4.23.1  Introduction

Manual Transmittal

March 01, 2013

Purpose

(1) This transmits a revision to IRM 4.23.1, Employment Tax - Introduction.

Background

Updates are made to this chapter for procedural and technical changes.

Material Changes

(1) Editorial, typographical, and technical changes have been made throughout this Section. References to LMSB changed to LB&I. Reference to "Employment Tax Handbook" changed to "IRM 4.23."

(2) IRM 4.23.1.1. Revised Purpose statement. Removed alpha list of forms and replaced with paragraphs.

(3) IRM 4.23.1.1. Added references to Schedule H, Form 941 (PR), Form 941 - Schedule R, and Form 941-SS where appropriate.

(4) IRM 4.23.1.1. Removed references to F1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, as it is an income tax return and assessments for tax, interest, and penalty are prepared on a Form 4549. Removed references to Form 941-M, as it is discontinued. Removed reference to Form 945 as duplicate.

(5) IRM 4.23.1.1(8). New addition on "X" Forms.

(6) IRM 4.23.1.3. Combined with paragraphs from IRM 4.23.1.4. Deleted reference to obsolete IRM 4.23.16.

(7) IRM 4.23.1.4. Moved first two paragraphs to IRM 4.23.1.3. Reference to Form 5391 removed, as it is obsolete. Replaced with link to SERP Feedback Homepage to use to request a change or improvement to procedures or a data processing system.

(8) IRM 4.23.1.4. Added link for SB/SE Policy Staff and program responsibilities. Deleted (3) to streamline the submission process for suggestions.

(9) IRM 4.23.1.5. Updated the availability of IRM 4.23 to the Forms and Pubs website, as well as SERP.

Effect on Other Documents

This transmittal supersedes IRM 4.23.1, dated April 28, 2009.

Audience

This section contains instructions and guidelines for all LB&I, TE/GE, and SB/SE employees dealing with employment tax issues.

Effective Date

(03-01-2013)

John H. Imhoff, Jr.
Director, Specialty Programs
Small Business/Self-Employed

4.23.1.1  (03-01-2013)
Overview: Purpose of IRM 4.23

  1. The purpose of IRM 4.23 is to provide Service-wide instructions for all operating divisions with employees involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of employment taxes by various IRS operating divisions. By providing one source of authority for all operating divisions, the Service greatly reduces inconsistencies regarding philosophies as well as procedures.

  2. Withholding of income tax on wages of employees (ITW), is reported on:

    • Form 941, Employer’s Quarterly Federal Tax Return

    • Form 941 - Schedule R, Reconciliation for Aggregate Form 941 Filers

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

    • Form 944, Employers Annual Federal Tax Return

    • Schedule H, Household Employment Taxes

  3. Employer tax and employee tax (social security and Medicare) under the Federal Insurance Contributions Act (FICA), are reported on:

    • Form 941, Employer’s Quarterly Federal Tax Return

    • Form 941 (PR), Employer's Quarterly Federal Tax Return (Puerto Rican Version)

    • Form 941-SS, Employer's QUARTERLY Federal Tax Return - American Samoa, Guam, the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands

    • Form 941 - Schedule R, Reconciliation for Aggregate Form 941 Filers

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

    • Form 944, Employers Annual Federal Tax Return

    • Form 4137, Social Security and Medicare Tax on Unreported Tip Income

    • Schedule H, Household Employment Taxes

  4. Tax under the Federal Unemployment Tax Act (FUTA) is reported on:

    • Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

    • Schedule H, Household Employment Taxes

  5. Employer tax and employee tax and the railroad employee representative’s tax under the Railroad Retirement Tax Act (RRTA) are reported on:

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

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

  6. All non-payroll items (backup withholding, annuities, withholding on pensions, IRA's, military retirement, and gambling winnings) are reported on:

    • Form 945, Annual Return of Withheld Federal Income Tax

  7. “X” forms are used to report adjustments to employment taxes and to claim refunds of overpaid employment taxes. The “X” forms correspond and relate line-by-line to the employment tax return they are correcting. The “X” forms:

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

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

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

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

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

  8. IRM 4.23 is controlling with respect to guidance and procedures for employment tax issues and is to be the primary source of authority for the administration of employment tax examinations by the IRS and be used in coordination with other Examination IRM's. Other IRS functions may develop guidance as long as it::

    1. Remains consistent with the procedures set forth in IRM 4.23.

    2. Retains the philosophy of the employment tax policy statement.

    3. Is shared with the Director, Specialty Programs, prior to distribution.

4.23.1.2  (04-21-1999)
Organization of IRM 4.23

  1. IRM 4.23 is arranged in a user-friendly format. The sections follow the logical sequence of events when working an employment tax case. Appropriate headings are provided which describe the text that follows.

  2. All employment tax examiners should become familiar IRM 4.23, as it is designed for use as an everyday reference guide and serves as the single official compilation of policies, procedures, instructions, and guidelines relating to employment taxes.

  3. Revenue agents, revenue officer examiners, tax examiners, tax auditors, and tax compliance officers should also be aware of important procedures in other segments of the Internal Revenue Manual which affect their examination responsibilities.

4.23.1.3  (03-01-2013)
Updating IRM 4.23

  1. The Service maintains a consolidated employment tax manual that serves as the source of technical and procedural information, as well as internal and external training material.

  2. The Director, Specialty Programs, has overall responsibility for coordinating and approving any update to IRM 4.23. The role of the Chief, Employment Tax Operations, is to ensure consistency in employment tax administration.

  3. The Director's responsibilities include:

    1. Initial determination as to the need for an amendment of, or announcement calling attention to, a provision in IRM 4.23.

    2. Decision-making as to whether an amendment shall be in the form of Manual Transmittal for a direct and immediate amendment to the Manual or a Manual Supplement prescribing procedures for a trial implementation period before inclusion in the Manual (direct amendment by Manual Transmittal is preferable whenever feasible).

    3. Verifying accuracy and completeness of any amendment and providing a statement as to its effect on outstanding Employment Tax documents or provisions of the Manual.

    4. Conforming amendments and announcements to the style and format of the IRM.

    5. Drafting Manual Transmittals and Manual Supplements for the review of the Director, Compliance.

    6. Coordinating proposed amendments and announcements with other Service components, as appropriate.

4.23.1.4  (03-01-2013)
Employment Tax IRM or Procedures Change Request

  1. All personnel are encouraged to inform management of a need for procedural or systemic changes. The SERP Feedback site, located at: http://serpfeedback.enterprise.irs.gov/Feedback/, is used to request a change or improvement to procedures or a data processing system.

  2. Proposed changes or corrections to contents of IRM 4.23 should be submitted to the policy analyst responsible for the applicable program. See the chart of responsibilities at Employment Tax Policy Analysts site, at: http://mysbse.web.irs.gov/Specialty/et/contacts/19791.aspx.

  3. Recommended corrections or improvements to forms used by Employment Tax examiners may also be submitted under these procedures.

4.23.1.5  (02-01-2003)
Distribution of IRM 4.23

  1. IRM 4.23 is available on the website Product Catalog Information, at: http://publish.no.irs.gov/catlg.html. The most current chapter revisions are available at the SERP IRM website at: http://serp.enterprise.irs.gov/databases/irm.dr/irms.html


More Internal Revenue Manual