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21.7.2  Employment and Railroad Tax Returns (Cont. 1)

21.7.2.4 
Employment Tax Returns Procedures

21.7.2.4.6 
Adjusted Employer's Federal Tax Return or Claim for Refund

21.7.2.4.6.8  (10-01-2012)
Adjustment Credit Claimed — Refunded in Error

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

  2. For example:

    1. An adjustment was made to a prior quarter Form 941 which resulted in an overpayment.

    2. The taxpayer filed a Form 941 for the current quarter taking the overpayment as a credit.

    3. The current quarter Form 941 posted after a refund had been issued from the prior tax period.

    4. The taxpayer returned the refund check and requested it be applied to the balance due on the current tax period.

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

    If And Then
    The overpayment was created by the filing of a Form 94XX (filed either as a claim or as an adjusted return) The credit is being applied to the tax period in which the Form 94XX was filed Apply the credit to the account designated by the taxpayer using a TC 830/710 as per the appropriate adjusted return procedures. For example, if Form 941-X was filed, follow the directions in Step 2 of IRM 21.7.2.4.7.6.1 (7) to determine the appropriate credit availability date.
    The overpayment was created by the filing of a Form 94XX (filed either as a claim or as an adjusted return) The credit is being applied to a tax period earlier than that in which the Form 94XX was filed Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.
    The overpayment was created by the filing of a Form 94XX as a claim The credit is being applied to a tax period later than that in which the Form 94XX was filed
    1. Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.

    2. Manually calculate and allow overpayment interest with a TC 770 and transfer the overpayment interest using TC 850/730 if appropriate. See IRM 20.2.4.6.1, Interest on Offsets, for more information.

    The overpayment was created by the filing of a Form 94XX as an adjusted return The credit is being applied to a tax period later than that in which the Form 94XX was filed
    1. Follow the directions in the first row of this table to apply the overpayment to the tax period in which the Form 94XX was filed except freeze the credit on the receiving module.

    2. Follow the directions in the last row of this table to apply the credit (if available) from the module the credit was applied to in Step 1 above to the account designated by the taxpayer.

    The overpayment was created by any issue other than the filing of a Form 94XX (missed credit elect, penalty abatement, simple tax overpayment, etc.) The credit is being applied to the same tax period or an earlier tax period Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.
    The overpayment was created by any issue other than the filing of a Form 94XX (missed credit elect, penalty abatement, simple tax overpayment, etc.) The credit is being applied to the immediately following tax period for the same MFT Apply the credit using a TC 830/710. See (3) of IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, for more information.
    The overpayment was created by any issue other than the filing of a Form 94XX (missed credit elect, penalty abatement, simple tax overpayment, etc.) The credit is being applied to a tax period later than that on which the overpayment exists but not to the immediately following tax period for the same MFT
    1. Apply the credit to the account designated by the taxpayer using a TC 820/700 with the appropriate credit availability date. See IRM 21.5.8.4.3, Determining Correct Credit Transfer Format, and IRM 20.2.4.3, Availability Dates for Overpayments, for more information.

    2. Manually calculate and allow overpayment interest with a TC 770 and transfer the overpayment interest using TC 850/730 if appropriate. See IRM 20.2.4.6.1, Interest on Offsets, for more information.

    Exception:

    Normal offset rules apply to overpayments addressed in the table above. If there is an outstanding balance due on a tax period earlier than that to which the taxpayer is requesting an overpayment to be applied, apply the credit to the earliest outstanding balance due(s) instead and inform the taxpayer of the action taken.

    Reminder:

    Credit must be available on the module to complete a credit transfer with a debit TC 820 or TC 830 transaction code. Otherwise, the credit transfer will unpost.

21.7.2.4.6.9  (10-01-2015)
One Form 94XX Filed but Two Forms 94XX were Required

  1. 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:

    • A refund of the overreported tax is requested using the claim process.

    • Filing within 90 days of the RSED ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

      Reminder:

      Taxpayers may net underreported and overreported amounts on one Form 94XX when the adjustment process is selected and the Form 94XX is filed more than 90 days prior to the RSED.

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

    If And Then
    The Form 94XX was filed more than 90 days prior to the RSED Box 2 is checked for the claim process
    1. Net the corrections reported into a single adjustment and process as an adjusted employment tax return. Consider general procedures in IRM 21.7.2.4.6, Adjusted Employer's Federal Tax Return or Claim for Refund, and process as per the appropriate specific adjusted employment tax return procedures for the type of form filed (e.g. Form 941-X reporting net increase, follow procedures in IRM 21.7.2.4.7.6.3, Form 941-X Tax Increases — Adjusted Employment Tax Return).

    2. If the net tax change is a decrease and credit will be applied to the tax period in which the Form 94XX was filed, issue Letter 4384C to inform the taxpayer we converted their claim to an adjusted employment tax return and indicate the quarter to which the credit is being applied.

    The Form 94XX was filed within 90 days of the RSED (with either Box 1 for the adjusted employment tax return process or Box 2 for the claim process checked) The ASED is within 90 days of expiring
    1. Contact the Statute function per normal procedures to initiate a manual assessment of the underreported amount before the ASED expires. See IRM 25.6.1, Statute of Limitations Processes and Procedures, for additional guidance on handling statute imminent cases.

    2. Follow procedures in IRM 21.5.3.4.3, Tax Decrease and Statute Consideration, to request a separate Form 94XX to claim the amount of the tax decrease. Inform the taxpayer that we are processing the reported tax increase but they must file a separate Form 94XX for the decrease requested as per the Form 94XX Instructions.

    3. Monitor for the posting of the increase as a manual assessment and for the taxpayer’s response to the request for a separately filed Form 94XX for the tax decrease.

    4. Complete processing of the case per (4), (5), or (6) of IRM 21.5.3.4.3 as appropriate.

    The Form 94XX was filed within 90 days of the RSED (with either Box 1 for the adjusted employment tax return process or Box 2 for the claim process checked) The ASED is expired and the net tax change reported on the Form 94XX is a decrease
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    The Form 94XX was filed within 90 days of the RSED (with either Box 1 for the adjusted employment tax return process or Box 2 for the claim process checked) The ASED is expired and the net tax change reported on the Form 94XX is an increase Forward the Form 94XX to the Statute function as per instructions in (1) of IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing.

21.7.2.4.6.10  (10-01-2015)
Processing Multiple Forms 94XX Filed for the Same Tax Period

  1. The Service 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.

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

    • Generally, separately filed Forms 94XX cannot be combined into a single adjustment. A separate adjustment must be input for each Form 94XX filed by the taxpayer to report corrections.

    • Separately filed Forms 94XX should generally be processed in received date order whenever possible.

    • Unless there are unusual circumstances in play, it is generally advantageous to process Forms 94XX in the order in which the taxpayer intended. This can usually be determined by reviewing the beginning and ending figures reported on the Forms 94XX.

    • Taxpayers cannot net tax on separately filed Forms 94XX reporting underreported amounts and overreported amounts to determine amounts of required payments. To avoid penalties and/or interest, the entire underreported amount must be paid by the time they file the Form 94XX. If the taxpayer does not fully pay the amount of the increase reported by the time they file the Form 94XX, any overpayment arising from the separately filed claim will be offset against the tax due but does not constitute the payment required with the Form 94XX reporting the tax increase. The amount of the tax increase not paid with the Form 94XX may be subject to an FTD penalty whether the adjustment is input as a TC 290 (see IRM 20.1.4.21.3, Amended or Supplemental (Tax Decrease or Non-Interest-Free Tax Increase)) or as a TC 298 (see IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X)). Other systemically generated penalties (FTF and/or FTP) and interest may also apply.

    • Current and expected module balances must be considered when processing multiple Form 94XX cases to ensure taxpayers do not receive incorrect refunds or balance due notices. Use hold codes as appropriate. For example, if processing a decrease which will result in an overpayment and then an increase for which no payment has been received, use Hold Code 1 on the first adjustment to hold the overpayment until the increase posts.

    Caution:

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

21.7.2.4.7  (02-27-2013)
Form 941, Employer’s QUARTERLY Federal Tax Return

  1. Employers who are required to withhold income tax on wages, social security tax, Medicare tax, or Additional Medicare Tax (for tax periods ending after December 31, 2012) must file Form 941 quarterly to report both the employer share and employee share of such taxes.

    Exception:

    Certain eligible taxpayers report employment taxes annually on Form 944, Employer's ANNUAL Federal Tax Return, instead of quarterly on Form 941. See IRM 21.7.2.4.9, Form 944, Employer's ANNUAL Federal Tax Return, for more information.

  2. The taxable period and due dates for Form 941 are always the same. (See below.)

    Quarter Covered Quarter Ending Due Date
    January, February, March March 31 April 30
    April, May, June June 30 July 31
    July, August, September September 30 October 31
    October, November, December December 31 January 31

    Note:

    The return due date for Form 941 is extended 10 days if timely deposits are made which full pay the amount of tax reported.

  3. Form 941 has the tax year in the title. Taxpayers must be encouraged to use the correct form to ensure proper processing.

21.7.2.4.7.1  (11-21-2011)
Seasonal Employers

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

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

  3. At least one return must be filed each year.

  4. Many seasonal employers also meet the criteria for filing Form 944, Employer's ANNUAL Federal Tax Return. However, seasonal employers not eligible to participate in the Form 944 program, or who have opted out of the Form 944 program, must continue to follow the instructions above. See IRM 21.7.2.4.9, Form 944, Employer's ANNUAL Federal Tax Return, for more information on Form 944 eligibility criteria and participation requirements.

21.7.2.4.7.2  (10-01-2015)
Line 2, Form 941

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

    • Not an adjustable field.

    • For research purposes only.

    • May be used to verify whether a taxpayer mistakenly entered this amount on Form 941-X for the purpose of computing adjustments to taxable wages.

  2. 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.

21.7.2.4.7.3  (10-01-2014)
Multiple Quarters Filed on Form 941

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

    Example:

    An employer files a Form 941 for the 201412 quarter with full payment. The Form 941 includes a notation or attached statement which indicates the employer is reporting wages and tax for the entire year.

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

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

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

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

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

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

    Exception:

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

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

21.7.2.4.7.4  (11-21-2011)
Negative Tax Liability on Form 941

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

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

    Caution:

    Do not reduce net module tax (sum of TC 150 and all TC 29X/30X transactions) to a negative amount on any tax period beginning on or after January 1, 2009.

21.7.2.4.7.5  (10-01-2013)
Form 941 Discrepancy — Taxpayer Files Form 941-X

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

    • Transposition of figures

    • Entry made on wrong line

    • Omission of allowable adjustment

    • Error in computation of tax

    • Erroneous withholding tax or wages reported on Form 941

  2. A Form 941-X is required to correct information previously reported on Form 941 unless the taxpayer's response meets oral statement authority for BMF as described in (1) of IRM 21.7.1.4, Business Master File (BMF) /Non-Master File (NMF) Adjustment Procedures.

21.7.2.4.7.6  (10-01-2015)
Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund (including Form 941-X (PR))

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

    • An adjusted employment tax return, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 941-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, verify which set of certification box(es) were checked. If the taxpayer checked the adjustment certification(s) or checked both the adjustment certification(s) and the claim certification(s), process as an adjusted employment tax return. If the taxpayer checked only the claim certification(s), process as a claim for refund.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3, Operational Guidelines Overview.

  2. Taxpayers are required to certify on Form 941-X that they have filed or will file Forms W-2, or Forms W-2c, as required. They must also complete the applicable certification box based on their selection in Part 1 of Form 941-X.

    Example:

    If taxpayer checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If taxpayer checks box 2 in Part 1, then they must check the applicable certification box(es) in line 5.

    Note:

    If the certification box checked in Part 2 is inconsistent with the process selected in Part 1, continue processing the Form 941-X based on the information provided in Part 1.

  3. Use the applicable reference numbers to adjust tax, wages, and advance earned income tax credit (AEITC) on employment tax returns. The following table shows the valid reference numbers for Form 941-X.

    Item Reference Number (IRN) Explanation
    111 Federal income tax withheld from wages, tips, and other compensation (line 7 of Form 941-X - column 4).
    004 Taxable social security wages (line 8 of Form 941-X - column 3 plus line 15 of Form 941-X - column 3).
    005 Taxable social security tips (line 9 of Form 941-X - column 3).
    073 Taxable Medicare wages and tips (line 10 of Form 941-X - column 3 plus line 16 of Form 941-X - column 3).
    074 Taxable Wages & tips subject to Additional Medicare Tax withholding (line 11 of Form 941-X - column 3 plus line 17 of Form 941-X - column 3) (valid for tax periods beginning after December 31, 2012).
    112 Total social security, Medicare tax, and (for tax periods beginning after December 31, 2012) Additional Medicare Tax.
    114 Section 3121(q) Notice and Demand — Tax due on unreported tips (line 12 of Form 941-X - column 4). Only for MFT 01 tax periods 201103 and after.
    104 Income tax withheld figured at IRC Section 3509 tax rate on Special addition to wages for federal income tax (line 14 of Form 941-X - column 4).
    105 Social security, Medicare taxes, and (for tax periods beginning after December 31, 2012) Additional Medicare taxes figured at IRC Section 3509 tax rates on Special addition to wages for social security taxes, Special addition to wages for Medicare taxes, and Special addition to wages for Additional Medicare Tax (total of lines 15, 16, and 17 from Form 941-X - column 4).
    106/107/108 Tax adjustments (line 13 of Form 941-X - column 4). See IRN 113 and Note below table.
    113 Total adjustments (total of lines 13, 14, 15, 16, and 17 of Form 941-X - column 4). See IRN 106/107/108 above and Note below table.

    Reminder:

    IRN 113 must be used when adjusting IRNs 104 through 108.

    Credit Reference Number (CRN)
    299 COBRA premium assistance payments (line 19a of Form 941-X - column 4).

    Note:

    Use Item reference numbers 106, 107, and 108 to adjust any corrections a taxpayer may have for lines 7, 8, and 9 on Form 941. If Form 941-X does not specify what is actually being corrected, use IRN 107 for total amount on line 13 - column 4. See IRM 21.7.2.4.1 for additional information on IRN's.

    Caution:

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

    Note:

    Lines for HIRE Act related adjustment items have been removed from the current Form 941-X version. See IRM 21.7.2.5.20.1, Adjusting the Account — HIRE if information is needed regarding adjustments for HIRE Act items on tax year 2010 (only).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012. Lines for this adjustment item have been removed from the current Form 941-X version. See IRM 21.7.2.4.3, Advance Earned Income Tax Credit (AEITC) — Form 941, Form 943, Form 944, and Schedule H, if information is needed regarding adjustments for AEITC on tax periods 201012 and earlier.

    Note:

    Although CRN 290 is valid for MFT 01, this credit cannot be claimed or adjusted by filing a Form 941-X. This credit is only allowed during the processing of Forms 5884-C. See IRM 21.7.2.5.22, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for more information.

21.7.2.4.7.6.1  (10-01-2015)
Form 941-X Tax Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 941-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Quarter being corrected

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Box 3 and the applicable certification is checked on line 4a, 4b or 4c in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Exception:

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

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

  4. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified. Take the following actions:

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

    2. Process the Form 941-X per procedures in IRM 21.7.2.4.7.6.2, Form 941-X Tax Decrease — Claim, and refer to IRM 21.7.2.4.6.5, 90 Day — Claim, for additional information.

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

  5. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A) — General, for additional information.

  6. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. Process adjusted employment tax returns as follows:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

    2. Transfer the applicable overpayment using TC 830/710 to the period in which the Form 941-X was filed.

      Caution:

      To prevent either debit or credit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not allowable (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

  8. If the taxpayer's filing requirement has changed from Form 944 to Form 941 or vice versa, the credit will be transferred to the filing requirement that was active for the period in which the adjusted return was filed.

21.7.2.4.7.6.2  (10-01-2015)
Form 941-X Tax Decrease — Claim

  1. These tax decreases involve income tax withholding, and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 941-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Quarter being corrected

    • Calendar year being corrected

    • Box 2 in Part 1 is checked

    • Box 3 and the applicable certification is checked on line 5a, 5b, 5c or 5d in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Exception:

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

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

    Exception:

    Claims filed without consent. If taxpayer has not checked a box on line 5 and states (in the explanation or in response to our contact) they are not required to obtain the consents prior to filing the claim and the claim is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send claim CAT-A. Exam will correspond with the taxpayer to secure applicable certifications. In certain situations, taxpayers may not have repaid or reimbursed their employees or obtained their consents prior to filing a claim (Form 941-X). However, they must certify they have repaid or reimbursed their employees or obtained consents before the Service can accept the claim. See Instructions for Form 941-X for more information.

  4. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A) — General, for additional information.

  5. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

  7. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.7.6.3  (10-01-2015)
Form 941-X Tax Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 941-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Quarter being corrected

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Box 3 is checked in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

    Note:

    See (3) and (4) of IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing, if the Form 941-X is missing required information. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation to see if it was entered there.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 941-X for the immediately preceding quarter prior to the due date for the current quarter (for example, a Form 941-X reporting a tax increase for the third quarter of 2016 received on or before January 31, 2017), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest-Free Adjustments (Employment Tax Returns), for more information.

    Reminder:

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

  4. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Use the table below to make your adjustment(s).

    If Then
    The Form 941-X was filed by the ascertained date (due date of the return for the period in which the taxpayer discovered the reporting error) Input TC 298 and BS 20 with the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    The Form 941-X was not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20.

    Example:

    An employer discovers an error on February 3, 2017 and files a Form 941-X which is received by the IRS on March 9, 2017 for the 01/201512 tax period. The interest computation date would be March 9, 2017.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3, Amended or Supplemental (Tax Decrease or Non-Interest-Free Tax Increase)) or a TC 298 (see IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X)).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 290 and an amended ROFTL was provided with the adjusted return.

  7. If payment for the additional tax reported on the Form 941-X is not reflected on the tax period being adjusted, research the taxpayer's account for the missing credit and, if located, transfer the payment as appropriate.

21.7.2.4.8  (02-27-2013)
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees

  1. Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, must be filed to report income tax withheld and employer and employee FICA taxes (including Additional Medicare Tax for tax periods beginning after December 31, 2012) on farm workers.

  2. Agricultural employers with household employees who work in a private home on a farm operated for profit can either:

    1. File Schedule H with their Form 1040 series return and report the household employees portion of wages and taxes, or

    2. Include the wages and taxes with farm employees on Form 943.

  3. Form 943 is an annual return due on or before January 31 following the close of the calendar year.

    Exception:

    The return due date for Form 943 is extended 10 days if timely deposits are made which full pay the amount of tax reported.

  4. The Form 943 threshold for making deposits is $2,500. Taxpayers follow either semi-weekly or monthly deposit schedules determined by the Form 943 lookback period. See IRM 20.1.4, Failure to Deposit Penalty.

  5. Forms 943 are recorded on MFT 11 and the tax class is 1.

  6. See (3) of IRM 21.7.2.4.8.3, Form 943-X, Adjusted Employer's Annual Tax Return for Agricultural Employees or Claim for Refund (including Form 943-X (PR)), for valid IRN's and CRN's used to adjust Form 943 accounts. Also see (5) and (6) of IRM 21.7.2.4.1.1, TC 29X / Item Reference Number (IRN) Valid Adjustment Formulas — Employment Taxes, for valid Form 943 adjustment formulas.

21.7.2.4.8.1  (10-01-2016)
Wages Subject to FICA and Income Tax Withholding

  1. All cash wages paid to farmworkers 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 are met:

    1. Cash and non-cash wages paid during the year to all farmworkers totals $2,500 or more.

    2. Annual cash wages of $150 or more are paid to a farmworker (this test is applied separately to each farm worker).

  2. 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:

    1. Is employed as a hand-harvest laborer

    2. Is paid piece-rates in an operation usually paid on a piece-rate basis in the region of employment

    3. Commutes daily from their permanent home to the farm, and

    4. Had been employed in agriculture less than 13 weeks in the preceding calendar year

    Note:

    Amounts paid to these farm workers, however, count toward the $2,500 or more test for determining the social security and Medicare liability regarding other farm workers.

  3. 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:

    • For tax years 2016, the threshold is $2,000.

    • For tax years 2014 and 2015, the threshold was $1,900.

    • Thresholds for prior years may be found in (3) of IRM 21.7.4.4.1.11.1, Provisions of SSDERA, General Information, or in the Pub 926, Household Employer's Tax Guide, for the year in question.

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

    • Compensation paid to H-2A agricultural workers are not subject to social security or Medicare taxes. However, compensation paid to H-2A agricultural workers is counted towards the tests discussed in (1) and (2) above.

    • Employers are not required to withhold federal income tax from compensation paid to an H-2A visa agricultural worker. However, if both the employer and employee agree, federal income tax may be withheld from compensation and those amounts would be reportable on Form 943.

    • H-2A agricultural workers are eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA) and should provide that information to the agricultural employer. An H-2A agricultural worker who fails to provide the employer with their Taxpayer Identification Number (TIN) may be subject to backup withholding (BUWH) which would be reportable on Form 945.

    • Employers must report compensation of $600 or more paid to an H-2A agricultural worker in a calendar year for agricultural labor on Form W-2, Wage and Tax Statement.

    • Additional information may be found on the IRS website at:Foreign Agricultural Workers on H-2A Visas.

21.7.2.4.8.2  (10-01-2015)
Incorrect Type of Return Filed — Forms 941 and 943

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

  2. 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:

    If And Then
    Taxpayer has filed Form 943 Previously reported employment taxes related to agricultural employees on Form 941 Advise the taxpayer (use the appropriate "C" letter if working paper correspondence) to file a Form 941-X for each quarter in which they incorrectly reported employment taxes related to agricultural employees on Form 941 and attach a statement detailing the amounts of any federal tax deposits or other payments which should be reapplied to their Form 943 tax account.
    Taxpayer has not yet filed Form 943 Previously reported employment taxes related to agricultural employees on Form 941 Advise the taxpayer (use the appropriate "C" letter if working paper correspondence) to take the following actions:
    1. File a Form 943 reflecting the correct tax for the year

    2. File a Form 941-X for each quarter in which they incorrectly reported employment taxes related to agricultural employees on Form 941 and attach a statement detailing the amounts of any federal tax deposits or other payments which should be reapplied to their Form 943 tax account.

21.7.2.4.8.3  (10-01-2015)
Form 943-X, Adjusted Employer's Annual Tax Return for Agricultural Employees or Claim for Refund (including Form 943-X (PR))

  1. 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:

    • An adjusted employment tax return, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 943-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, verify which set of certification box(es) were checked. If the taxpayer checked the adjustment certification(s) or checked both the adjustment certification(s) and the claim certification(s), process as an adjusted employment tax return. If the taxpayer checked only the claim certification(s), process as a claim for refund.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3, Operational Guidelines Overview.

  2. Taxpayers are required to certify on Form 943-X that they have filed or will file Forms W-2, or Forms W-2c, as required. They must also complete the applicable certification box based on their selection in Part 1 of Form 943-X.

    Example:

    If taxpayer checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If taxpayer checks box 2 in Part 1, then they must check the applicable certification box(es) in line 5.

    Note:

    If the certification box checked in Part 2 is inconsistent with the process selected in Part 1, continue processing the Form 943-X based on the information provided in Part 1.

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

    Item Reference Number (IRN) Explanation
    004 Total wages subject to social security tax (line 6 of Form 943-X - column 3 plus line 12 of Form 943-X - column 3).
    073 Taxable Medicare wages and tips (line 7 of Form 943-X - column 3 plus line 13 of Form 943-X - column 3).
    074 Taxable Wages & tips subject to Additional Medicare Tax withholding (line 8 of Form 943-X - column 3 plus line 14 of Form 943-X - column 3). Valid for tax periods beginning after December 31, 2012.
    007 Total social security, Medicare tax, and (for tax periods beginning after December 31, 2012) Additional Medicare Tax (combined figures in column 4 of Form 943-X - lines 6, 7, 8, 12, 13, and 14).
    003 Federal income tax withheld (line 9 of Form 943-X - column 4plus line 11 of Form 943-X - column 4).
    185 Tax adjustments (line 10 of Form 943-X - column 4). For tax periods after 200812, IRN 185 is only used on Form 943 adjustments for fractions of cents and third party sick pay.
    Credit Reference Number (CRN)
    299 COBRA premium assistance payments (line 16a of Form 943-X - column 4).

    Caution:

    Form 943-X is revised on a regular basis and line numbers for particular adjustment items occasionally change. However, there is no requirement for the taxpayer to use the most current version of Form 943-X. Although line numbers are provided in the table above for easy reference, employees are responsible for ensuring the proper adjustment action is taken based on the form version filed by the taxpayer.

    Note:

    Lines for HIRE Act related adjustment items have been removed from the current Form 943-X version. See IRM 21.7.2.5.20.1, Adjusting the Account — HIRE if information is needed regarding adjustments for HIRE Act items on tax year 2010 (only).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012. See IRM 21.7.2.4.3, Advance Earned Income Tax Credit (AEITC) — Form 941, Form 943, Form 944, and Schedule H, if information is needed regarding adjustments for AEITC on tax periods 201012 and earlier.

    Caution:

    Although CRN 290 is valid for MFT 11, this credit cannot be claimed or adjusted by filing a Form 943-X. This credit is only allowed during the processing of Forms 5884-C. See IRM 21.7.2.5.22, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for more information.

21.7.2.4.8.3.1  (10-01-2015)
Form 943-X Tax Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 943-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Box 3 and the applicable certification is checked on line 4a, 4b or 4c in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Exception:

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

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

  4. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified. Take the following actions:

    1. Notate the Form 943-X with the following text: "90 day - Claim" .

    2. Process the Form 943-X per procedures in IRM 21.7.2.4.8.3.2, Form 943-X Tax Decreases — Claim, and refer to IRM 21.7.2.4.6.5, 90 Day — Claim, for additional information.

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

  5. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A), for additional information.

  6. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. Process adjusted employment tax returns as follows:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

    2. Transfer the applicable overpayment using TC 830/710 to the period in which the Form 943-X was filed.

      Caution:

      To prevent either debit or credit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.8.3.2  (10-01-2015)
Form 943-X Tax Decreases — Claim

  1. These tax decreases involve income tax withholding and/or FICA (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 943-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Box 2 in Part 1 is checked

    • Box 3 and the applicable certification is checked on line 5a, 5b, 5c or 5d in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Exception:

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

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

    Exception:

    Claims filed without consent. If taxpayer has not checked a box on line 5 and states (in the explanation or in response to our contact) they are not required to obtain the consents prior to filing the claim and the claim is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send claim CAT-A. Exam will correspond with the taxpayer to secure applicable certifications. In certain situations, taxpayers may not have repaid or reimbursed their employees or obtained their consents prior to filing a claim (Form 943-X). However, they must certify they have repaid or reimbursed their employees or obtained consents before the Service can accept the claim. See Instructions for Form 943-X for more information.

  4. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A), for additional information.

  5. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

  7. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer explaining the discrepancy.

21.7.2.4.8.3.3  (10-01-2015)
Form 943-X Tax Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 943-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Box 3 is checked in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

    Note:

    See (3) and (4) of IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing, if the Form 943-X is missing required information. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation to see if it was entered there.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 943-X for the immediately preceding tax year prior to the due date for the current tax year (for example, a Form 943-X reporting a tax increase for tax year 2015 received on or before January 31, 2017), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest-Free Adjustments (Employment Tax Returns), for more information.

    Reminder:

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

  4. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Use the table below to make your adjustment(s).

    If Then
    The Form 943-X was filed by the due date of the return for the period in which the taxpayer discovered the reporting error Input TC 298, BS 20, and the appropriate IRN's with the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    The Form 943-X was not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 and the appropriate IRN's with BS 20.

    Example:

    An employer discovers an error on February 1, 2017 and files a Form 943-X which is received by the IRS on March 8, 2017 for the 11/201612 tax period. The interest computation date would be March 8, 2017.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3, Amended or Supplemental (Tax Decrease or Non-Interest-Free Tax Increase)) or a TC 298 (see IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X)).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 290 and an amended ROFTL was provided with the adjusted return.

  7. If payment for the additional tax reported on the Form 943-X is not reflected on the tax period being adjusted, research the taxpayer's account for the missing credit and, if located, transfer the payment as appropriate.

21.7.2.4.9  (10-01-2014)
Form 944, Employer's ANNUAL Federal Tax Return

  1. Form 944 is the annual employment tax return for small employers. Instead of filing quarterly tax returns (Form 941), certain eligible employers file an annual tax return (Form 944).

  2. Form 944 is processed under MFT 14 and the tax class is "1" . The first tax year for which Form 944 could be filed was 2006.

    Caution:

    MFT 14 is also the MFT for Non-Master File (NMF) Form 8613, Return of Excise Tax on Undistributed Income of Regulated Investment Companies. When generating a "C" letter from a Form 944 account, make sure the letter contains the correct form number.

  3. The same filing, paying, and depositing options available for Form 941 are also currently available for Form 944.

  4. All penalties and interest applicable to Form 941 also apply to Form 944, including FTD penalties. Federal tax deposits are required for Form 944 filers who report tax of $2,500 or more.

  5. To qualify for the Form 944 program one of the following situations must apply:

    • The taxpayer is a new employer who expects to have $1,000 or less in employment tax liability for the calendar year.

    • The taxpayer is an existing employer who expects to have $1,000 or less in employment tax liability for the calendar year, contacts the Service to request to file Form 944 (rather than Form 941), and receives written notice from the Service to file Form 944.

    • The taxpayer was required to file Form 944 for the prior year and reported $1,000 or less in total tax liability.

    Note:

    Domestic employers will generally have $1,000 or less in employment tax liability if they pay wages of $4,000 or less in a year. Employers in U.S. possessions will generally have $1,000 or less in employment tax liability if they pay wages of $6,536 or less in a year.

  6. For tax years 2006 (the first program year) through 2008, the Service ran an extract to identify employers who were eligible for the Form 944 program. If the Service determined an employer was eligible for the program, it would send a notification letter to the employer. Employers who received notification letters were required to file Form 944 to report their social security, Medicare, and withheld federal income taxes for the calendar year unless the employer made a timely request to file Form 941 quarterly instead (to opt out) and received written confirmation that their filing requirement was changed. See archived files of this IRM if information is needed for the notification letters that were issued or handling that was applied to responses.

  7. For tax years after 2008, taxpayers will either self identify during EIN assignment or can contact the Service to request consideration (opt in) for the Form 944 program. The eligibility extract is no longer run.

  8. Generally, existing employers must contact the Service by phone not later than April 1 of the current year, or send a written request postmarked by March 15th to opt in or opt out of the Form 944 program. If the due date falls on a Saturday, Sunday, or legal holiday, the last day employers may call the Service or have their written correspondence postmarked is the next business day following that Saturday, Sunday, or legal holiday.

  9. Eligible new employers can notify the IRS on Form SS-4, Application for Employer Identification Number, that they would like to file Form 944 by checking the box on line 14 of this form. Alternately, they can opt in by contacting the IRS by phone not later than the first day of the month that the first required Form 941 for the current year is due or in written correspondence postmarked on or before the 15th day of the month before the first required Form 941 is due. If the due date falls on a Saturday, Sunday, or legal holiday, the last day employers may call the Service or have their written correspondence postmarked is the next business day following that Saturday, Sunday, or legal holiday.

  10. Prior to January 1, 2010, Form 944 filers could only opt out of the program (i.e., request to file Form 941 instead) if they estimated that their employment tax liability would exceed the $1,000 threshold during the tax year or if they wanted to e-file Forms 941 quarterly. For tax years beginning on or after January 1, 2010, Rev. Proc. 2009-51 allows employers to opt out of the Form 944 program for any reason so long as their request is timely made.

  11. Current procedures for addressing taxpayer inquiries regarding the Form 944 program (including associated letters and notices), as well as for processing Form 944 adjustment requests, are found in the following subsections.

21.7.2.4.9.1  (10-01-2016)
Form 944 Cache

  1. 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:

    • "blank" : The employer is required to file Forms 941 for the calendar year, or no filing requirement determination has yet been made for the calendar year in question.

    • "1" : The employer is required to file Form 944 for the calendar year in question.

    • "2" : The employer is required to file Form 944 for the current calendar year but will be required to file Form 941 in the following calendar year. A cache value of "2" automatically updates to a cache value of "1" at the end of the current calendar year.

    Example:

    If CC BMFOLE for an employer reflects a F944 CACHE YRS: 2012 = "blank" , 2013 = "1" , 2014 = "1" , and 2015 = "2" , then the employer was required to file Forms 941 for 2012, Forms 944 for 2013 through 2015, and will be required to file Forms 941 for 2016.

  2. 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.

    Note:

    Form 944 Cache data is also displayed on CC ENMOD. However, it is not recommended that CC ENMOD be used for research purposes because the data is displayed as a string of values without a clear indication of corresponding calendar years.

  3. 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 the description of CC BNCHG element "F944-YR/IND" in Exhibit 2.4.9-13, BMF CC BNCHG General Format, for the input format of Form 944 Cache value changes.

    • The year for which the Form 944 Cache value is being changed must be input along with an indicator of "1" to turn on Form 944 requirements or "9" to turn off Form 944 requirements (as appropriate).

    • If the Form 944 Cache value of more than one year needs to be corrected, separate CC BNCHG inputs must be completed for each year.

21.7.2.4.9.2  (10-01-2014)
Form 944 Program — Opt-In and Opt-Out Inquiries

  1. For tax years 2006 through 2008, the Service identified employers who were eligible for the Form 944 program via an extract. Notification letters were issued yearly on or around February 1st to newly eligible taxpayers. (Taxpayers who were already Form 944 filers did not receive another notification letter.) The notification letters instructed the taxpayer that they were required to file Form 944 and to contact the IRS for any questions, including requests to "opt out" of the program. See archived files of this IRM if information is needed about the notification letters that were previously issued or handling of responses.

    Note:

    For tax years 2006 through 2009, Form 944 filers could only opt out (i.e., request to file Form 941 instead) if they estimated that their employment tax liability would exceed the $1,000 threshold during the tax year or if they wanted to e-file Forms 941 quarterly.

  2. For tax years after 2008, the eligibility extract is no longer run to identify taxpayers eligible for the Form 944 program. Taxpayers who wish to participate in the program will either self identify during EIN assignment or can contact the Service to request consideration (opt in) for the Form 944 program.

  3. For tax years beginning on or after January 1, 2010, Rev. Proc. 2009-51 allows employers to opt out of the Form 944 program for any reason, but they must contact the Service by phone by April 1st of the year or send a written request postmarked by March 15th. If the due date falls on a Saturday, Sunday, or legal holiday, the last day employers may call the Service or have their written correspondence postmarked is the next business day following that Saturday, Sunday, or legal holiday.

  4. The chart below provides procedures for handling most opt-in and opt-out inquiries.

    If And Then
    Taxpayer with Form 944 filing requirements wishes to file Form 941 for the current year (opt-out) for any reason The taxpayer contact is on or before April 1 or is in correspondence postmarked by March 15th Change the filing requirement from Form 944 to Form 941 and issue Letter 3007C to confirm filing requirement change.
    Taxpayer with Form 944 filing requirements wishes to file Form 941 for the current year (opt-out) for any reason The taxpayer contact is after April 1 or is in correspondence postmarked after March 15th Instruct the taxpayer as follows:
    1. They must file Form 944 for the current year.

    2. If their Form 944 for the current year reports tax of $1,000 or more, they will be notified that they are no longer eligible to file Form 944.

    3. They should contact us again after the close of the current year but before April 1 if they want to opt-out of filing Form 944 for the following year.

    Exception:

    If the taxpayer is a new employer, see the last row of this table.

    Taxpayer states they are not required to file an employment tax return (no employees, etc.) An employment tax filing requirement is open Close the open employment tax filing requirement.

    Note:

    You must verify the date the last wages were paid.

    Existing Form 941 filer (or existing taxpayer with no current employment tax filing requirement) wants to file Form 944 The taxpayer contact is on or before April 1 or is in correspondence postmarked by March 15th Review the taxpayer's Form 941 accounts for the current and preceding tax years.
    • If the tax reported for the preceding year is $1,000 or less, change filing requirement from Form 941 to Form 944 and issue Letter 3007C to confirm filing requirement change.

    • If the tax reported for the preceding year is more than $1,000, inform the taxpayer that they must file Form 941 for the current year and can request to file Form 944 for the following year if they meet eligibility requirements and contact us after the close of the year but before April 1.

    Note:

    If the tax for the preceding year was slightly over $1,000 and account analysis indicates a decreasing tax liability, the first bullet above can be followed. However, use caution when considering this action.

    Existing Form 941 filer (or existing taxpayer with no current employment tax filing requirement) wants to file Form 944 The taxpayer contact is after April 1 or is in correspondence postmarked after March 15th Instruct the taxpayer as follows that they must file Form 941 for the current year and to contact us again after the close of the current year but before April 1 if they want to file Form 944 for the following year.
    Taxpayer states they are a new employer and believe their liability will not exceed $1,000 for the year and want to file Form 944 It is any time during the year Research CC ENMOD. If CC ENMOD shows no filing requirement prior to the current year, establish filing requirements for Form 944 (delete Form 941 filing requirements if applicable) and issue 3007C letter to taxpayer.
    The taxpayer is a new employer that received a CP 575 stating they have Form 944 filing requirements and wants to file Form 941 instead because they expect to exceed the $1,000 threshold for the year ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Change the filing requirement from Form 944 to Form 941 and issue Letter 3007C to confirm filing requirement change.

    Caution:

    Any time the filing requirements are changed per the above instructions, it is necessary to consider all payments previously made for the current tax year. If payments have been applied to MFT 01 for tax that will be reported on MFT 14, or if payments have been applied to MFT 14 for tax that will be reported on MFT 01, transfer those payments to the appropriate tax account and tax period.

    Note:

    Do not change the filing requirement to Form 944 for any taxpayer that has a tax period in the preceding tax year which is in MasterFile status 02 or 03 (TDI status).

    Reminder:

    Always research the "Form 944 Cache" when addressing taxpayer contacts regarding Form 944 filing requirements. See IRM 21.7.2.4.9.1, Form 944 Cache, for more information on researching the "Form 944 Cache" and changing filing requirements to and from Form 944.

  5. 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.

    Caution:

    If faxing an acknowledgement, refer to IRM 11.3.1.11, Facsimile Transmission of Tax Information, for proper faxing guidance.

  6. 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.

21.7.2.4.9.3  (05-26-2016)
Form 944 — CP Notices and Letters

  1. 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.

    • CP 250A — See IRM 21.7.2.4.9.3.1, CP 250A

    • CP 250B — See IRM 21.7.2.4.9.3.2, CP 250B

    • CP 250C — See IRM 21.7.2.4.9.3.3, CP 250C

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

    • Letter 3007C — Issued when changing filing requirement to or from Form 944. Instructions for sending and considering this Letter 3007C are found throughout these procedures for Form 944 issues and in IRM 21.7.2.4.9.3.4, Taxpayer Files Form 944 or Form 941 in Error — Letter 4148C/4086C/3007C Responses.

    • Letter 4148C — Issued when a taxpayer files a Form 941 but is instead required to file Form 944. See IRM 21.7.2.4.9.3.4Taxpayer Files Form 944 or Form 941 in Error — Letter 4148C/4086C/3007C Responses.

    • Letter 4086C — Issued when a taxpayer files a Form 941 but is instead required to file Form 944. See IRM 21.7.2.4.9.3.4Taxpayer Files Form 944 or Form 941 in Error — Letter 4148C/4086C/3007C Responses.

    Reminder:

    Always research the "Form 944 Cache" when addressing taxpayer contacts regarding Form 944 filing requirements. See IRM 21.7.2.4.9.1, Form 944 Cache, for more information on researching the "Form 944 Cache" and changing filing requirements to and from Form 944.

21.7.2.4.9.3.1  (10-01-2014)
CP 250A

  1. CP 250A is issued to taxpayers who filed Form 944 with a total reported tax liability of more than $1,000 on line 7 and the Form 944 was posted in cycle 09 or earlier.

  2. The notice instructs the taxpayer that they are no longer eligible to file Form 944 and that Form 941 must be filed quarterly for the current year. The notice also informs the taxpayer that they may be required to make federal tax deposits as appropriate.

  3. The Form 944 Cache on CC BMFOLE will continue to reflect a value of "1" for the prior tax year when a CP 250A is issued to show they were eligible to file Form 944 for that tax year. However, the current year Cache value will be blank and the filing requirements will be changed to Form 941 to show that the taxpayer is no longer eligible for the Form 944 program.

  4. Follow the chart below for inquiries from taxpayers who received CP 250A.

    If Then
    The taxpayer states they want to remain in the Form 944 program and will not exceed the $1,000 threshold in the current year Verify with the taxpayer that they will in fact have a total tax liability of $1,000 or less for the current year. If the explanation provided is reasonable , allow the taxpayer to remain in the Form 944 program.
    1. Change the filing requirement to Form 944.

    2. Issue Letter 3007C to the taxpayer for verification of filing requirement change.

    3. Instruct the taxpayer of their deposit requirements.

    Note:

    Taxpayers may have exceeded the $1,000 threshold for many reasons (for example, the taxpayer corrected an administrative error from a prior year or a unique situation occurred in the preceding tax year that will not recur in the current year). However, if doubt exists do not allow the taxpayer to change back to Form 944 filing requirements for the current year.

    The taxpayer states they want to remain in the Form 944 program even though they will again exceed the threshold in the current year Instruct the taxpayer that they are not eligible for the Form 944 program and must file Form 941 for the current year.

    Reminder:

    Always research the "Form 944 Cache" when addressing taxpayer contacts regarding Form 944 filing requirements. See IRM 21.7.2.4.9.1, Form 944 Cache, for more information on researching the "Form 944 Cache" and changing filing requirements to and from Form 944.

21.7.2.4.9.3.2  (12-02-2014)
CP 250B

  1. CP 250B is issued to taxpayers who filed Form 944 with a total reported tax liability on line 7 of more than $1,000 and the Form 944 was posted in cycles 10 through 49.

  2. The notice instructs the taxpayer that:

    • They must file Form 944 for the current year.

    • They may be required to make federal tax deposits as appropriate for the current year.

    • They will not be eligible to file Form 944 for the following tax year and that Form 941 must be filed quarterly for the following tax year.

    Note:

    Taxpayers that receive CP 250B in the current year will also receive a CP 250C later in the year reminding them that they must file Form 941 quarterly for the following year. See IRM 21.7.2.4.9.3.3, CP 250C, for more information.

  3. The Form 944 Cache on CC BMFOLE will initially reflect a value of "2" when a CP 250B is issued because a Form 944 posted in cycles 10 through 49 and the tax reported exceeds the $1,000 threshhold. This cache value allows the computer to correctly identify taxpayers who should be sent CP 250C at the end of the year. Once the CP 250C is issued, the cache value will update for the year in which the CP 250B was issued from "2" to "1" .

    Example:

    Taxpayer filed Form 944 for 201612 which posted after cycle 09 (in 2017) and reported a tax liability of more than $1,000 (taxpayer will receive CP 250B). The "Form 944 Cache" for tax year 2017 is set to "2" when the 2016 return posts and will remain that value until the end of the year when MasterFile generates a CP 250C reminder notice to the taxpayer regarding their Form 941 filing requirement for 2018. At that time, the "2" cache value for 2017 will change to a "1" and the taxpayer's filing requirement will be changed to Form 941 for tax year 2018.

  4. Follow the chart below for inquiries from taxpayers who received CP 250B.

    If And Then
    Taxpayer states they wish to file Form 941 for the current year It is April 1 or prior (or postmarked on or before March 15th for written responses) Allow the taxpayer to file Form 941 for the current year.
    1. Change the filing requirement to Form 941.

    2. Issue Letter 3007C to the taxpayer for verification of filing requirement change.

    3. Inform taxpayer of their deposit requirements and Form 941 due dates.

    4. Verify that all applicable deposits are transferred to the Form 941 account.

    Taxpayer states they wish to file Form 941 for the current year It is after April 1 (or postmarked after March 15th for written responses) Instruct the taxpayer they must file Form 944 for the current year and that they will be required to file Form 941 quarterly for the following year.
    Taxpayer contacts us in the current year and states they wish to remain in the Form 944 program for the following tax year   Inform the taxpayer that we cannot consider their request until they file their Form 944 for the current year. Instruct the taxpayer to contact us again once they have filed their Form 944 for the current year but not later than April 1 of the following year.
    Taxpayer contacts us in the year following the issuance of the CP 250B and states they wish to remain in the Form 944 program for that year The taxpayer reported a tax liability of $1,000 or less on the Form 944 filed for the year in which the CP 250B and it is April 1 or prior (or postmarked on or before March 15th for written responses) Allow the taxpayer to remain in the Form 944 program.
    1. Change the filing requirement for the current year to Form 944.

    2. Issue Letter 3007C to the taxpayer for verification of filing requirement change.

    3. Instruct the taxpayer of their deposit requirements.

    Taxpayer contacts us in the year following the issuance of the CP 250B and states they wish to remain in the Form 944 program for that year The taxpayer reported a tax liability of more than $1,000 on the Form 944 filed for the year in which the CP 250B was issued or it is after April 1 (or postmarked after March 15th for written responses) Instruct the taxpayer that they are not eligible for the Form 944 program for the current year and must file Form 941.

    Note:

    If the due date falls on a Saturday, Sunday, or legal holiday, the last day employers may call the Service or have their written correspondence postmarked is the next business day following that Saturday, Sunday, or legal holiday.

    Reminder:

    Always research the "Form 944 Cache" when addressing taxpayer contacts regarding Form 944 filing requirements. See IRM 21.7.2.4.9.1, Form 944 Cache, for more information on researching the "Form 944 Cache" and changing filing requirements to and from Form 944.

    Note:

    If you receive an inquiry from a taxpayer stating they filed their Form 944 and it exceeds the $1,000 threshold and the return has not posted, do not change the filing requirement. Allow the Form 944 to post and the taxpayer will either receive a CP 250A or CP 250B, depending on when the 944 posts. Instruct the taxpayer to respond to the notice at that time.

21.7.2.4.9.3.3  (10-01-2014)
CP 250C

  1. CP 250C is generated in cycle 52 and is issued to taxpayers who:

    • Received a CP 250B earlier in the year; or,

    • Filed a Form 944 reporting more than $1,000 in total tax liability which posted after cycle 49 of the current calendar year. (Due to the timing involved, these taxpayers will receive a CP 250C but not a CP 250B,)

  2. The notice instructs the taxpayer that they are no longer eligible to file Form 944 and that Form 941 must be filed quarterly for the current year. The notice also informs the taxpayer that they may be required to make federal tax deposits as appropriate.

  3. Follow the chart below for inquiries from taxpayers who received CP 250C.

    If And Then
    The taxpayer states they want to remain in the Form 944 program for the current year It is April 1 or prior Follow the procedures for CP 250A responses provided in the table in IRM 21.7.2.4.9.3.1 (4).
    The taxpayer states they want to remain in the Form 944 program for the current year It is after April 1 Instruct the taxpayer that they are not eligible for the Form 944 program and must file Form 941 for the current year.

    Reminder:

    Always research the "Form 944 Cache" when addressing taxpayer contacts regarding Form 944 filing requirements. See IRM 21.7.2.4.9.1, Form 944 Cache, for more information on researching the "Form 944 Cache" and changing filing requirements to and from Form 944.

21.7.2.4.9.3.4  (05-26-2016)
Taxpayer Files Form 944 or Form 941 in Error — Letter 4148C/4086C/3007C Responses

  1. If a taxpayer files a Form 941 in a calendar year in which they are designated as a Form 944 filer, the Form 941 unposts (Unpostable Code (UPC) 329 Reason Code (RC) 6). Similarly, if a taxpayer files a Form 944 for a year in which they are designated to file Form 941, the Form 944 will unpost (also UPC 329 RC 6).

    Reminder:

    See IRM 21.7.2.4.9.1, Form 944 Cache, for information on researching the taxpayer's filing requirement.

  2. BMF Entity Unpostables uses an IAT tool to resolve these unposted returns. In most situations, the IAT tool resolves the unpostable based on recorded Form 944 Cache data as of when the tool is run:

    • If the 944 Cache was updated to match the form filed after it unposted and before the tool is run, the tool will take action to accept the return as filed.

    • On the other hand, if the unposted return is not compatible with the 944 Cache value, the tool generally initiates action to delete the return and generates a letter informing the taxpayer of the correct return to be filed for the tax year in question.

    Note:

    The IAT tool in question includes programming to reapply tax deposits appropriately for those unpostable cases on which it is run.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ The role of Accounts Management employees working taxpayer inquiries addressed in IRM 21.7.2 procedures is generally to advise the taxpayer as to the correct tax return to be filed based on the current filing requirement reflected in the Form 944 Cache as of when the inquiry is worked. Procedures which follow below also allow for changes to filing requirements based on taxpayer responses to letters issued by the IAT tool in the limited circumstances described.

  4. The IAT tool used by Entity Unpostables is programmed to issue the following letters:

    • Letter 4148C is used by the tool to inform taxpayers who filed Form 941 in error that they must file Form 944 annually.

    • Letter 4086C is used by the tool to inform taxpayers who filed Form 944 in error that they must file Form 941 quarterly.

    • Letter 3007C may also be used by the tool in certain circumstances to inform taxpayers who filed either Form 941 or Form 944 that their return was accepted for processing. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. If you receive an inquiry concerning Letter 4148C, follow the procedures below:

    If And Then
    Taxpayer states that they opted out of the Form 944 program by the April 1st deadline

    Note:

    Taxpayer must have submitted a written request and/or made contact via phone and the request was not processed. Accept the taxpayer's word.

    The filing requirement was not changed to Form 941 and the 944 Cache is set to the current year and request is received in the current year

    Example:

    Taxpayer is required to file Form 944 in 2015 and the request is received in 2015.

    Allow the taxpayer to continue to file Form 941.
    1. Request the originally filed return from Files using the DLN (Document Locator Number) of the unpostable/rejected TC 150. If you are not able to secure the originally filed return, request a signed copy of the originally filed Form 941 from the taxpayer, via fax. (See NOTE below table.)

    2. Change the filing requirement to Form 941.

    3. Send Letter 3007C to confirm filing requirement change, even if resulting from a phone call.

    4. Transfer all applicable deposits to the Form 941 account.

    5. Send Form 941, secured from Files, for processing as the original. (If you are unable to secure the original return from Files and must use a faxed return, edit the received date on faxed forms to reflect a timely filed return. See Note below table.)

    Exception:

    If you are staffing the toll-free telephone lines at a remote call site, do not follow steps 1-5 above; instead complete Form 4442/e-4442 and route to the Campus AM account paper function within your Directorate or designated campus. Include the DLN of the unpostable/Rejected TC 150 on the Form 4442.

    Taxpayer states they opted out of the 944 program by the April 1st deadline The filing requirement was not changed to Form 941 and the 944 Cache is set to the current year and request is received in a subsequent year

    Example:

    Taxpayer is required to file Form 944 in 2015 and a request is received in 2016.

    DO NOT change the filing requirement. Explain to the taxpayer they must file a Form 944 for the year in question because we are not able to change the 944 filing requirement in a subsequent year.
    Taxpayer did not opt out of the 944 program by April 1st   DO NOT change the taxpayer's filing requirement to Form 941.
    1. Instruct the taxpayer that they must file Form 944 and deposit accordingly.

    2. Input history items (via CC ACTON) to document that the taxpayer did not opt out and must file Form 944.

    3. Ensure all applicable deposits are applied to the 944 account.

    4. Advise taxpayer that if they file a timely Form 944 and exceed the $1,000 annual threshold, they will be notified that they are required to file a Form 941 for the next year.

    Taxpayer cites any other extenuating circumstances   Refer to your manager/lead for approval.

    Reminder:

    Always research the "Form 944 Cache" when addressing taxpayer contacts regarding Form 944 filing requirements. See IRM 21.7.2.4.9.1, Form 944 Cache, for more information on researching the "Form 944 Cache" and changing filing requirements to and from Form 944.

    Note:

    If the unpostable/rejected DLN of the Form 941 is not available on IDRS, the Letter 4148C contains the DLN of the unprocessed return and can be used to request the return from Files. If you secure the originally filed return from Files and are forwarding to be processed as the original, cross out the DLN and make sure the received date is on the return.

    Reminder:

    Only the taxpayer or their authorized representatives may "opt out" of the Form 944 program. Chief Counsel has determined that Reporting Agents are not permitted to "opt out" of the 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.

    Reminder:

    If the taxpayer's filing requirement is changed based on a 4148C reply, be sure to secure any missing returns (not already filed) that need to be filed. If the taxpayer has missing Forms 941, secure the returns, preferably by fax. Once returns are received, forward for processing with the actual received date.

  6. Letter 4086C responses are not common. And, the letter will generally only be issued after the close of the tax year when it is too late to opt in to the Form 944 program. If a taxpayer responds to a 4086c and states they wish to file Form 944 instead of Form 941 for the tax year in question, do not change the filing requirement to Form 944 unless the taxpayer provides a copy of a written notification from the Service (i.e. Letter 3007C) instructing the taxpayer to file Form 944 for that tax year or there is clear documentation in the IRS records that a timely request to opt-in was made but failed to be properly acted upon by the Service.

  7. Letter 3007C responses are usually received by the Service as documentation from the taxpayer to support their position with regards to filing requirements. Procedures for those cases are found throughout subsections of IRM 21.7.2.4.9. However, if the taxpayer is disputing the content of a 3007C letter, contact the IRM author through the campus P & A Staff for guidance on resolving the case.

21.7.2.4.9.4  (10-01-2016)
Form 944-X — Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund (including Form 944-X (PR) and 944-X (SP))

  1. 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:

    • An adjusted employment tax return, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 944-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, verify which set of certification box(es) were checked. If the taxpayer checked the adjustment certification(s) or checked both the adjustment certification(s) and the claim certification(s), process as an adjusted employment tax return. If the taxpayer checked only the claim certification(s), process as a claim for refund.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3, Operational Guidelines Overview.

  2. Taxpayers are required to certify on Form 944-X that they have filed or will file Forms W-2, or Forms W-2c, as required. They must also complete the applicable certification box based on their selection in Part 1 of Form 944-X.

    Example:

    If taxpayer checks box 1 in Part 1, then they must check the applicable certification box(es) in line 4. If taxpayer checks box 2 in Part 1, then they must check the applicable certification box(es) in line 5.

    Note:

    If the certification box checked in Part 2 is inconsistent with the process selected in Part 1, continue processing the Form 944-X based on the information provided in Part 1.

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

    Item Reference Number Explanation
    111 Federal income tax withheld from wages, tips, and other compensation (line 7 of Form 944-X - column 4).
    004 Taxable social security wages (line 8 of Form 944-X - column 3 plus line 14 of Form 944-X - column 3).
    005 Taxable social security tips (line 9 of Form 944-X - column 3).
    073 Taxable Medicare wages and tips (line 10 of Form 944-X - column 3 plus line 15 of Form 944-X - column 3).
    074 Taxable Wages & tips subject to Additional Medicare Tax withholding (valid for tax periods beginning after December 31, 2012) (line 11 of Form 944-X - column 3 plus line 16 of Form 944-X - column 3).
    112 Total social security, Medicare tax, and Additional Medicare Tax (for tax periods beginning after December 31, 2012).
    106 Tax adjustments (line 12 of Form 944-X - column 4).
    104 Income tax withheld figured at IRC Section 3509 tax rate on Special addition to wages for federal income tax (line 13 of Form 944-X - column 4).
    105 Social security, Medicare taxes, and (for tax periods beginning after December 31, 2012) Additional Medicare taxes figured at IRC Section 3509 tax rates on Special addition to wages for social security taxes, Special addition to wages for Medicare taxes, and Special addition to wages for Additional Medicare Tax (total of lines 14, 15, and 16 from Form 944-X - column 4).
    113 Total adjustments (total of lines 12, 13, 14, 15 and 16 of Form 944-X - column 4).

    Reminder:

    IRN 113 must be used when adjusting IRNs 104 through 106.

    Credit Reference Numbers (CRN)
    299 COBRA premium assistance payments (line 18a of Form 944-X - column 4).

    Caution:

    Form 944-X is revised on a regular basis and line numbers for particular adjustment items occasionally change. However, there is no requirement for the taxpayer to use the most current version of Form 944-X. Although line numbers are provided in the table above for easy reference, employees are responsible for ensuring the proper adjustment action is taken based on the form version filed by the taxpayer.

    Note:

    See IRM 21.7.2.4.1 for additional requirements with specific item reference numbers.

    Note:

    Lines for HIRE Act related adjustment items have been removed from the current Form 941-X version. See IRM 21.7.2.5.20.1, Adjusting the Account — HIRE if information is needed regarding adjustments for HIRE Act items on tax year 2010 (only).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012. Lines for this adjustment item have been removed from the current Form 941-X version. See IRM 21.7.2.4.3, Advance Earned Income Tax Credit (AEITC) — Form 941, Form 943, Form 944, and Schedule H, if information is needed regarding adjustments for AEITC on tax periods 201012 and earlier.

    Caution:

    Although CRN 290 is valid for MFT 14, this credit cannot be claimed or adjusted by filing a Form 944-X. This credit is only allowed during the processing of Forms 5884-C. See IRM 21.7.2.5.22, Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for more information.

  4. 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 21.7.2.4.7.2, Line 2, Form 941, apply to adjustments to Line 1 of Form 944 reported on Form 944-X.

21.7.2.4.9.4.1  (10-01-2015)
Form 944-X Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or FICA (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 944-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Box 3 and the applicable certification is checked on line 4a, 4b or 4c in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Exception:

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

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

  4. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified. Take the following actions:

    1. Notate the Form 944-X with the following text: "90 day - Claim" .

    2. Process the Form 944-X per procedures in IRM 21.7.2.4.9.4.2, Form 944-X Decreases — Claim, and refer to IRM 21.7.2.4.6.5, 90 Day — Claim, for additional information.

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

  5. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A), for additional information.

  6. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. Process adjusted employment tax returns as follows:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

    2. Transfer the applicable overpayment using TC 830/TC 710 to the period in which the Form 944-X was filed.

      Caution:

      To prevent either debit or credit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

  8. If the taxpayer's filing requirement has changed from Form 944 to Form 941 or vice versa, the credit will be transferred to the filing requirement that was active for the period in which the adjusted return was filed.

21.7.2.4.9.4.2  (10-01-2015)
Form 944-X Decreases — Claim

  1. These tax decreases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC has been legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 944-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Calendar year being corrected

    • Box 2 in Part 1 is checked

    • Box 3 and the applicable certification is checked on line 5a, 5b, 5c or 5d in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a certification box is not checked, make two attempts to secure the information by phone if a telephone number is available. Otherwise, follow procedures in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing. Use Letter 4384C to reject the claim and identify the missing information in the letter.

    Exception:

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

    Caution:

    The individual contacted by phone must be authorized to prepare taxpayer's employment tax returns. Document the case history with the date, time, name of individual contacted, and information obtained from the individual.

    Exception:

    Claims filed without consent. If taxpayer has not checked a box on line 5 and states (in the explanation or in response to our contact) they are not required to obtain the consents prior to filing the claim and the claim is ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send claim CAT-A. Exam will correspond with the taxpayer to secure applicable certifications. In certain situations, taxpayers may not have repaid or reimbursed their employees or obtained their consents prior to filing a claim (Form 944-X). However, they must certify they have repaid or reimbursed their employees or obtained consents before the Service can accept the claim. See Instructions for Form 944-X for more information.

  4. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A) — General, for additional information.

  5. Math verify adjustments to income tax, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Input TC 291, BS 20 and the appropriate IRN's for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

  7. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer explaining the discrepancy.

21.7.2.4.9.4.3  (10-01-2015)
Form 944-X Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or FICA tax (including Additional Medicare Tax for tax periods beginning after December 31, 2012).

    Reminder:

    AEITC was legislatively eliminated for tax periods after 201012.

  2. Verify all required items on Form 944-X are complete, such as:

    • Name, address, and EIN

    • Type of return being corrected

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Box 3 is checked in Part 2

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

    Note:

    See (3) and (4) of IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing, if the Form 944-X is missing required information. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 944-X for the immediately preceding tax year prior to the due date for the current tax year (for example, a Form 944-X reporting a tax increase for tax year 2015 received on or before January 31, 2017), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest-Free Adjustments (Employment Tax Returns), for more information.

    Reminder:

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

  4. Math verify adjustments to income tax withholding, social security tax, Medicare tax, and Additional Medicare Tax (AdMT).≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Use the table below to make your adjustment(s).

    If Then
    Return is filed by the due date of the return for the period in which the taxpayer discovered the reporting error Input TC 298, BS 20 and the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    Return is not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20.

    Example:

    An employer discovers an error on February 1, 2016 and files a Form 944-X which is received by the IRS on March 1, 2016 for the 14/201512 tax period. The interest computation date would be March 1, 2016.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3, Amended or Supplemental (Tax Decrease or Non-Interest-Free Tax Increase)) or a TC 298 (see IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X)).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 290 and an amended ROFTL was provided with the adjusted return.

  7. Be sure any payments are credited to period(s) where the tax is being assessed.

21.7.2.4.10  (10-01-2012)
Form 945, Annual Return of Withheld Federal Income Tax

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

    • Pensions

    • Annuities

    • IRA's

    • Military retirement

    • Gambling winnings

    • Indian Gaming Profits

    Note:

    As a general rule, all income tax withholding and BUWH (backup withholding) reported on Forms 1099 or W-2G must be reported on Form 945.

  2. Form 945 is an annual return due January 31 following the close of the calendar year.

    Exception:

    The return due date for Form 945 is extended 10 days if timely deposits are made which full pay the amount of tax reported.

  3. A taxpayer is required to file Form 945 only for a calendar year in which the taxpayer is required to withhold tax required to be reported on Form 945.

  4. The threshold for making deposits for Form 945 is $2,500. Form 945 tax deposit requirements are separate from Form 941. They cannot be combined. Taxpayers follow either semi-weekly or monthly deposit schedules determined by the Form 945 lookback period. See IRM 20.1.4, Failure to Deposit Penalty.

  5. Forms 945 are recorded on MFT 16 and the tax class is 1.

  6. Valid IRN's for Form 945 are 003 (federal income tax withheld) and 008 (BUWH).

    Note:

    IRN 184 (adjustment of withheld income tax) was valid for Form 945 for tax periods 199512 through 200812.

21.7.2.4.10.1  (10-01-2011)
Form 945-X — Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund

  1. 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:

    • An adjusted return of withheld federal income tax, or

    • A claim

    Note:

    If the taxpayer does not check a box in Part 1 (or checks both boxes) and the Form 945-X reflects a tax decrease, make two attempts to contact the taxpayer by phone (if a telephone number is available) to determine whether the they intended to follow the adjustment process or the claim process. If unable to contact the taxpayer by phone, process as an adjusted employment tax return.

    Reminder:

    When contacting the taxpayer or authorized representative, follow taxpayer authentication guidelines in IRM 21.1.3, Operational Guidelines Overview.

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

    1. See IRM 21.7.2.4.6.3.1 for more information on administrative errors.

    2. Even if income tax or BUWH was erroneously withheld, it cannot be corrected in a subsequent year. This includes erroneous withholding on IRA's.

    3. The amount withheld must be reported on Form 945-X under the same EIN as was actually used to do the withholding. Withholding amounts cannot be transferred or delegated to different EIN's, unless such action involves a successor employer.

    Example:

    The mutual fund industry has an "industry practice" involving transfer agents where one agent has control of an account and withholds taxes for part of the year. Another agent may take control of the account and withhold taxes for the remainder of the year. The industry practice is for the agent in control of the account at the end of the year to report all taxes withheld. This CANNOT be done. Each agent must report and deposit the amount of tax withheld under their own EIN and issue a Form 1099. Any requests for adjustments involving this practice must be denied. Input TC 290 .00 in block 98 (without return) or 99 (with return) and issue Letter 105C or 106C as appropriate.

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

21.7.2.4.10.1.1  (10-01-2015)
Form 945-X Decreases — Adjusted Employment Tax Return

  1. These tax decreases involve income tax withholding and/or BUWH.

  2. Verify all required items on Form 945-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. If a taxpayer files an adjusted employment tax return within 90 days of the expiration of the period of limitations, the adjustment must be converted to a claim for refund and the taxpayer must be notified. Take the following actions:

    1. Notate the Form 945-X with the following text: "90 day - Claim" .

    2. Process the Form 945-X per procedures in IRM 21.7.2.4.10.1.2, Form 945-X Decreases — Claim, and refer to IRM 21.7.2.4.6.5, 90 Day — Claim, for additional information.

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

  4. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2 , Examination Criteria (CAT-A) — General, for additional information.

  5. Math verify adjustments to income tax and/or BUWH.

  6. Process adjusted employment tax returns as follows:

    1. Input TC 291, HC 1, BS 20 and the appropriate IRN's (003 and/or 008) for the amount of decrease.

      Note:

      Overpayments arising from adjustments made under these procedures are subject to offset. Omit Hold Code 1 with the adjustment and allow the computer to systemically offset the credit if it will be fully absorbed by an outstanding balance due. Otherwise, if conditions prevent the computer from completing the offset, or if only part of the credit needs to be offset, manual offsets using TC 820/TC 700 transactions will be required.

      Caution:

      For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

    2. Transfer the applicable overpayment using TC 830/710 to the period in which the Form 945-X was filed.

      Caution:

      To prevent either debit or credit interest from generating, use the later of the return due date of the tax period being adjusted or the availability date of the overpayment as the transaction date of the TC 830 and use the due date of the return the credit is being applied to as the transaction date of the TC 710. See IRM 21.5.8.4.3(3), Determining Correct Credit Transfer Format, for more information.

    3. If the entire credit is not available to be transferred, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.10.1.2  (10-01-2015)
Form 945-X Decreases — Claim

  1. These tax decreases involve income tax withholding and/or BUWH.

  2. Verify all required items on Form 945-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Box 2 in Part 1 is checked

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

  3. A decrease in tax may meet examination criteria. See Exhibit 21.5.3–2, Examination Criteria (CAT-A) — General, for additional information.

  4. Math verify adjustments to income tax and/or BUWH.

  5. Input TC 291, BS 20 and the appropriate IRN's (003 and/or 008) for the amount of the decrease.

    Caution:

    For tax decreases with an unreversed FTD penalty, see (4) of IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X).

  6. If the entire credit is not available to be refunded to the taxpayer, generate Letter 4384C to the taxpayer. Explain why the entire amount was not available (for example, there was a balance due on the tax period being adjusted or the credit is being offset to a balance due on another tax period).

21.7.2.4.10.1.3  (10-01-2015)
Form 945-X Increases — Adjusted Employment Tax Return

  1. These tax increases involve income tax withholding and/or BUWH.

  2. Verify all required items on Form 945-X are complete, such as:

    • Name, address, and EIN

    • Calendar year being corrected

    • Box 1 in Part 1 is checked

    • Detailed explanation (see IRM 21.7.2.4.6 (11))

    • Signature

    Note:

    See (3) and (4) of IRM 21.5.3.4.1, Tax Increase or Credit Decrease Processing, if the Form 945-X is missing required information. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Check for the date the taxpayer discovered the error. If not entered on page 1, review the explanation.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , if the ascertained date is not provided and a telephone number is available, make two attempts to contact the taxpayer by phone to obtain the information. If the ascertained date cannot be obtained by phone, input the adjustment as a TC 290.

    Exception:

    If you receive a Form 945-X for the immediately preceding tax year prior to the due date for the current tax year (for example, a Form 945-X reporting a tax increase for tax year 2013 received on or before January 31, 2015), it is not necessary to contact the taxpayer for an ascertained date. In that situation, input a TC 298 with the applicable interest computation date. See IRM 21.7.2.4.6.2, Interest-Free Adjustments (Employment Tax Returns), for more information.

    Reminder:

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

  4. Math verify adjustments to income tax and/or BUWH.

  5. Use the table below to make your adjustment(s).

    If Then
    The Form 945-X was filed by the due date of the return for the period in which the taxpayer discovered the reporting error Input TC 298, BS 20, IRN 003 and/or IRN 008 as appropriate, and the correct interest computation date (INTCMP-DT). See IRM 21.7.2.4.6.2 and example below for additional information.
    The Form 945-X was not filed by the due date of the return for the return period in which the error was ascertained or "date you discovered errors" was blank or the date error was discovered was not furnished in Part 4 Input TC 290 with BS 20 along with IRN 003 and/or IRN 008 as appropriate.

    Example:

    An employer discovers an error on February 1, 2016 and files a Form 945-X which is received by the IRS on March 1, 2016 for the 16/201512 tax period. The interest computation date would be March 1, 2016.

  6. Adjust the FTD penalty when using either a TC 290 (see IRM 20.1.4.21.3, Amended or Supplemental (Tax Decrease or Non-Interest-Free Tax Increase)) or a TC 298 (see IRM 20.1.4.21.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, and CT-1X)).

    Note:

    See IRM 20.1.4.21.5.1, Amended ROFTL (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X), when using a TC 298 or TC 290 and an amended ROFTL was provided with the adjusted return.

  7. If payment for the additional tax reported on the Form 945-X is not reflected on the tax period being adjusted, research the taxpayer's account for the missing credit and, if located, transfer the payment as appropriate.

21.7.2.4.10.2  (10-01-2014)
Taxpayer Reports Non-Payroll Withholding on Incorrect Form

  1. 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:

    If And Then
    Taxpayer has filed Form 945 Previously reported non-payroll withholding on Form 941 Advise the taxpayer (use the appropriate "C" letter if working paper correspondence) to file a Form 941-X for each quarter in which they incorrectly reported non-payroll withholding on Form 941 and attach a statement detailing the amounts of any federal tax deposits or other payments which should be reapplied to their Form 945 tax account.
    Taxpayer has not yet filed Form 945 Previously reported non-payroll withholding on Form 941 Advise the taxpayer (use the appropriate "C" letter if working paper correspondence) to take the following actions:
    1. File a Form 945 reflecting the correct non-payroll withholding for the tax year

    2. File a Form 941-X for each quarter in which they incorrectly reported non-payroll withholding on Form 941 and attach a statement detailing the amounts of any federal tax deposits or other payments which should be reapplied to their Form 945 tax account.

    Taxpayer files Form 941 indicating non-payroll items were included on the return Code & Edit (C&E) identifies the situation As per procedures in (4) of IRM 3.11.13.13, C&E will correspond with the taxpayer to determine their intent. If the taxpayer's reply indicates they should have filed Form 945, C&E will forward the Form 941 to Accounts Management on Form 3465 indicating "Non-payroll on Form 941" Take the following actions to resolve the situation:
    1. If appropriate, delete the filing requirements for Form 941 and establish Form 945 filing requirements.

    2. Return the Form 941 to the taxpayer using the appropriate "C" letter and inform the taxpayer of their correct filing requirements.

    3. Input credit transfers as appropriate to move credits from the Form 941 account to the Form 945 account.

21.7.2.4.10.3  (10-01-2016)
BUWH Claims on Form 945

  1. For payments made in tax years 2003 and subsequent, BUWH is imposed at the rate of 28% on reportable payments of interest, dividends, patronage dividends, etc.

  2. Some payors withhold the tax from exempt recipients who are not otherwise required to file an income tax return, and advise them to secure refunds from IRS. Basically, a payor is not required to withhold on a payment made to a payee described in IRC 3406(g)(1).

  3. The following types of entities are exempt from withholding:

    1. An organization exempt from taxation under IRC 501(a) or an individual retirement plan.

    2. The United States, its wholly owned agency or instrumentality.

    3. A state, the District of Columbia, a possession of the United States, or any political subdivision, wholly owned agency, or instrumentality of these entities.

    4. A foreign government or political subdivision of a foreign government, wholly owned agency, or instrumentality of these entities.

    5. An international organization (e.g., the United Nations and the Organization of American States).

  4. If an organization is exempt under IRC 501(a) or an individual retirement plan, and has been erroneously subjected to BUWH, it must file Form 990-T, Exempt Organization Business Income Tax Return, to claim a refund of such withholding.

    Exception:

    A Private Foundation can claim erroneous BUWH on Form 990-PF, Return of Private Foundation, instead of Form 990-T.

    Note:

    See IRM 5.19.3, Backup Withholding Program and IRM 21.7.7.4.3.5, Backup Withholding, for additional information on BUWH.

21.7.2.4.10.3.1  (10-01-2012)
Form 945 BUWH Refunds for Exempt Entities

  1. The procedures listed below on issuing a refund from the employer’s Form 945 account apply only to the exempt entities described in list items (b), (c) and (d) in IRM 21.7.2.4.10.3 (3).

  2. If a payor withholds on an exempt recipient, the payor may treat the amount as erroneously withheld and refund it to the payee as long as the refund is made prior to the end of calendar year and prior to the time the appropriate Form 1099 series information return is furnished.

    1. If a payor makes a refund after having made last deposit for tax year, but before the Form 945 is filed, then only the correct amount of BUWH should be reported but nevertheless includes the BUWH amount of the Form 945 and the overpayment automatically refunded to taxpayer (payor).

    2. If a payor makes a refund during the calendar year but after last deposit has been made for tax year, then a Form 843 claim must be filed to obtain a refund.

  3. If recipient is exempt from filing an income tax return, use the following procedure:

    1. The exempt recipient must file Form 843 or similar statement.

    2. Attach a statement to Form 843 from each payor who erroneously withheld tax, setting forth the amount of tax withheld, the date withheld, and a statement to the effect the payor did not repay or reimburse the recipient and will not claim an adjustment for the amount on Form 945.

    3. The statement must be signed by the person authorized to sign the payor’s Form 945, and list the TIN (Taxpayer Identification Number) of the account the BUWH was paid under. See the table below for processing instructions.

    If Then
    Payee files a Form 843 for tax withheld before the end of the tax year Advise payee to seek reimbursement from the payor.
    Tax year has ended and the required statement is attached Follow normal procedures to issue a manual refund to the exempt recipient from the payor’s Form 945. Include manual interest and verify posting of the manual refund.
    The tax year has ended and the required statement is not attached Advise the payee to obtain the required statement from the payor.

21.7.2.4.10.3.2  (10-01-2011)
BUWH Claims for Taxpayers Other Than Exempt Entities

  1. All other taxpayers must claim BUWH on a related income tax return. See IRM 21.7.4.4.10, Backup Withholding (BUWH) on Income Tax Returns, for more information.

  2. If a Form 94XX or Form 843 claim is filed for BUWH on any employment tax account, including Form 945, reject the claim and explain to taxpayer an income tax return must be filed to claim the credit.

21.7.2.4.10.4  (10-01-2013)
Tax Equity and Fiscal Responsibility Act (TEFRA)

  1. 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.

  2. 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.

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

    1. Correspond to inform taxpayer to combine all the withholding from pension incomes on one Form 945, or to request separate EIN's for each pension trust.

    2. Inform taxpayer, if separate EIN's are assigned, they are responsible for all filing requirements and penalty assessments.


    If Then
    No reply, or taxpayer states they do not want separate EIN's Input TC 290 to assess any additional tax.
    Taxpayer requests separate EIN's Photocopy the case file and forward to Entity for assignment of EIN's. When EIN's are assigned, re-input the returns and transfer any credits to the new EIN's.
    Refunds were issued prior to the posting of the second return Contact taxpayer as stated in (3) above.

21.7.2.4.11  (10-01-2015)
Household Employment Taxes

  1. The Social Security and Domestic Employment Reform Act of 1994 (SSDERA) added IRC 3510 which provides that the collection of domestic service employment taxes on services performed after December 31, 1994 be coordinated with the collection of income taxes.

  2. Domestic service in the private home of the employer is also referred to as household employment. Domestic employees are also referred to as household employees. The FICA taxes, federal income tax withholding (if any), and FUTA taxes incurred by employers of household employees are referred to as household employment taxes.

    Note:

    Household employers are required to withhold Additional Medicare Tax on household employees who they pay wages/tips in excess of $200,000 for a calendar year beginning after December 31, 2012.

  3. Although collected with income tax, household employment taxes are employment taxes.

  4. See IRM 21.7.2.4.11.1, Forms Used in Reporting Employment Taxes for Household Employees, for information on the proper form to be filed for reporting household employment taxes.

  5. For additional guidance on household employment taxes, see:

    • Pub 926, Household Employer's Tax Guide

    • Notice 95-18 (1995-1 C.B. 300) which clarifies issues related to SSDERA.

    • Rev. Proc. 2013-39 , IRB 2013.-52.

21.7.2.4.11.1  (10-01-2013)
Forms Used in Reporting Employment Taxes for Household Employees

  1. 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:

    • Individuals file Schedule H (Form 1040) with their Form 1040 series income tax return. These are processed on MFT 30. See IRM 21.6.4.4.8, Schedule H, Household Employment Taxes, for more information.

    • Trusts file Schedule H (Form 1040) with Form 1041. These are processed on MFT 05. See IRM 21.7.4.4.1.11, Social Security Domestic Employment Reform Act and BMF Schedules H , for more information.

    • If no income tax return is required to be filed, Schedule H (Form 1040) is filed by itself. These are processed to either MFT 30 or MFT 05 as appropriate.

  2. 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.

  3. Partnerships cannot be domestic employers.

  4. Corporations cannot be domestic employers.

  5. See IRM 21.7.2.4.11.3, 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.

21.7.2.4.11.2  (01-08-2014)
Procedures for Household Employment Tax Inquiries

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

    If And Then
    A general inquiry is received regarding household employment taxes.

    Example:

    Questions regarding wage thresholds, tax rates, forms to be filed, etc.

      Research Pub 926, Household Employer's Tax Guide, forms, and form instructions as appropriate to provide the taxpayer with the guidance needed.
    An inquiry is received about a Schedule H (Form 1040) which was or will be filed with Form 1041.   See IRM 21.7.4.4.1.11, Social Security Domestic Employment Reform Act and BMF Schedules H , for more information.
    An inquiry is received about a Schedule H (Form 1040) which was or will be filed with Form 1040.   See IRM 21.6.4.4.8, Schedule H, Household Employment Taxes for more information.
    An inquiry is received about a Form 941, Form 943, Form 944 filed to report household employment taxes (FICA and/or federal income tax withheld). The household employment taxes (FICA and/or federal income tax withheld) should have instead been reported on Schedule H (Form 1040) with a Form 1040 See IRM 21.6.4.4.8.12, BMF Form 941 Filed Instead of IMF Schedule H, for more information.
    An inquiry is received about a Form 941, Form 943, Form 944 filed to report household employment taxes (FICA and/or federal income tax withheld). The household employment taxes (FICA and/or federal income tax withheld) should have instead been reported on Schedule H (Form 1040) with a Form 1041 See paragraph (5) of IRM 21.7.4.4.1.11.2.3, Adjustments (Amended Returns, TRNS 193s, etc.) Involving Forms 1041 With Schedule H, for more information.
    An inquiry is received regarding a Form 940 filed to report FUTA taxes for household employees. The FUTA tax should have instead been reported on Schedule H (Form 1040) with either a Form 1040 or Form 1041 See IRM 21.7.3.4.13, Schedule H FUTA Erroneously Reported.
    An inquiry is received from an entity claiming to be a partnership The entity has reported household employment taxes Advise the taxpayer that a partnership cannot be a domestic employer. Instruct the taxpayer that they must follow one of the following options for reporting household employment wages and tax:
    1. One member of the unit can report all taxes and wages on Schedule H filed with their Form 1040, or;

    2. Each member can report their portion on Schedule H filed with their Form 1040.

    An inquiry is received from a state or local government acting as an IRC 3504 agent on behalf of Home Care Service Recipients (HCSR)

    Note:

    These entities may be identified by the presence of Employment Code "A" , the literals "HHCSR" or "HCSR" in the name line, or use of the following terms: "Household Employer Agency" , "Fiscal Agent" , or "Choreworker" .

    An FTD penalty has been charged (on any tax module) Abate any FTD penalties identified on these accounts even if taxpayer is not requesting abatement. Taxes can be paid with the return. No deposits are necessary. See IRM 20.1.4.5, State and Local Health Welfare, for more information.
    An inquiry is received from a party who is operating as an IRC 3504 agent for one or more household employers but is not a state or local government. An FTD penalty has been charged Do not adjust the penalty unless other abatement criteria applies. These agents are responsible for making timely federal tax deposits as any other employer or Section 3504 agent.

    Note:

    Starting January 2, 2014, see (5), (6), and (7) in IRM 21.1.1.6, Customer Service Representative (CSR) Duties, for new tax law procedures.


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