There are several ways to address adjustments to the employment taxes you reported on your return.
Effective for errors discovered on or after January 1, 2009, regulations were issued in connection with the IRS's development of the "X" amended return forms. The "X" forms are used to report adjustments to employment taxes and to claim refunds of overpaid employment taxes. These forms correspond and relate line-by-line to the employment tax return they are correcting.
Employers should use the corresponding "X" forms listed below to correct employment tax errors as soon as they are discovered. For example, use Form 941-X, Adjusted Employers QUARTERLY Federal Tax Return or Claim for Refund, to correct errors on a previously filed Form 941.
Taxpayers will continue to use Form 843 when requesting abatement of assessed penalties and interest. In addition, there is no "X" form for the Form 940, and taxpayer will continue to use a Form 940 for amended returns.
For overpayments: Employers correcting an overpayment must use the corresponding “X” form. Employers can choose to either make an adjustment or claim a refund on the form.
For underpayments: Employers correcting an underpayment must use the corresponding “X” form. Amounts owed must be paid by the receipt of the return. Payments can be made using EFTPS, by sending a check, or by credit card (for most “X” forms).
Interest-Free Adjustments and Claims for Refund
Revenue Ruling 2009-39 illustrates the application of the interest-free adjustment and claim for refund processes under the final regulations promulgated by Treasury Decision 9405 (TD 9405). TD 9405 amends the process for making interest-free adjustments of employment taxes under sections 6205 and 6413, and claiming refunds of employment taxes under sections 6402 and 6414.
Revenue Procedure 2017-28 provides guidance on the requirements for employers to obtain employee consents to support a claim for refund of overpaid Federal Insurance Contributions Act (FICA) and the Railroad Retirement Tax Act (RRTA) taxes. It clarifies the basic requirements for both a request for employee consent, and for the employee consent itself, and allows the consent to be requested, furnished, and retained in an electronic format. It also contains guidance concerning what constitutes “reasonable efforts” if employee consent is not secured in order to permit the employer to claim a refund of the employer share of overpaid FICA or RRTA taxes.
Worker Classification: Voluntary Classification Settlement Program (VCSP)
The VCSP is a voluntary program 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. To participate in this voluntary program, the taxpayer must meet certain eligibility requirements and apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.
Information about Form SS-8 includes recent updates, related forms and instructions on how to file. Firms and workers file this form to request a determination of the status of a worker for purposes of federal employment taxes and income tax withholding.
The IRS has established a voluntary administrative process to allow certain employment tax issues not involving worker classification to be permanently and conclusively resolved through a closing agreement program. The objective of this voluntary process is to reduce administrative burden by saving time and resources for both the IRS and taxpayers and to enhance voluntary compliance in specified limited situations. Under this administrative process, along with other specific requirements, taxpayers must demonstrate that Form 94X-X and other correction procedures would not allow for the prompt, permanent, and conclusive resolution of the issue(s). While these procedures provide for the submission of requests for a closing agreement, whether an agreement will be entered into is a matter within the Commissioner's sole discretion. For more information, see Voluntary Closing Agreement Process – Employment Tax Issues (VCAP–ET)