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IRS Form 941-X: Advice, Records, and Employer Implications

Index​

  1. Guidance from the IRS for Completing Form 941-X
  2. Resources for Questions Related to Form 941-X
  3. Seminars and Workshops for Understanding Form 941-X
  4. Role of Third-Party Payroll Services
  5. Record Keeping for Form 941-X Corrections
  6. Reflecting Voided Checks or Payments
  7. Inclusion of State and Local Tax Corrections
  8. Impact on Future Employer Tax Deposits
  9. Notifying Employees About Corrections
  10. Implications for Employee W-2 Forms
  11. Actions if Employees Have Already Filed Their Taxes

Guidance from the IRS for Completing Form 941-X​

The IRS provides comprehensive instructions for completing Form 941-X, essential for correcting errors on previously filed Form 941. Key aspects include:

  • When to File: File Form 941-X upon discovering an error on a previously filed Form 941. Correct underreported taxes as soon as possible and for overreported taxes either make an interest-free adjustment or file a claim for a refund or abatement.
  • How to Complete: The form is divided into five parts, requiring specific information about adjustments, explanations, and signatures.
  • Special Considerations: Specific worksheets and steps are required for credits like the Employee Retention Credit (ERC) and COBRA premium assistance credit.

For specific questions about Form 941-X, the following resources are available:

  • IRS Website: Detailed instructions and FAQs can be found on the IRS Employment Taxes page and the Correcting Employment Taxes page.
  • Publications: IRS Publication 15 (Circular E) provides additional guidance.
  • IRS Business and Specialty Tax Line: Contact 800-829-4933, available Monday through Friday, 7:00 a.m. to 7:00 p.m. local time.

Seminars and Workshops for Understanding Form 941-X​

Employers can utilize several seminars and workshops to understand Form 941-X better:

  • Online Webinars: Platforms like ComplianceOnline and Learning Premier offer webinars and virtual training events on Form 941-X.
  • YouTube Tutorials: Free resources such as tutorials provide step-by-step guidance on completing Form 941-X.

Role of Third-Party Payroll Services​

Third-party payroll services can file Form 941-X on behalf of employers. Key points include:

  • Authority to File: Authorized third-party payers can sign and submit Form 941-X on behalf of their clients.
  • Liability: Both the third-party payer and the client employer are liable for underpayments resulting from improper claims.
  • Documentation Requirements: Third-party payers must obtain and maintain accurate records to substantiate the claims made on Form 941-X.
[Collaborate with Your Payroll Service]

Ensure that your payroll service provider is aware of any changes or corrections needed so they can file Form 941-X accurately on your behalf. Communication and detailed record-keeping are vital.

Record Keeping for Form 941-X Corrections​

Duration for Retaining Records​

Employers must retain all employment tax records for at least four years after the tax becomes due or is paid, whichever is later. This includes records related to corrections made using Form 941-X.

Specific Documents to Retain​

When making corrections using Form 941-X, retain the following documents:

  • Original and Corrected Forms: Keep copies of the original Form 941 and the corrected Form 941-X.
  • Supporting Documentation: Payroll records, tax deposit receipts, and other documentation supporting the corrections made.
  • Employee Records: Maintain records of employee earnings, tax withholdings, and adjustments made.
  • Correspondence with IRS: Communication with the IRS regarding the corrections.
  • Worksheets and Calculations: Worksheets or calculations used to determine corrections.

Reflecting Voided Checks or Payments​

When a payroll check is voided, it must be accurately reflected on Form 941-X:

  • Adjusting Wages and Taxes: Correct wages and taxes reported in the quarter when the check was issued.
  • Detailed Explanation: Provide a detailed explanation in Part 4 of Form 941-X, describing the voided check and adjustments made.
  • Reconciliation: Ensure that total wages and taxes reported match the corrected amounts.

Inclusion of State and Local Tax Corrections​

Form 941-X is used for correcting federal employment taxes reported on Form 941. Corrections for state and local taxes must be done using the appropriate state or local forms.

[State and Local Tax Compliance]

Always stay updated with your state or local tax agency's guidelines for making corrections. This may require separate forms and processes from federal corrections.

Impact on Future Employer Tax Deposits​

Correcting errors on Form 941 using Form 941-X affects future employer tax deposits:

  • Overreported Taxes: Apply the overpayment to the next Form 941 or request a refund.
  • Underreported Taxes: Pay the additional amount owed immediately to avoid interest and penalties.
[Risk of Penalties]

Failing to pay underreported taxes promptly can result in accruing interest and penalties. Address corrections swiftly to minimize financial risks.

Notifying Employees About Corrections​

When making corrections on Form 941-X, notify employees:

  • Written Notification: Inform employees in writing about the nature of the corrections.
  • Updated Forms W-2c: Issue corrected W-2 forms (W-2c) if corrections affect amounts reported on original W-2 forms.

Implications for Employee W-2 Forms​

Corrections on Form 941-X affect employee W-2 forms:

  • Issuing W-2c Forms: File Form W-2c with the SSA and provide copies to employees if corrections impact wages, tips, or other compensation.
  • Certification on Form 941-X: Certify that all necessary W-2c forms have been filed with the SSA.

Actions if Employees Have Already Filed Their Taxes​

If employees have already filed their taxes before corrections are made on Form 941-X:

  • Inform Employees Promptly: Notify employees and provide corrected W-2c forms.
  • Amended Tax Returns: Employees may need to file Form 1040-X to correct their tax filings.
  • Assistance and Guidance: Offer assistance on how to file amended returns.
[Employee Assistance]

Facilitate resources and support for employees who need to file amended tax returns due to corrections. This can include informational sessions or guides on completing Form 1040-X.

Citations​

  1. IRS Form 941-X Instructions
  2. IRS Instructions for Form 941-X
  3. Filling Out Form 941-X for Employee Retention Credit
  4. Form 941 Information and Guide
  5. IRS Topic No. 305 - Recordkeeping
  6. Advising Clients to File Form 941-X for Missed COVID-19 Relief Credits
  7. IRS Retention Requirement for Employer Tax Records
  8. Updated Form 941-X: Correcting 941 Reporting Errors
  9. IRS Third-Party Arrangements
  10. IRS Determines Third-Party Payers Liable for Clawback of Improper Employee Retention Credit Refunds to Clients
  11. Due Dates for Filing Forms 941-X
  12. Voided Check Crossing Quarters
  13. Understanding Form 941 Payment Methods
  14. About Form 941-X
  15. Voiding Process in USPS-R
  16. Filling out Form 941-X