employers to pay any underpayment of tax by the time the adjusted tax return is filed. Otherwise, the correction will not qualify for a completely interest-free tax adjustment. See the table below for more information.

    If And Then
    The employer does not file the applicable Form 94XX by the due date of the tax return for the tax period in which the error was ascertained.   The adjustment will be input with a TC 290 transaction. Interest will be due as per normal underpayment interest rules.
    The employer files the applicable Form 94XX by the due date of the tax return for the tax period in which the error was ascertained. Fully pays the underpayment owed by the time the Form 94XX is filed. The adjustment will be input with a TC 298 transaction. No interest will be due on the amount of the underpayment reported if it is paid by the time the Form 94XX is filed.
    The employer files the applicable Form 94XX by the due date of the tax return for the tax period in which the error was ascertained. Does not fully pay the underpayment owed by the time the Form 94XX is filed. The adjustment will be input with a TC 298 transaction. Interest will be due on the amount of the underpayment from the interest computation date to the date payment is made.
  5. When inputting a TC 298, the interest computation date is the IRS received date of the Form 94XX ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for all errors ascertained after December 31, 2008. See archived copies of this IRM for information on how interest computation dates were determined on errors ascertained prior to January 1, 2009.

    Example:

    An employer discovers an error on February 1, 2014 and the adjustment form has an IRS received date of March 1, 2014. Enter the TC 298 with an interest computation date of March 1, 2014.

    Exception:

    If an employer files an "X" form that is received prior to the due date of the quarter being corrected, input the due date of the quarter being corrected as the interest computation date.

    Example:

    An employer files a Form 941-X (underpayment) correcting the 201403 tax period on April 19, 2014. The interest computation date input should be April 30, 2014, not April 19, 2014.

    Note:

    The computer also uses the interest computation date of the TC 298 for the FTP penalty start date if the underpayment is not paid when the Form 94XX is filed.

  6. No underpayment can be reported as an interest-free adjustment after receipt of the earlier of either:

    1. Notice and Demand for payment

    2. Notice of Determination Concerning Worker Classification Under IRC Section 7436.

21.7.2.4.6.3  (10-01-2014)
Income Tax Withholding, Backup Withholding, and Additional Medicare Tax Adjustments

  1. After the end of the year, adjustments (increases or decreases) to income tax withholding, backup withholding (BUWH), or Additional Medicare Tax (AdMT) can only be made if the adjustment is due to an administrative error, IRC Section 3509 rates are being applied, or as the result of an Examination. Even if income tax, BUWH, or AdMT was erroneously withheld, it cannot be adjusted in a subsequent year. Tax erroneously withheld does not constitute an administrative error.

    Note:

    See IRM 21.7.2.4.6.3.1, Administrative Errors, and IRM 21.7.2.5.4, IRC Section 3509, for additional information.

  2. For corrections to income tax withheld, BUWH, or AdMT, the employer must:

    • Submit the applicable adjustment/claim form.

    • Check the applicable certification box(es).

    • Provide a detailed explanation for the adjustment request.

  3. All general guidance in IRM 21.7.2.4.6 and form/situation specific guidance (e.g., for a tax decrease - claim for refund filed on Form 941-X, follow IRM 21.7.2.4.7.6.2) applies to Forms 94XX filed reporting corrections to income tax withheld, BUWH, and AdMT. However, the following table provides additional guidance on special considerations for adjustment requests for income tax withheld, BUWH, and AdMT.

    If And Then
    A Form 94XX is filed requesting an adjustment to income tax withheld or AdMT The correction is being made at IRC 3509 rates Process the adjustment as requested so long as the form is complete and processable. See IRM 21.7.2.5.4, IRC Section 3509 for processing instructions.
    A quarterly Form 941-X is filed requesting an adjustment (increase or decrease) to income tax withheld or AdMT The Form 941-X indicates the error was discovered on or before December 31 of the year for which the adjustment is requested Process the adjustment as requested so long as the form is complete and processable. 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., for a tax decrease - claim for refund filed on Form 941-X, follow IRM 21.7.2.4.7.6.2) to make any necessary account corrections.
    A Form 94XX is filed requesting an adjustment (increase or decrease) to income tax withheld, BUWH, or AdMT The explanation section indicates the correction requested is for an administrative error or the taxpayer checked box 4c or 5d in the certification section (does not apply to Form 945-X) Process the adjustment as requested so long as the form is complete and processable. 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., for a tax decrease - claim for refund filed on Form 941-X, follow IRM 21.7.2.4.7.6.2) to make any necessary account corrections.
    A Form 94XX is filed (after December 31 of the year for which the adjustment is requested) requesting a decrease to income tax withheld, BUWH, or AdMT The explanation section indicates the correction requested is not for an administrative error. Disallow the income tax withheld, BUWH, or AdMT portion of the claim and send Letter 105C or Letter 106C(as appropriate) per instructions in IRM 21.5.3.4.6.1, Disallowance and Partial Disallowance Procedures. The following language should be used in the disallowance letter open paragraph:
    "Amounts reported as income tax withheld, backup withholding, or Additional Medicare Tax withheld in a prior year cannot be changed unless it is to correct an administrative error, Section 3509 applies, or as the result of an examination. An administrative error occurs if the amount you entered on your tax return is not the amount you actually withheld."

    Caution:

    If the taxpayer combined tax increases with the decrease being disallowed on a single Form 94XX, all normal procedures for securing missing information (e.g. ascertained dates, revised liability schedules (if required), etc.) must be applied before adjusting the account and issuing the disallowance letter.

    A Form 94XX is filed (after December 31 of the year for which the adjustment is requested) requesting a decrease to income tax withheld, BUWH, or AdMT It cannot be determined from the explanation whether the correction requested is for an administrative error. See IRM 21.7.2.4.6 (11) for information on explanation requirements. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    A Form 94XX is filed (after December 31 of the year for which the adjustment is requested) requesting an increase to income tax withheld, BUWH, or AdMT The explanation section indicates the correction requested is not for an administrative error
    1. Process the adjustment as requested so long as the form is complete and processable. 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 filed on Form 941-X, follow IRM 21.7.2.4.7.6.3) to make any necessary account corrections.

    2. Send Letter 4384c and include the following language in the two open paragraphs:
      "We have processed your Form [specify]. However, amounts reported as income tax withheld, backup withholding, or Additional Medicare Tax withheld in a prior year cannot be changed unless it is to correct an administrative error or Section 3509 applies. An administrative error occurs if the amount you entered on your tax return is not the amount you actually withheld."
      "If the Form [specify] you filed included a correction to income tax withheld, backup withholding, or Additional Medicare Tax withheld in a prior year which was not the result of an administrative error, you may file a new Form [specify] to request a refund or credit of the tax reported in error."

    A Form 94XX is filed (after December 31 of the year for which the adjustment is requested) requesting an increase to income tax withheld, BUWH, or AdMT It cannot be determined from the explanation whether the correction requested is for an administrative error See IRM 21.7.2.4.6 (11) for information on explanation requirements. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Reminder:

    See IRM 21.7.2.4.6.3.1, Administrative Errors, for additional information when applying the guidance provided in the table above.

21.7.2.4.6.3.1  (02-27-2013)
Administrative Errors

  1. Administrative errors are mistakes in reporting which do not change the amount of income tax, BUWH, or Additional Medicare Tax (AdMT) actually withheld from wages or payments.

    Example:

    An employer withheld income tax of $7,500 from employee wages and reported the $7,500 figure on the employees' Forms W-2. However, due to an error in addition, the employer reported $7,900 in withholding on their Forms 941 for the year. The employer files a Form 941-X seeking a refund of $400. This situation would constitute an administrative error.

    Example:

    An employer withheld income tax of $3,600 from employee wages and reported the $3,600 figure on the employees' Forms W-2. However, due to a transposition error, the employer reported $6,300 in withholding on their Forms 941 for the year. The employer files a Form 941-X seeking a tax abatement of $2,700. This situation would constitute an administrative error.

    Example:

    An employer withheld Additional Medicare Tax (AdMT) of $1,200 from employee wages paid during the fourth quarter of 2013 and included the $1,200 figure on the employees' Forms W-2 for 2013. However, due to a transposition error, the employer reported $2,100 in AdMT on their Form 941 for the tax period ending December 31, 2013. The employer files a Form 941-X seeking a tax abatement of $900. This situation would constitute an administrative error.

  2. Income tax withholding, BUWH, and Additional Medicare Tax (AdMT) cannot be corrected after the close of a tax year unless the issue constitutes an administrative error, IRC Section 3509 rates are being applied (IRM 21.7.2.5.4, IRC Section 3509), or as the result of an Examination. This is true even if income tax, BUWH. or AdMT was erroneously withheld.

    Example:

    An employer withheld $3,700 in income taxes from an employee's wages instead of $3,400 due to an error in recording the number of allowances the employee could claim. The employer issued a Form W-2 to the employee showing the withholding figure of $3,700. The employer subsequently files a Form 941-X requesting a refund of the $300 erroneously withheld. This situation would not constitute an administrative error and the claim would not be allowable.

    Example:

    An employer withheld $800 in Additional Medicare Tax (AdMT) from an employee's wages paid during the fourth quarter of 2013 instead of $600 due to an error in determining when the employee reached the $200,000 wage/tip threshold for AdMT withholding. The employer reported $800 in AdMT withholding on their Form 941 filed for the tax period ending December 31, 2013 and issued a Form W-2 to the employee which included the AdMT withheld figure of $800. The employer subsequently files a Form 941-X requesting a refund of the $200 erroneously withheld and reported on their Form 941. This situation would not constitute an administrative error and the claim would not be allowable.

  3. A situation in which income tax, BUWH, or Additional Medicare Tax (AdMT) was withheld and reported on a payment (such as a lump sum distribution) mailed to an individual who did not have the ability or legal right to receive the payment in the year the tax was withheld also constitutes an administrative error:

    1. This rule applies if a payment was returned as undeliverable in the subsequent year.

    2. Income tax, BUWH, or Additional Medicare Tax (AdMT) withheld and the payment received by the individual must both be reported in the year the individual actually receives the payment.

  4. See IRM 21.7.2.4.6.3, Income Tax Withholding, Backup Withholding, and Additional Medicare Tax Adjustments, for adjustment procedures relating to income tax withheld.

21.7.2.4.6.3.2  (10-01-2014)
Withholding Tax Adjustment When Unable to Determine Proper Tax Correction

  1. In some cases, Accounts Management cannot determine the proper tax to correct, even after taxpayer contact. Rather than adjusting FICA tax, which is held in a trust account and accrues interest, adjust income tax withholding.

  2. Process as follows:

    1. Input TC 29X using IRN 003 or 111, whichever is applicable.

    2. Advise taxpayer of the action taken by phone, letter, or notice.

21.7.2.4.6.4  (02-27-2013)
FICA Tax Adjustments

  1. FICA tax adjustments can be made for both current and prior years (providing the statute is still open).

  2. Employers making corrections to previously reported FICA taxes must file the applicable "X" form to either file an adjusted employment tax return or claim for refund.

  3. Employers are no longer permitted to use Form 843 to submit a claim for refund of employment taxes. However, employees who are unable to obtain a refund from their employer may file Form 843 to obtain a refund. See IRM 21.7.2.4.6.4.2, Excess FICA Tax Withheld — Employee Claims for Refund, for additional information.

  4. For a tax decrease, the employer must check the applicable certification box(es).

    Note:

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

    Caution:

    Although employers are required to calculate, withhold and report Additional Medicare Tax (AdMT) in a manner similar to other FICA taxes, the tax treatment closely follows income tax withholding procedures. AdMT cannot be corrected after the close of a tax year unless the issue constitutes an administrative error, IRC Section 3509 rates are applied, or as the result of an Examination. This is true even if AdMT was erroneously withheld. See IRM 21.7.2.4.6.3, Income Tax Withholding, Backup Withholding, and Additional Medicare Tax Adjustments, IRM 21.7.2.4.6.3.1, Administrative Errors, and IRM 21.7.2.5.4, IRC 3509, for more information.

21.7.2.4.6.4.1  (02-27-2013)
Refund or Credit of Employer’s Portion of FICA

  1. For a refund or credit of ONLY the employer portion of FICA tax, a certification must be present on the appropriate Form 94XX indicating the employer has attempted to locate the employee(s) involved to repay or reimburse them in the amount of the overcollection, or to obtain their consent to the filing of the claim, but that the attempt was unsuccessful or the employee(s) would not provide consent.

    Reminder:

    Additional Medicare Tax (AdMT) is only imposed on the employee. There is no employer share of AdMT.

  2. If the employer has not attempted to locate the employee(s) involved, close the case as per guidance in IRM 21.5.3.4.6.3, No Consideration Procedures, and issue Letter 916C advising the employer:

    • They must send a letter to each former employee’s last known address advising them of their right to repayment.

    • For claims of overcollected FICA tax for prior years, the letter to the employee must also include a statement that if the individual wishes to be repaid, they must return a written statement to the employer stating the employee has not claimed a refund or credit of the amount of the over-collection, or, if so, such claim has been rejected, and stating the employee will not claim refund or credit of such amount on their individual income tax return.

    Note:

    Letter 916C must be sent even if phone contact was made to explain the reason the claim cannot be processed.

  3. If the employer follows the procedure described in (2) above and then files a new Form 94XX with the proper certification, the employer is entitled to an adjustment of the employer’s share (only) of FICA tax with respect to any employees that could not be found or would not provide consent. Process the claim as appropriate.

21.7.2.4.6.4.2  (10-01-2014)
Excess FICA Tax Withheld — Employee Claims for Refund

  1. Treasury Regulations Section 31.6402(a)-2(b) provides that employees may file claims for refund of excess FICA tax collected in error when the employer has not repaid or reimbursed the employee, nor has the employee authorized employer to file a claim for refund. These claims will generally be filed on Form 843, Claim For Refund and Request for Abatement.

    Caution:

    The procedures in this IRM subsection do not apply to excess Additional Medicare Tax (AdMT) withheld by an employer. If a claim is received for excess AdMT, disallow the claim as per the instructions in row 6 or row 7 (as appropriate) of the table in (3) below. Instruct the claimant in the 105C disallowance letter that any excessive withholding of AdMT must be claimed on a Form 1040 or Form 1040-X with attached Form 8959, Additional Medicare Tax.

  2. Upon receipt of a claim:

    1. Review the employer’s Form 941 account for the last quarter of the year in which FICA wages were paid. If necessary, review the employee’s Form 1040 to verify claim information.

      Reminder:

      Use online research tools whenever possible. Do not request tax returns from Files unless necessary.

    2. The employee must include a statement from the employer indicating the employee has not authorized the employer to file a claim, nor had the employee been repaid or reimbursed by the employer for the amount overwithheld. Verify whether the required statement is attached to the Form 843.

  3. Continue processing the claim using the table below:

    If Then
    The claim filed by the employee involves excess FICA withheld by more than one employer The employee must claim the excess FICA withheld as a credit on their individual tax return. See IRM 21.6.3.4.2.4, Excess Social Security and RRTA Tier I Tax Credits, for more information. Return the claim to the employee using Letter 916C, Claim Incomplete for Processing; No Consideration. Instruct the employee that they must claim the excess FICA withheld by filing either a Form 1040 or Form 1040-X (depending on whether they have already filed an original tax return for the tax year in question).
    A statement from the employer is not received Return the claim to the employee using Letter 916C, Claim Incomplete for Processing; No Consideration, requesting they obtain the required statement. See (2) step 2 above.
    There is no indication the employee has contacted the employer for reimbursement of the excess FICA withheld Encourage the employee to obtain a refund from the employer.
    The employee is unable to obtain a statement from the employer The employee must make the statement to the best of their knowledge and belief.
    Note: The employee statement must include an explanation of why the employee was unable to obtain a statement from the employer.
    A claim is correctly filed with the employer’s statement attached 1. Input a TC 291 with HC 2 for the amount of the decrease using IRN 004 (and IRN 073 if appropriate) for the wage amount and IRN 007 or IRN 112 for the tax amount on the last Form 941 tax account for the tax year involved.
    2. Prepare Form 5792, Request for IDRS Generated Refund, and compute interest from the Form 941 due date or payment date, whichever is later. Enter TC 770 for amount of allowable interest. See IRM 20.2.4, Overpayment Interest.

    Reminder:

    All procedures in IRM 21.4.4, Manual Refunds, must be followed, including input of a TC 971 Action Code 037 to cross-reference the employee's SSN.


    3. Attach a copy of the claim to the refund document and route it to the Accounting Function.
    4. Attach the employee's claim to the adjustment document.
    A claim must be disallowed 1. Input TC 290 .00 in BS 98/99 (99 if electronically filed with a TRPRT print) on the individual employee's IMF tax account for the tax period which includes the period of time for which the claim is filed.
    2. Send Letter 105C , Claim Disallowed, to the employee.
    A claim must be disallowed and the individual employee's IMF tax return has not yet posted 1. Send Letter 105C, Claim Disallowed, to the employee.
    2. Push code the claim and a copy of the denial letter using TC 930.
    3. After the tax return posts, the disallowed claim and original return is returned to the originator for input of the TC 290 for .00, BS 98/99 (99 if electronically filed with a TRPRT print).

    Note:

    These procedures also apply to Indian Fishing Claims citing IRC 7873 filed by individuals filing a claim for refund of FICA taxes. Refer to Alert 080092 for additional information.

    Reminder:

    There are no special documentation requirements for employee FICA claims related to amounts paid to same sex spouses which are not taxable as a result of the DOMA (United States v. Windsor) decision. See IRM 21.7.2.5.24.5, DOMA (United States v. Windsor) Related FICA Claims Filed by Employees.

21.7.2.4.6.5  (10-01-2014)
90 Day — Claim

  1. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations on credit or refund (Refund Statute Expiration Date or RSED), the adjustment request must be converted to a claim for refund. In general, the RSED expires three years from when the original tax return is filed, or two years from when the tax is paid, whichever is later. For employment tax returns reporting FICA taxes and federal withholding, IRC 6513 provides for special time frames for when returns are deemed filed and payments are deemed made. Tax returns and payments received on or before April 15 of the year following the calendar year for which the tax was to be reported are deemed received on April 15 of that following year. See IRM 25.6.1, Statute of Limitations Processes and Procedures, for additional guidance on statute considerations. The following table provides examples of when to convert adjustment requests to claims when a tax return was timely filed and all tax timely paid.

    Form Tax Period Received Date of Original Return (timely) Statute Expiration Date Convert to Claim for Refund if IRS Received Date of Form 94XX is
    941 201112 01-31-2012 04-15-2015 01-15-2015 or subsequent
    943 201112 01-31-2012 04-15-2015 01-15-2015 or subsequent
    944 201112 01-31-2012 04-15-2015 01-15-2015 or subsequent
    945 2011122 01-31-2012 04-15-2015 01-15-2015 or subsequent
    CT-1 201112 02-28-2012 02-28-2015 11-30-2014 or subsequent

21.7.2.4.6.6  (10-01-2013)
Adjusted Employer's Tax Return or Claim for Refund Return Filed — No TC 150 Posted

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

  2. If the adjusted employment tax return was scanned into Correspondence Imaging System (CIS), the tax module will reflect an E- freeze which must be addressed prior to closing the case.

  3. Process as per instructions in the following table:

    If Then
    An adjusted return was intended for another tax period for which there is a posted TC 150. Follow procedures in IRM 21.7.9.4.10.2, TC 976 Return Posted to Incorrect TIN/Tax Period, Account for Which It was Intended Contains the Original Return (TC 150), to resolve the E-freeze and adjust the correct account as appropriate.
    An adjusted return was filed for an incorrect MFT (e.g. employer is Form 941 filer but files a Form 944-X).
    1. Generate Letter 4384C to the taxpayer explaining their adjusted return cannot be processed and inform them of the proper form to be filed.

    2. Input a TC 971 AC 002 to release the E- freeze.

    Exception:

    If the adjusted return reflects a tax increase and there is a TC 150 processed under the correct MFT for the same year for which the adjusted return was filed, follow the first row of this table to make the appropriate tax assessment on the module with the TC 150 and release the E- freeze on the module where the Form 94XX was recorded. In addition, send Letter 4384C explaining that the adjustment has been made, but in the future they must file the appropriate "X" form (identify the specific form to be used) to make corrections.

    An adjusted employer's tax return is received and is intended to be an original return and no TC 150 is posted.
    1. Contact the taxpayer (preferably by phone) to obtain a signed copy of the return (including the corrected information) along with any required schedules.

    2. Suspend the case for 40 days.

    3. If taxpayer replies with copy of original return, process accordingly.

    4. If taxpayer does not reply, follow the steps below:
      a) Prepare a "dummy" return using the corrected information from the "X" form. On the signature line, indicate "Dummy Return - Do not correspond for signature" .
      b) Attach applicable 94XX form to the back of the "dummy" return. Edit (in green) a line across the applicable 94XX form and notate "Do Not Detach" in the margin.
      c) Process the "dummy" return as the original.
      d) Ensure all applicable deposits are correctly applied.
      e) Input a TC 971 AC 002 to prevent a duplicate filing condition from generating when the "dummy" return posts.

    Note:

    Processing of the "dummy" return in this situation is not considered reprocessing. Do not attach Form 13596 when routing the "dummy" return to be processed.

    Note:

    For additional information on E- freezes, see IRM 21.5.6.4.9, E- Freeze.

21.7.2.4.6.7  (10-01-2014)
Exception Processing — Incorrect Filing, Including Forms Routed to AM from SP

  1. The appropriate Form 94XX must be used to report corrections to previously reported employment taxes for all errors ascertained on or after January 1, 2009. However, taxpayers continue to occasionally file the incorrect return to correct errors. The guidance in the following subsections was developed to address the most common incorrect filing situations.

    Note:

    When adjusting these accounts, do not use NSI 1. See IRM 21.7.1.4.2, Notice Suppression Indicator (NSI).

    Reminder:

    When following these procedures, use blocking series (BS) 20. See IRM 21.7.2.4.6 (13) for more information.

  2. The volumes of certain types of incorrect filing situations have decreased significantly over time. Guidance for those issues has been removed from the current IRM revision. See archived files for this IRM if information is needed on the handling previously applied to:

    • Original 200812 (or prior year return) Return Received with no Form 941c

    • Form 94X (prior version) for TY2009 or later with no Form 941c

    • Electronically Filed Form 94X for TY 2009 Claiming Line Adjustments

21.7.2.4.6.7.1  (10-01-2014)
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 Submission Processing (SP): SP will verify the adjustment on Form 941-X is not being claimed on the original Form 941.

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

    • Enter CCC "X" on the original return

    • Send CP 102 to taxpayer explaining their adjustment request is being 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 taxpayer Letter 4384C informing them the Form 941-X was processed but should be filed separately from their original Form 941.

21.7.2.4.6.7.2  (10-01-2014)
Form 94X (all tax years and form versions) with Form 941c Attached

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

  2. Submission Processing (SP) will no longer process employment tax returns with Form 941c attached. Instead, SP will move the Form 941c to the top and route the documents to AM.

  3. Process employment tax returns received for any tax year with Form 941c attached as follows:

    If And Then
    The Form 941 does not reflect an entry for the adjustment requested on Form 941c There is no TC 150 posted for the tax period for which the Form 941 was filed
    1. Route the Form 941 to be processed as the original tax return. Do not attach the Form 941c to the Form 941.

    2. Process the Form 941c per instructions in IRM 21.7.2.4.6.7.3, Stand Alone Form 941c (including incorrectly filed Form 843).

    The Form 941 does not reflect an entry for the adjustment requested on Form 941c There is a TC 150 posted for the tax period for which the Form 941 was filed Process the documents per instructions in IRM 21.7.2.4.6.7.4, "Amended" /"Supplemental" Form 94X with or without Form 941c.
    The Form 941 reflects an entry for the adjustment requested on Form 941c   Contact the IRM author through your management chain and the site P&A Staff for guidance on handling the case.

21.7.2.4.6.7.3  (10-01-2014)
Stand Alone Form 941c (including incorrectly filed Form 843)

  1. These procedures apply to stand alone Forms 941c and incorrectly filed Forms 843 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 the appropriate "X" form (identify the specific form to be used) 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 they must file the appropriate "X" form (identify the specific form to be used) to make the adjustment. 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:

    If adjusting per≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ send taxpayer Letter 4384C.

21.7.2.4.6.7.4  (10-01-2014)
"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 the appropriate "X" form (identify the specific form to be used) 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 they must file the appropriate "X" form (identify the specific form to be used) to make the adjustment. 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:

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

21.7.2.4.6.7.5  (10-01-2014)
Incorrect Form 94XX Version Filed

  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 lines for expired or expiring tax items have been removed from newer versions of the forms. Accordingly, Accounts Management will occasionally receive adjustment requests submitted on versions of Form 94XX that do not correspond to the tax year for which the adjustment request pertains. Do not reject adjustment requests filed on prior versions of Form 94XX unless it is not possible to determine the correct adjustment action. Review page 2 of Form 94XX, Part 4 of Form 94XX, and any attachments to determine if information missing from Part 3 was provided in written form and process as follows:

    If And Then
    If the missing information was provided in written form   Make the requested correction using general procedures in IRM 21.7.2.4.6 , Adjusted Employer's Federal Tax Return or Claim for Refund, and per specific procedures for the form filed (e.g. Form 941-X claim filed, follow procedures in IRM 21.7.2.4.7.6.2, Form 941-X Tax Decrease — Claim).
    If the missing information was not provided in written form The Form 94XX reflects tax increases or credit decreases ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , make two attempts to contact the taxpayer by phone to obtain the missing information if a telephone number is available. If the missing information is provided, make the requested correction as per the first row of this table. Otherwise, assess tax based on the available information and issue Letter 4384C to explain the missing information and action taken. Also see IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing.
    If the missing information was not provided in written form The Form 94XX reflects tax decreases or credit increases ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , make two attempts to contact the taxpayer by phone to obtain the missing information if a telephone number is available. If the missing information is provided, make the requested correction as per the first row of this table. Otherwise, reject the Form 941-X using Letter 4384C and identify the missing information in the letter. Also see IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing.

    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. 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  (10-01-2014)
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 201412 quarter with full payment. The Form 941 includes a notation or attached statement which indicates the employer is reporting wages and tax for the entire year.

  2. Submission Processing (SP) has procedures in IRM 3.11.13.5, Unprocessable Conditions, to address this situation when identified during initial return processing.

  3. If taxpayer contact (or a referral from SP) is received identifying a multiple quarter Form 941 filing situation, process as follows:

    If And Then
    The multiple quarter Form 941 has been posted   Advise the taxpayer (use the appropriate "C" letter if working paper correspondence) to take the following actions:
    1. File a correct original Form 941 for each tax period (specify in the letter) for which wages/tax was incorrectly included on the multiple quarter Form 941.

    2. File a Form 941-X to correct the tax period to which the multiple quarter Form 941 was processed (specify in the letter) and to attach a breakdown of the federal tax deposits or other payments which should be applied to the respective tax periods previously included on the multiple quarter Form 941.

    The multiple quarter Form 941 has not been posted There is no indication the multiple quarter Form 941 will post (i.e. not in ERS/Rejects or was previously deleted) Advise the taxpayer (use the appropriate "C" letter if working paper correspondence) to take the following actions:
    1. File a correct original Form 941 for each tax period (specify in the letter) for which tax was incorrectly reported on the multiple quarter Form 941.

    2. Submit a breakdown of the federal tax deposits or other payments which should be applied to the respective tax periods previously included on the multiple quarter Form 941.

    Exception:

    If the multiple quarter Form 941 includes a breakdown of the federal tax deposits or other payments which should be applied to the respective tax periods, initiate credit transfers to reapply credits as appropriate before closing the case and skip item 2) above.

    The multiple quarter Form 941 has not been posted There is an indication that the multiple quarter Form 941 will post (i.e. return is in ERS/Rejects) Monitor for posting or deletion of the return and then process as appropriate per the preceding rows in this table.

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  (10-01-2014)
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, Operational Guidelines Overview.

  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 taxpayer checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If taxpayer 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 (line 11 of Form 941-X - column 3 plus line 17 of Form 941-X - column 3) (valid for tax periods beginning after December 31, 2012).
    112 Total social security, Medicare tax, and (for tax periods beginning after December 31, 2012) Additional Medicare Tax .
    114 Section 3121(q) Notice and Demand — Tax due on unreported tips (line 12 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..

    Note:

    For MFT 01, tax periods 201006, 201009, and 201012 only. Lines for this adjustment item have been removed from the current Form 941-X version.

    116 Taxes on exempt wages/tips paid to qualified employees this quarter.

    Note:

    For MFT 01, tax periods 201006, 201009, and 201012 only. Lines for this adjustment item have been removed from the current Form 941-X version.

    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, Medicare taxes, and (for tax periods beginning after December 31, 2012) Additional Medicare taxes figured at IRC Section 3509 tax rates on Special addition to wages for social security taxes, Special addition to wages for Medicare taxes, and Special addition to wages for Additional Medicare Tax (total of lines 15, 16, and 17 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, 16, and 17 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.

    Note:

    For MFT 01, this credit can only be claimed on tax period 201006. Lines for this adjustment item have been removed from the current Form 941-X version.

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

    Note:

    AEITC was legislatively eliminated for tax periods after 201012. Lines for this adjustment item have been removed from the current Form 941-X version.

    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.

    Note:

    For MFT 01, this credit can only be claimed on tax period 201006. Lines for this adjustment item have been removed from the current Form 941-X version.

    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:

    Form 941-X is revised on a regular basis and line numbers for particular adjustment items occasionally change. However, there is no requirement for the taxpayer to use the most current version of Form 941-X. Although line numbers are provided in the table above for easy reference, employees are responsible for ensuring the proper adjustment action is taken based on the form version filed by the taxpayer.

    Note:

    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  (10-01-2014)
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. Take the following actions:

    1. Notate the Form 941-X with the following text: "90 day - Claim" .

    2. Process the Form 941-X per procedures in IRM 21.7.2.4.7.6.2 and refer to IRM 21.7.2.4.6.5 for additional information on 90 day - Claims.

    3. Generate Letter 4384C to the taxpayer explaining the adjustment has been converted to a claim.

  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. Process adjusted employment tax returns as follows::

    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 either debit or credit 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 was 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 2014 received on or before October 31, 2014), 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, 2014 and files a Form 941-X which is received by the IRS on March 1, 2014 for the 01/201212 tax period. The interest computation date would be March 1, 2014.

  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.


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