Agency highlights key requirements, time frames

 

The IRS is clearing up confusion surrounding when employers should submit Form 941-X for an adjustment or a refund claim.

 

Because the terms are often treated as synonyms and the same form is used in both circumstances, may think all the guidelines are the same.

 

However, that’s not correct

 

Recent Chief Counsel Advice clarifies the difference between claims and adjustments as well as the time frame employers have for adjustments.

 

Claims process

 

Per the Internal Revenue Code, companies can only file refund claims for income taxes due to administrative errors when the tax actually withheld doesn’t match what was listed on Line 3 of Form 941.

 

The same is true when the amount of taxable wages and rips subject to the Additional Medicare Tax listed on Line 5d of Form 941 isn’t the same as what was withheld.

 

Remember: the claims process can’t be used to correct withholding errors for income taxes or Additional Medicare Taxes that were deducted from employees’ wages.

 

Adjusted returns

 

Adjustments can be used to correct overpayments or underpayments.

 

For taxes withheld from workers’ pay, if the error is discovered in the same calendar year wages were paid and the company reimbursed any affected employees during that same year, the employer can use the adjustment process to resolve it.

 

And as long as the mistake is corrected and employees are repaid during the same calendar year, the employers have a bit of time to make things right.

 

Previous guidance has suggested that Form 941-X must always be filed in the same year the error occurred, but that’s not the case. If it’s been resolved correctly, employers can file Form 941-X in the next calendar year.

 

The IRS plans to revise different publications and training materials that discuss the adjustment and claims processes to make the differences clearer, and to emphasize employers’ options for filing Form 941-X.

 

More info: irs.gov/pub/irs-wd/201822028.pdf