FICA must be paid on services performed by:

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

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

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

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).

The table which follows provides guidance on mathematical validity checks governing Item Reference Number (IRN) usage with adjustments to employment tax returns on Command Code ADJ54:

IRN 110 is used 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)).

IRN 185 is used for MFT11/Form 943 (only) to record adjustments for third-party sick pay and for fractions of cents.

If an adjustment to an employment tax account is required and the posted IRN amounts do not equal the TC 150, process as follows:

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

Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, was introduced in 2005. Refer any loose forms received in Accounts Management to the CAWR (Combined Annual Wage Reporting) unit at the Philadelphia Compliance Campus, Drop Point 4-G08.151.

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).

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.

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

The chart below indicates procedures for most Schedule R inquiries:

See IRM 21.7.2.5.21, Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, for additional information on Form 8974.

Form 8974 is required to be attached to either an original employment tax return or an adjusted/amended employment tax return as supporting documentation for claims and adjustments to the QSB Research Credit. However, AM may occasionally receive loose Forms 8974 (i.e., not attached to an employment tax form); this will generally result from:

When working a loose Form 8974, review the document and research the tax account for which it was filed to determine if the credit claimed was already processed or if there is another case document to which it should be associated (e.g., a Form 941-X case). Continue processing as follows:

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.

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

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. FICA and RRTA taxes include Additional Medicare Tax (AdMT) withheld from employees' wages and compensation.

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

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.

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.

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.

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

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.

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

Although income tax withheld and AdMT cannot be changed after the close of the calendar year except for administrative errors, IRC Section 3509 rates being applied, or Examinations, changes to "Wages, tips and other compensation" and "Taxable wages and tips subject to Additional Medicare Tax withholding" can be reported by taxpayers on Forms 94XX to account for nonadministrative errors. See the specific line instructions for those items in the appropriate Form 94XX instructions for more information (e.g., for Form 941-X, see the Line 6 and Line 13 instructions in Instructions for Form 941-X).

All general guidance in IRM 21.7.2.4.4, Adjusted Employer's Federal Tax Return or Claim for Refund, and form/situation specific guidance (e.g., for a tax decrease - claim for refund filed on Form 941-X, follow IRM 21.7.2.4.5.6.2, Form 941-X Tax Decrease — Claim) applies to Forms 94XX filed reporting corrections to income tax withheld, BUWH, and AdMT. However, the following table provides additional guidance on special considerations for adjustment requests for income tax withheld, BUWH, and AdMT.

Social security and Medicare tax adjustments can be made for both current and prior years providing the statute is still open.

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

Employers are no longer permitted to use Form 843, Claim For Refund and Request for Abatement, 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 21.7.2.4.4.4.2, Excess Social Security and Medicare Tax Withheld — Employee Claims for Refund, for additional information.

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

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

Occasionally, a Form 941-X, Form 943-X, Form 944-X, Form 945-X, or Form CT-1X is received for a tax period for which no original return (TC 150) is posted.

In such cases, research the taxpayer's account for the missing tax return. This research should include reviewing the taxpayer's account for misapplied tax returns and unposted or rejected tax returns. If a missing return is located, take action to process or reprocess it to the proper tax account and then process the adjusted tax return as appropriate.

If the missing return is not located, process as per instructions in the following table:

Process response and non-response cases as per instructions in the following table:

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

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

For example:

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

Employers who need to make corrections for both underreported and overreported amounts on the same tax period cannot combine the correction requests on a single Form 94XX when either of the following applies:

Process single Form 94XX filing situations where it appears two Forms 94XX were required as follows:

The IRS often receives multiple Forms 94XX filed by taxpayers for a particular tax period. These may be filed over a period of time for different tax adjustment issues or at the same time due to the requirement to file separate Forms 94XX when using the adjustment process to report corrections for underreported amounts and the claim process to report corrections of overreported amounts.

The following general guidance should be considered when processing multiple Forms 94XX cases:

Forms 94XX must be signed in order to be considered processable. The table that follows provides guidance on who may sign Forms 94XX:

The following table provides guidance on handling common Form 94XX signature problems:

As per the instructions for Forms 94XX and guidance in Rev. Proc. 2010-16, the IRS will record changes of addresses reported on processable Forms 94XX. If the address shown on a Form 94XX is different than that shown on ENMOD, update the address via CC BNCHG.

The following conditions and exceptions must be considered before making an address change:

If an address change was reported on Form 94XX but is not being completed (e.g., due to missing signature), send any required closing letter to the address of record. If you are not completing a requested address change and are not rejecting the Form 94XX, advise the taxpayer to file a file a Form 8822-B, Change of Address or Responsible Party - Business, when closing the case.

This subsection provides handling guidance for Form 94XX (or duplicate filed employment tax returns being processed as a Form 94XX) when there is Return Integrity and Compliance Services (RICS), Return Integrity Verification Operations (RIVO), or Identity Theft (IDT) involvement.

BMF IDT is defined as creating, using, or attempting to use a business’s identifying information to obtain a tax benefit without authority. BMF IDT can involve the use of a business’s information to file fraudulent returns to support Individual Master File (IMF) IDT or to obtain refunds from BMF accounts. An individual’s stolen personal information can also be used to obtain an Employer Identification Number (EIN) which is used to file false BMF tax returns and income documents. BMF accounts include the following entity types: sole proprietorship, corporation, partnership, estate, trust, exempt organization, or government entity.

BMF IDT inquiries are complex and require extensive research. BMF taxpayers are often not aware their identities have been compromised until a notice is received from the IRS. The taxpayer may contact the IRS after receiving an unexpected notice regarding an inactive EIN, a recently-established EIN they have no knowledge about, or an IRS notice showing the business name was changed.

If you suspect BMF IDT on a case, refer to IRM 25.23.11.4, Business Master File (BMF) ID Theft Research, and IRM 25.23.11.6, Business Master File (BMF) Identity Theft Inquiries.

For any cases involving potential identity theft with RICS involvement, refer to IRM 25.23.11.6.3, BMF Returns Selected for RICS Review, for additional guidance. The following indicators (not all inclusive) may be seen on accounts:

The following table provides guidance on handling common Form 94XX case scenarios with RICS/RIVO/IDT involvement:

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

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

At least one return must be filed each year.

Many seasonal employers also meet the criteria for filing Form 944, Employer's ANNUAL Federal Tax Return. However, seasonal employers not eligible to participate in the Form 944 program, or who have opted out of the Form 944 program, must continue to follow the instructions above. See IRM 21.7.2.4.7, Form 944, Employer's ANNUAL Federal Tax Return, for more information on Form 944 eligibility criteria and participation requirements.

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

If the only change reported on a Form 941-X is to total wages and tips (line 6 of Form 941-X), then input a TC 290 $.00 with blocking series 20 to release the -A freeze. If there are other changes in addition to corrections to total wages and tips, adjust accordingly.

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

Submission Processing (SP) has procedures in IRM 3.11.13.6, Unprocessable Conditions, to address this situation when identified during initial return processing.

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

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

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

The programming which allowed the posting of negative TC 150 amounts for employment tax accounts continued to be supported until June 28, 2021. Beginning June 28, 2021, programming was altered to set the TC 150 tax settlement to zero (i.e., $0.00) if an employment tax return attempts to post reflecting a negative tax liability; all other transcribed tax data on the return is generally recorded as filed. Accordingly, this may lead to account situations wherein the tax recorded (i.e., zero) does not match the corresponding tax data reference fields. This generally occurs when an employer claims excessive nonrefundable COVID credits or excessive nonrefundable QSB Research Credit. When adjusting these accounts, it will generally be necessary to correct reference lines to match tax (i.e., zero) before completing any other tax adjustment. See IRM 21.7.2.4.1.3, IRNs Do Not Equal TC 150, for more information.

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

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

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

Use the applicable reference numbers to adjust tax, wages, and credits on employment tax returns. The following table shows the valid reference numbers for Form 941-X.

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

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

Cash wages paid to a household worker are not counted in the $2,500 test and are not subject to FICA taxes unless the worker is paid cash wages at least equal to the threshold established by the Social Security Domestic Employment Reform Act of 1994 (SSDERA) for that particular year. Wage thresholds may be found in Pub 926, Household Employer's Tax Guide, for the year in question.

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

Taxpayers occasionally report employment taxes related to agricultural employees on quarterly Forms 941 instead of on an annual Form 943 as required.

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

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

Item Reference Numbers (IRNs) valid for Form 943-X are:

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

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

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

See (5) through (9) in IRM 21.7.2.4.7, Form 944, Employer's ANNUAL Federal Tax Return, for a general discussion of Form 944 program eligibility requirements and opt-in/opt-out guidance. The chart below provides specific procedures for handling most opt-in and opt-out inquiries.

If the taxpayer requests immediate confirmation of a filing requirement change made per the instructions in (4) above and the taxpayer will accept a hand written faxed document, notate on approved IRS fax cover sheet and sign statement indicating the taxpayer's request for filing requirement change has been made. Make sure the filing requirement change is made prior to closing the call.

Chief Counsel has determined that Reporting Agents (RA) are not permitted to request to "opt out" of the Form 944 program on behalf of their clients. Do not change filing requirements based on a request from an RA unless the RA also has a valid Power of Attorney (POA) (i.e., Form 2848) either on file or that can be faxed to us. Third-Party PIN designees are also not authorized to "opt out" of the Form 944 program for the taxpayer.

There are three CP notices that may be issued to employers informing them of changes to their filing requirements based on the taxes reported on their most recently processed Form 944.

There are also three "C" letters used for Form 944 filing requirement issues:

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

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

Line 1 of Form 944, wages tips and other compensation, is the equivalent of Line 2 on Form 941. The same considerations and adjustment procedures discussed in IRM 21.7.2.4.5.2, Line 2, Form 941, apply to adjustments to Line 1 of Form 944 reported on Form 944-X.

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

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

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

Non-payroll items including backup withholding and withholding for pensions, annuities, gambling winnings, Individual Retirement Account (IRA), 401K, military pensions, etc., are required to be reported on Form 945, Annual Return of Withheld Federal Income Tax. However, taxpayers occasionally report these amounts on an incorrect tax form. If taxpayer contact (or a referral from SP) is received identifying a situation in which non-payroll items were reported on Form 941, process as follows:

Backup withholding (BUWH) is imposed under IRC 3406 on certain reportable payments as defined in IRC 3406(b), such as interest and dividends, if a condition for backup withholding exists. The BUWH tax rate is 28% of reportable payments made in tax years 2003 through 2017 and 24% of reportable payments made in tax year 2018 or in subsequent tax years. Once withheld, BUWH must generally be deposited and reported by the payor on Form 945.

Payments described in IRC 3406(g) are exempt from BUWH. On occasion, a payor may incorrectly withhold the tax from exempt payments or exempt recipients:

After the end of the calendar year, the process a taxpayer who has had BUWH deducted from payment(s) must follow to obtain credit or a refund depends on the organization type and whether they are required to file an income tax return:

TEFRA requires pension trusts to withhold federal income tax from pension income. The withholding is subject to deposit rules and is reported on Form 945.

Taxpayers can request a separate EIN for the pension trust, however, it is not a requirement. Separate branches within a company may want a different EIN for internal purposes only.

If multiple Form 945 tax returns are filed under one EIN and the taxpayer’s intent cannot be determined:

Schedule H (Form 1040), Household Employment Taxes, is used to report FICA tax, any federal income tax withheld, and FUTA tax for household employees as follows:

Taxpayers who are sole proprietors, or whose home is on a farm operated for profit, may include FICA tax and income tax withholding for domestic employees on their employment tax returns (Forms 941, 943, or 944 as appropriate) along with the employment taxes for their other business or farm employees. If the employer chooses to report household employment taxes in this manner, FUTA taxes for the household employees must be reported on Form 940.

Partnerships cannot be domestic employers.

Corporations cannot be domestic employers.

See IRM 21.7.2.4.9.3, Household Employment Taxes and Section 3504 Agents, for filing and payment requirements when an employer has designated an agent (including state and local governments or their subagents) to withhold, report, and make payment of household employment taxes.

The table below provides guidance for handling common household employment tax inquiries received in Accounts Management.