21.7.2  Employment and Railroad Tax Returns

Manual Transmittal

September 03, 2013

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 13U0426 issued 02-27-2013 IRM 21.7.2.2 Added bullet in (1) and updated (3) with information regarding new Additional Medicare Tax (AdMT) which will be reported on employment tax returns for tax periods after December 31, 2012.
IRM 21.7.2.3 Added new (3) with information on researching earlier versions of this IRM and a link to the IRS publishing site.
IPU 13U0255 issued 01-31-2013 IRM 21.7.2.3.3 Added new (7) per Counsel with regards to 2013 tax rates. Added new (8) with information regarding retroactive increase to the monthly transit benefit exclusion under IRC Section 132(f)(2)(A) and Notice 2013-8 which provides for a special administrative procedure for related corrections by employers.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.3.3 Revised title and added new (9) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0055 issued 01-04-2013 IRM 21.7.2.3.3(2) Updated table with row for social security wage limit for 2013 and deleted row for earliest year.
IRM 21.7.2.3.3(8) Revised language throughout to place in past tense.
IRM 21.7.2.3.3(9) Revised sixth bullet per Counsel to clarify when AdMT threshold is reached.
IRM 21.7.2.3.3.2 Complete revision of content per Counsel feedback.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.3.3.2(3) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.3.3.3(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.3.3.3.1 Revised text of (1) for clarity and inserted cross reference formerly in (3) which has now been deleted.
IRM 21.7.2.3.9(1) Updated with link to Announcement 2012-45.
IRM 21.7.2.4.1(1) Revised language to address use of Credit Reference Numbers (CRNs).
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.1(2) Added new IRN 074, used to adjust wages and tips subject to the new Additional Medicare Tax (AdMT), to the table of valid Item Reference Numbers and updated IRN 112 tax adjustment information.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.2 Updated (2) and (3) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012 and added associated IRN 074 to table in (7).
IRM 21.7.2.4.2(2) Revised first bullet per Counsel to clarify when AdMT threshold is reached.
IRM 21.7.2.4.6 Revised and clarified content.
IRM 21.7.2.4.6.1 Revised and clarified content.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.6.2 Updated (1) and Caution which follows with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.6.3 Revised title and updated throughout with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.6.3.1 Updated throughout with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012, including additional examples.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.6.4(4) Added Caution with regards to adjustments of new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.6.4.1(1) Added Reminder that there is no employer matching share for the new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.6.4.2(1) Added Caution to indicate the procedures in this subsection do not apply to the new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.6.5(1) Revised dates throughout table.
IRM 21.7.2.4.6.6(3) Added note in last row of table to indicate Form 13596 should not be attached to a "dummy" return being routed for processing under these procedures.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.7(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.7.5 Retitled subsection and revised content to clarify a Form 941-X is required to correct errors in reporting on Form 941 unless oral statement criteria is met.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.7.6(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.7.6(2) Clarified language in note.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.7.6(3) Added new IRN 074, used to adjust wages and tips subject to the new Additional Medicare Tax (AdMT), to the table of valid Item Reference Numbers and updated IRN 112 tax adjustment information.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.7.6.1 Updated (1) and (6) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.7.6.1(8) Deleted last sentence and example.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.7.6.2 Updated (1) and (5) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.7.6.3 Updated (1) and (4) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8.1(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.8.1(1) Revised per Counsel to clarify when AdMT threshold is reached.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8.3(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.8.3(2) Clarified language in note.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8.3(3) Added new IRN 074, used to adjust wages and tips subject to the new Additional Medicare Tax (AdMT), to list of valid Item Reference Numbers. Added Note with regards to IRN 074 use for wage changes and IRN 007 for tax changes.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8.3.1 Updated (1) and (6) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8.3.2 Updated (1) and (5) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.8.3.3 Updated (1) and (4) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.9(5) For clarity purposes, replaced sentence on applicability of FTD penalties.
IRM 21.7.2.4.9.1(4) Added information about deadline for writing in for opt ins and opt outs.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.9.4(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.9.4(2) Clarified language in note.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.9.4(3) Added new IRN 074, used to adjust wages and tips subject to the new Additional Medicare Tax (AdMT), to the table of valid Item Reference Numbers and updated IRN 112 tax adjustment information.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.9.4.1 Updated (1) and (6) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.9.4.1(8) Deleted last sentence and example.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.9.4.2 Updated (1) and (5) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.9.4.3 Updated (1) and (4) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.10.4 Clarified language in (3) and (4) per Counsel feedback.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.4.11(2) Added note to indicate certain household employees will be subject to withholding of the new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.4.11(2) Revised note per Counsel to clarify when AdMT threshold is reached.
IRM 21.7.2.4.11.1(1) Revised second bullet and added third bullet per Counsel feedback.
IRM 21.7.2.4.11.3.2 Revised section title and clarified language in (1) per Counsel feedback.
IRM 21.7.2.5.1(3) Updated Official Use Only information and slight text revisions based on Counsel advice.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.5.2(2) Added new IRN 074, used to adjust wages and tips subject to the new Additional Medicare Tax (AdMT), to list of Item Reference Numbers which may need to be corrected.
IRM 21.7.2.5.3 Revised language in (1) and (4) per Counsel feedback.
IRM 21.7.2.5.4 Added new (7) with information on adjusting FTD penalties and renumbered existing (7) as (8). Clarified language in (8) relative to payment research requirements.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.5.4(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.5.4(1) Revised per Counsel to clarify when AdMT threshold is reached.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.5.4(6) Added new IRN 074, used to adjust wages and tips subject to the new Additional Medicare Tax (AdMT), to list of Item Reference Numbers which may need to be corrected.
IRM 21.7.2.5.6 Updated dates throughout tables in (4) and (5).
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.5.7.2(2) Added reminder that there is no employer share for the new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.5.8(4) Added note indicating this subsection will be updated when more information is available with regards to requests for relief of payment of Additional Medicare Tax (AdMT) under IRC 3102(f)(3) for tax periods after December 31, 2012.
IRM 21.7.2.5.11 Reorganized and clarified content including information in subsections.
IPU 13U0925 issued 05-14-2013 IRM 21.7.2.5.11(2) Revised to reflect routing of employee foreign student claims to the Ogden Campus and added note to clarify routing of employer claims.
IPU 13U0925 issued 05-14-2013 IRM 21.7.2.5.11.1(4) Revised to reflect routing of employee foreign student claims to the Ogden Campus and added note to clarify routing of employer claims.
IRM 21.7.2.5.16 Retitled subsection and revised content throughout after considering Counsel feedback.
IPU 13U1320 issued 08-06-2013 IRM 21.7.2.5.16(5) Revised language for 105c letters per Counsel advice.
IRM 21.7.2.5.16.1 Retitled subsection and revised content throughout after considering Counsel feedback.
IRM 21.7.2.5.16.2 Retitled subsection and revised content throughout after considering Counsel feedback.
IPU 13U1320 issued 08-06-2013 IRM 21.7.2.5.16.2(3) Revised language for 86c letters per Counsel advice.
IPU 13U0055 issued 01-04-2013 IRM 21.7.2.5.19(2) Added note with regards to timing of COBRA premium assistance eligibility periods.
IRM 21.7.2.5.19.1.1(2) Deleted final sentence which contained a toll free line which is no longer active.
IPU 13U1320 issued 08-06-2013 IRM 21.7.2.5.21(6) Revised assignment number per Ogden P&A staff.
IPU 13U0255 issued 01-31-2013 IRM 21.7.2.5.22 Updated (1) and (3) to address legislative extension of valid eligibility period for claiming credit.
IPU 13U0255 issued 01-31-2013 IRM 21.7.2.5.22.1(2) Updated to address legislative extension of valid eligibility period for claiming credit.
IRM 21.7.2.6.1 Revised text and formatting for clarity and per Counsel feedback.
IRM 21.7.2.6.2 Revised title and content per Counsel feedback.
IRM 21.7.2.6.3 Revised title and content per Counsel feedback.
IPU 13U0055 issued 01-04-2013 IRM 21.7.2.6.4.2 Various edits including updates to tables with wage limits and tax rates for 2013.
IPU 13U0255 issued 01-31-2013 IRM 21.7.2.6.4.2 Added new (9) with regards to 2013 tax rates. Added new (9) with information regarding retroactive increase to the monthly transit benefit exclusion under IRC Section 132(f)(2)(A) and Notice 2013-8 which provides for a special administrative procedure for related corrections by employers.
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.6.4.2 Revised title and added new (7) with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012. Renumbered succeeding paragraphs.
IRM 21.7.2.6.4.2 Revised section title per Counsel feedback.
IRM 21.7.2.6.4.2(1) Deleted outdated and misplaced information.
IRM 21.7.2.6.4.2(7) Revised sixth bullet per Counsel to clarify when AdMT threshold is reached.
IRM 21.7.2.6.4.2(9) Deleted (9) which had outdated information per Counsel feedback. Renumbered succeeding para (10) as (9).
IPU 13U0426 issued 02-27-2013 IRM 21.7.2.6.5.1(1) Updated with information regarding new Additional Medicare Tax (AdMT) which is effective for tax periods after December 31, 2012.
IRM 21.7.2.6.5.4 Revised and updated content on deposit requirements.
IRM 21.7.2.6.5.6 Removed outdated information and referred reader to archived versions of IRM if information is needed on the issue addressed.
IRM 21.7.2.6.5.9(2) Minor text edit, updated dates in the example, and added note with regards to reapplying credits.
IRM 21.7.2.6.5.10(2) Clarified language in note.

Effect on Other Documents

IRM 21.7.2 dated August 14, 2012 (effective October 1, 2012) is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs) - 13U0055 (dated January 4, 2013), 13U0255 (dated January 31, 2013), 13U0426 (dated February 27, 2013), 13U0925 (May 14, 2013) and 13U1320 (August 6, 2013).

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

(10-01-2013)

Ivy S. McChesney
Director, Accounts Management
Wage & 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 US 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. All wages (except household employment wages now reported on Schedule H) 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 (SSDERA) of 1994 and BMF Schedule 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  (10-01-2013)
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
    2004 87,900
    2005 90,000
    2006 94,200
    2007 97,500
    2008 102,000
    2009 — 2011 106,800
    2012 110,100
    2013 113,700

  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 reflect 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 (since 1994). 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.

    • Notice 2013-8 provided guidance to employers regarding the retroactive application of the increased exclusion for 2012 and provided a special administrative procedure for employers to use in filing Form 941 (or other required employment tax returns) for the fourth quarter of 2012 to reflect changes in the excludable amount for transit benefits provided in all quarters of 2012 and in filing Forms W-2. This special administrative procedure was for employers that provided transit benefits during 2012 in excess of $125 per month up to $240 per month (excess transit benefits).

    • Employers who repaid or reimbursed the overcollected FICA on the excess transit benefits for all four quarters of 2012 on or before filing the fourth quarter Form 941 (or other required employment tax return) were permitted to reduce the fourth quarter wages, tips, and compensation reported on line 2, taxable social security wages on 5a, and Medicare wages on line 5c, (or equivalent lines on other required employment tax returns) by the excess transit benefits for all four quarters of 2012. By taking advantage of this special administrative rule, employers could avoid having to file a Form 941-X (or other required "X" form) for each quarter of 2012 and avoid having to file Forms W-2c.

    • Employers who filed the fourth quarter Form 941 (or other required employment tax return) prior to the issuance of Notice 2013-8, employers who chose not to follow the special administrative procedure, and employers who were unable to reimburse all or some of the employees within the required timeframe, must use Form 941-X (or other required "X" form) to make an adjustment or claim a refund for any quarter with regard to overpayment of tax on the excess transit benefits after repaying or reimbursing employees or, for refund claims, securing consents from its employees.

    Note:

    To ensure required tax liability schedules matched the tax reported on employment tax returns, employers following the special administrative procedure provided in Notice 2013-8 were advised to reduce the last liability reported on the tax liability schedule for the fourth quarter by the amount of the correction made to tax. If the correction made under the special administrative procedure exceeded the amount of the last tax liability, additional tax liabilities on the schedule were to be reduced in reverse date order until the full amount of the correction being made was absorbed.

  9. A new 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 Additional Medicare Tax (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 are being added to 2013 employment tax returns for the purpose of reporting amounts of AdMT withheld by employers.

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

    • IRN 112 will 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 Adjustments 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 the 2013 version of Publication 15, and instructions for 2013 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  (10-01-2010)
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.

21.7.2.3.3.2  (10-01-2013)
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 job 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 available. 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.

    Note:

    Employers do not withhold income tax or the employee share of FICA from allocated tips. Allocated tips are not reported on Form 941.

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  (10-01-1013)
Agents — Filing Forms W-2

  1. An employer may designate an agent under IRC Section 3504 to withhold, report and pay Federal employment taxes 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 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  (10-01-2012)
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 $ Threshold
    941 200103 and subsequent 2,500
    941 199809 — 200012 1,000
    941 199806 and prior 500
    943 200112 and subsequent 2,500
    943 199912 and 200012 1,000
    943 199812 and prior 500
    944 200612 and subsequent 2,500
    945 200112 and subsequent 2,500
    945 199912 and 200012 1,000
    945 199812 and prior 500

  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 or CP 207 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. FTD's cannot be paid by credit card. For specific information on business payments made by credit card, see IRM 21.2.1.48.4, 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  (01-01-2007)
Electronic Processing of Employment Tax Returns

  1. Currently, IRS can process Forms 941 and Forms 944 electronically. Several Program Options are available which businesses can select.

    • 941 e-file Program (Legacy). This option was obsolete on 11-13-2006.

    • 941 On Line Filing Program

    • 941 XML Program (Employment Tax e-file System)

    • 944 On Line Filing Program

    • 944 XML Program (Employment Tax e-file System)

  2. An original filed electronic return cannot be requested. Instead, a TRPRT print must be requested, if a disallowance needs to be input. Use the TRPRT print and Blocking Series 99. Use Blocking Series (BS) 15 for all other adjustments.

21.7.2.3.5.1  (10-01-2012)
Form 941 e-file Program

  1. All information concerning the different methods for electronic filing of Forms 941, 940 and 944 is contained in IRM 3.42.4, IRS e-file for Business Tax Returns.

  2. To distinguish the different electronic methods of filing on TXMOD, see IRM 21.7.2.3.5.3, Electronic Filed/TeleFile Filing Location Codes.

21.7.2.3.5.2  (10-01-2008)
Form 941 TeleFile Tax Record

  1. TeleFile for Form 941 was obsoleted after the second quarter of 2005.

  2. In the rare instance additional information is needed about TeleFile for Form 941, see archived copies of this IRM on SERP (Servicewide Electronic Research Program).

21.7.2.3.5.3  (10-01-2012)
Electronic Filed/TeleFile Filing Location Codes

  1. All e-filed/TeleFiled returns can be recognized on TXMOD by their unique Filing Location Codes (FLC)/Document Codes (Doc Codes). The table below aids in determining which program the TP used to file.

    Program Tax Year FLC Doc Code
    941 e-file 2002 and prior 72 TCC 35
    941 On Line Filing 2002 and prior 76 AUSPC 39
    941 TeleFile 2002 and prior 72 TCC 41
    941 Mag Tape 2003 and prior 08 ANSPC
    28 PSPC
    89 FSPC
    35
    941 e-file 2003 and current 26 CSPC 35
    941 On Line Filing 2003 and current 27 CSPC 39
    941 TeleFile 2003 through 2nd quarter 2005 26 CSPC 41
    941 e-file XML 2003 and current 35 CSPC 35
        38 CSPC 35
        38 CSPC 39
    941-PR e-file XML   78 OSPC 35
        78 OSPC 39
    941-SS e-file XML   60 OSPC 35
        60 OSPC 39
    944 On Line Filing 2006 and current 35 CSPC 49
    944 e-file XML 2006 and current 38 CSPC 49

    Note:

    Form 944-PR, Form 944 (SP), and Form 944-SS cannot be filed electronically.

  2. Form 941 for period ending December 31, 2003, and Form 940 for tax year 2003, were the final returns accepted using Magnetic Media. See archived IRM 21.7.2 if information is needed with regards to magnetically filed Forms 941 or 940.

21.7.2.3.6  (10-01-2011)
Reporting Agents File (RAF)

  1. This is a file of taxpayers and Reporting Agents who file Forms 940, 941 and/or 944 electronically (e-file). Taxpayer prepares and signs Form 8655, Reporting Agent Authorization, or Service Approved Form. This authorizes the Reporting Agent to:

    • 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:

    Forms 945 and Form 943 cannot 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 designate an agent under IRC Section 3504 to withhold, report and pay Federal employment taxes. 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 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 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 Fiscal/Employer Agents, for more information.

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 promotes tip income reporting and reduces record keeping burden. This program is an expansion of the Service's Tip Rate Determination and Education Program (TRD/EP) and is 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 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” 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  (10-01-2013)
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 and 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 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.

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 2013. 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 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-CR-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 new 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 an 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 Fiscal/Employer 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 has filed a Schedule R (Form 941) with his original return and he 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 if a Schedule R indicator is present) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    Note:

    If a TP is required to file a Schedule R (Form 941) and does not do so with his original return, he 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  (10-01-2011)
Form 941c (Obsolete)

  1. A new set of multi-purpose forms for adjustments and claims was created to reduce burden for employers. These forms include Form 941-X, 943-X, 944-X, 945-X, and CT-1X. The entire set of forms was made available in 2009 for use in correcting errors on previously filed employment tax returns. The effective date for the new forms and process was for errors ascertained on or after January 1, 2009. With the implementation of these new forms, Form 941c was made obsolete and employers will no longer use Form 843 to claim refunds of employment taxes. See IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund, for more information.

    Note:

    If past Form 941c procedures are needed, see archived files for this IRM.

  2. The following two subsections previously contained procedures for issues that were commonly encountered in handling Forms 941c. At this time, the references are being retained for research purposes (only).

21.7.2.4.5.1  (10-01-2009)
Math Verified Forms 941c (Detached)

  1. A new set of multi-purpose forms for adjustments and claims has been developed for employers to correct previously filed employment tax returns. The effective date for these new forms and process is for errors ascertained on or after January 1, 2009. With the implementation of these new forms, the "line item adjustments" have been removed from the applicable employment tax returns and Form 941c has been made obsolete. See IRM 21.7.2.4.6.7, Exception Processing — Incorrect Filing, Forms Routed to AM from SP, for additional information.

    Note:

    See archived IRM 21.7.2 if information is needed on math verified Form 941c processing.

21.7.2.4.5.2  (10-01-2009)
CP 175/875 — Unexplained Adjustment to Withholding, Tips, or FICA

  1. For tax periods beginning January 1, 2009 and subsequent, CP 175/875 will no longer be generated. A new set of multi-purpose forms for adjustments and claims has been developed for employers to correct previously filed employment tax returns. The effective date for these new forms and process is for errors ascertained on or after January 1, 2009.

    Note:

    See archived IRM 21.7.2 if information is needed on CP 175/875.

21.7.2.4.6  (10-01-2013)
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 new adjusted return 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 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 21.7.2.4.6.7.5, 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 employment 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 the new forms were published in Treasury Decision (T.D.) 9405 along with the revised regulations. The revised procedures allow employers to 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 under reported amounts.

    • The adjustment process may be used by the employer to report corrections for over reported 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 over reported amounts if the employer is requesting a refund or abatement and must be used when a correction request for over reported 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 "X" forms 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 2011 for an adjustment to their 200909 Form 941, the credit will be applied to their 201103 account.

    Example:

    If an employer files a Form 943-X in February 2011 for an adjustment to their 200912 Form 943, the credit will be applied to their 201112 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 2011 claiming a refund for an overpayment on their 200909 Form 941, the overpayment will be refunded from the 200909 account.

    Example:

    If an employer files a Form 943-X in March 2011 claiming a refund for an overpayment on their 200912 Form 943, the overpayment will be refunded from the 200912 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 over reported 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, 2010, and an original employment tax return reporting those wages was filed on or by July 31, 2010, and the reported taxes were timely paid, then the period of limitations for assessment or for credit or refund would expire April 15, 2014. An adjusted return reporting an overpayment must be filed by January 15, 2014, 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, 2014 , 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 under reported and over reported amounts on the same tax period have two filing options:

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

    Note:

    Employers making corrections for both under reported and over reported 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 under reported amounts and over reported 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 under reported amount before processing the adjustment for the over reported 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 21.7.2.5.19.3, 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 under reported or over reported wages, administrative errors or payroll errors.

    Note:

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

  12. When scanned into Correspondence Imaging System (CIS), the TC 971 AC 010 systemically generates on all of these new forms. The input of this transaction sets the -A or E- freeze, 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. A unique blocking series (200-289) was validated for MFT 01, 09, 11, 14 and 16. 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.

  14. Since the taxpayer has the option to have overpayments refunded or applied to the current period, the AM clerical function (or other function or employees designated at the campus) should review any of the new "X" forms received during the last month of a tax period to identify those that are requesting overpayments be applied to the current tax period. Unless processing of these Forms 94XX is expedited, there is a strong possibility that the original return for the current period will post before the credit arising from the Form 94XX can be applied resulting in the issuance of an unnecessary balance due notice.

    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  (10-01-2013)
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

  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 2012 but became a Form 941 filer for 2013. If the TP is correcting tax period 2012, 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, 2013, an employer discovers an error with the Form 941 they filed for the 201303 tax period. They must file a Form 941-X reporting the correction by October 31, 2013 in order to qualify for an interest free tax adjustment.

    Example:

    On June 7, 2013, an employer discovers an error with the Form 943 they filed for the 201112 tax period. They must file a Form 943-X reporting the correction by January 31, 2014 in order to qualify for an interest free tax adjustment.

    Example:

    On February 18, 2013, an employer who is currently a Form 944 filer for 2013 discovers an error on a Form 941 they filed for the 201109 tax period. They must file a Form 941-X by April 30, 2013 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, 2014 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 when 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 and paid with the Form 94XX.
    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 when 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, 2013 and the adjustment form has an IRS received date of March 1, 2013. Enter the TC 298 with an interest computation date of March 1, 2013.

    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 201303 tax period on April 19, 2013. The interest computation date input should be April 30, 2013, not April 19, 2013.

    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  (02-27-2013)
Income Tax Withholding Adjustments 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 a decrease 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.

    Exception:

    If the taxpayer does not explain why they are adjusting income tax withholding or AdMT but they check box 4c or 5d in the certification section indicating the amounts were not withheld from employee wages, consider it an administrative error. This exception does not apply to Forms 945-X. Also see IRM 21.7.2.4.6 (11) for additional information on explanation requirements.

  3. Follow procedures in IRM 21.5.3, General Claim Procedures, for disallowance of any unallowable claims.

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 Adjustments and Additional Medicare Tax Adjustments, for adjustment procedures relating to income tax withheld.

21.7.2.4.6.3.2  (03-30-2006)
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. Do the following:

    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 Adjustments 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, he/she 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 his/her 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  (02-27-2013)
Excess FICA Tax Withheld — Employee Claims for Refund

  1. IRC 6402 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.

  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. Check the claim for a signed statement from the employer indicating the employee had not authorized the employer to file a claim, nor had the employee been repaid or reimbursed by the employer for the amount over-withheld.

  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.

    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.

21.7.2.4.6.5  (10-01-2013)
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 illustrates 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 IRS Received Date of Form 94XX
    941 201012 01-31-2011 04-15-2014 01-15-2014 or subsequent
    943 201012 01-31-2011 04-15-2014 01-15-2014 or subsequent
    944 201012 01-31-2011 04-15-2014 01-15-2014 or subsequent
    945 201012 01-31-2011 04-15-2014 01-15-2014 or subsequent
    CT-1 201012 02-28-2011 02-28-2014 11-30-2013 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 TP 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 and release the E- freeze. In addition, send Letter 4384C explaining that the adjustment has been made, but in the future they must file the proper "X" form (specify the specific form to use) 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  (07-29-2010)
Exception Processing — Incorrect Filing, Including Forms Routed to AM from SP

  1. The effective date for the new "X" forms and process is for errors ascertained on or after January 1, 2009. Under TD 9405, the new forms are used to make adjustments and claims.

  2. Since taxpayers may continue to file the incorrect return to correct errors, the following guidance has been developed.

    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.


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