the abcs and xyzs of correcting irs forms - ascentis · the abcs and xyzs of correcting irs forms...

©2017 The Payroll Advisor1

The ABCs and XYZs of

Correcting IRS Forms

Presented on Thursday, July 13, 2017

Housekeeping

©2016 The Payroll Advisor

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Credit QuestionsToday’s

topicSpeaker

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by August 13th

Our Focus For Today


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Correcting the Form 941 using the Form 941-X

Correcting the Form 944 using the Form 944-X

Filing amended returns for Form 940

When to issue a Form W-2c and how to

complete it

When to use the Form W-3c and how to

complete it

About the Speaker


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Vicki M. Lambert, CPP, is President and Academic Director of

The Payroll Advisor™, a firm specializing in payroll education

and training. The company’s website

www.thepayrolladvisor.com offers a subscription payroll

news service which keeps payroll professionals up-to-date on

the latest rules and regulations.

As an adjunct faculty member at Brandman University, Ms.

Lambert is the creator of and instructor for the Practical

Payroll Online payroll training program, which is approved by

the APA for recertification credits.

Vicki M. Lambert, CPP, is President and

Academic Director of The Payroll

Advisor™, a firm specializing in payroll

education and training. The company’s

website www.thepayrolladvisor.com offers

a subscription payroll news service which

keeps payroll professionals up-to-date on

the latest rules and regulations.

http://www.thepayrolladvisor.com/

http://www.thepayrolladvisor.com/

Adjusted Employer’s QUARTERLY

Federal Return or Claim for Refund

Form 941-X7


Background


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IRS introduced 941X Form in 2009

Stand alone forms do not attach to 941

Discontinue using Form 941c as of Dec 31, 2008.

Use corresponding 94X series for Forms 941, 943, 944, 945, and CT-1

Latest version April, 2017

Purpose


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Do not request an abatement of assessed interest

or penalties on Form 941-X– Use Form 843, Claim

for Refund and Request for Abatement

If Form 941 has not been filed for one or more

quarters do not use Form 941-X—File Form 941 for

those quarters

General Filing Rules


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Do not use Form 941-X to correct other forms such

as 944 or 945—use that form’s version such as

944-X or 945-X

Report the correction of underreported and over-

reported amounts for the same tax period on a

single Form 941-X

Exception: If requesting a refund or abatement

If Requesting Refund or Abatement


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If correcting both underreported and overreported

amounts…

File one Form 941-X correcting the underreported

amounts only and…

File a second Form 941-X correcting the

overreported amounts

Due Dates


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The due date for filing depends on two factors

When the error is discovered

If the employer underreported or over-reported

tax

The process used depends on when the Form 941-

X is filed

There is a 90 day period of limitations

If any due date falls on a Saturday,

Sunday or legal holiday, the form may

be filed on the next business day

Due Date—Underreported Tax


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If correcting underreported tax the form must be filed

by the due date of the return for the period in which

the error was discovered and must pay the amount

owed by the time of filing

If the error is discovered in Form 941-X is due

1. January, February, March April 30

2. April, May, June July 31

3. July, August, September October 31

4. October, November, December January 31

The dates shown in this table apply only to corrections of underreported amounts.

Due Date—Underreported Tax


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If the form is filed late the employer must attach an

amended Schedule B to the Form 941-X

If this is not done, the IRS may assess an

“averaged” failure-to-deposit penalty

Total tax reported on the “Total Liability for the

quarter” line of Schedule B must match the

corrected tax for the quarter

Due Date—Underreported Tax--Example


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On April 10, 2017 an error is discovered

The payroll department under-reported $10,000 of

social security and Medicare wages on their first

quarter 2016 Form 941

Because the error is discovered in the second

quarter of 2017, the Form 941-X and the total tax

owed must be filed and paid by July 31, 2017

If filing earlier than July 31st , the amount owed

must be paid by the time the form is filed

Due Date Over-reported Taxes


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For over-reported taxes there are two choices:

Credit: If you choose to apply the credit to a Form

941 file the Form 941-X soon after the error is

discovered but more than 90 days before the

period of limitations on the credit or refund for the

Form 941 expires

Claim: if you choose to file a claim must do so

before the period of limitations on credit or refund

expires for Form 941

Due Date Over-reported Taxes


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If also correcting underreported amounts must file

separate Form 941-X reporting only the

underreported amounts

You may not file a refund claim to correct federal

income tax or Additional Medicare Tax actually

withheld from employees.

Filing Deadlines


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May correct over-reported taxes on a previously filed

Form 941 if the Form 941-X is filed:

within 3 years of the date the Form 941 was filed

or;

2 years from the date you paid the tax reported on

the Form 941, whichever is later

May correct underreported taxes on a previously filed

Form 941 if the Form 941-X is filed:

within 3 years of the date the Form 941 was filed

Filing Deadlines


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These timeframes are

called “period of limitations”

For the purpose of these

period of limitations Forms

941 for a calendar year are

considered filed on April 15

of the succeeding year if

filed by that date

Filing Deadlines-Example


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The payroll department filed the fourth quarter

2013 Form 941 on January 27, 2014 and the

payments were made on time

The IRS treats this return as if it were filed on April

15, 2014

On January 20, 2017 the payroll department

discovers that they had over-reported the social

security and Medicare taxes on that form by $350

Filing Deadlines-Example


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To correct the error:

The payroll department must file Form 941-X by

April 18, 2017 which is the end of the period of

limitations for the Form 941 and use the claim

process

If you file Form 941-X to correct overpayments in

the last 90 days of the period of limitations,

January 18, 2017 for our example, the claim

process must be used

Filing Deadlines-Example 2


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The employer wants to use over-reported tax as a

credit to Form 941:

On June 19, 2017 the payroll department discovers

that it over-reported the tax on its 2016 fourth

quarter Form 941

It wants to use the adjustment process

To allow sufficient time for IRS to process the credit

the Form 941-X must be filed by July 3, 2017 and

the credit taken on the third quarter 2017 Form 941

Adjustment or Claim?


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If the payroll department overreported the tax on a

previously filed Form 941, it may choose one of the

following options:

Use the adjustment process

Check the box on line 1 to apply credit to Form 941

that is being submitted in same quarter as Form 941-X

Use the claim process

Check the box on line 2 to file a claim on Form 941-X

request refund or abatement

Completing the Form


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It is a five-section form plus the employer

information area

24 lines are available for completion

Part 1– Selecting the Process lines 1 and 2

Part 2: The Certifications Lines 3 – 5d

Part 3: Corrections Lines 6 – 21

Part 4: Explanations of corrections Lines 22 – 24

Part 5: Signature

Completing the Form


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All of the information concerning the employer

must be provided

In Part 1 one box (but not both) must be checked

Part 2 the box on line 3 must be checked and any

applicable boxes on line 4 and 5

Part 3: if any line does not apply leave it blank

Show negative amounts or reductions with minus

sign (-) and positive amounts to show additional tax

Info Area


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Enter the EIN, name and

address of the employer

Also enter on the top of

pages 2 and 3 and any

attachments

If the address has

changed enter the new

address and the IRS will

update the records

Info Area


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Indicate the return being

corrected

Check the appropriate box for

the one quarter being

corrected

Enter the calendar year of the

Form 941 being corrected

Enter the date the error is

discovered

Part 1: Select ONLY one process


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Because Form 941-X may be used to file either

an adjusted employment tax return or a claim

for refund or abatement one box must be

checked in Part 1

Do not check both boxes



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Check the box on line 1 if correcting underreported

amounts or over-reported amounts and the

adjustment process will be used to correct the

errors

Box 1 must be checked if correcting both

underreported and over-reported amounts

X



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Check the box on line 2 to use the claim process if

correcting over-reported amounts only and claiming

a refund or abatement for the negative amount

(credit) shown on line 21

Do not check this box if correcting any

underreported amounts on the form

X

Part 2: Complete the certifications


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All certifications that apply must be completed by

checking the appropriate boxes

If all corrections relate to underreported amounts

complete line 3 only skip lines 4 and 5 and go on to

Part 3

X



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This box must be checked to certify that the Forms

W-2 or Forms W-2c have been filed

Must be checked even if the corrections do not

affect or change the amounts on the forms

X



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Check the appropriate box for line 4

It may be appropriate to check more than one box

Part 2: Box 5


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If filing claim for refund or abatement of over-

reported federal income tax, social security tax,

Medicare tax, or Additional Medicare Tax check the

appropriate box on line 5

More than one box may need to be checked

Employee Statements


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On the following slide is an example of the

information needed for the statement from the

employee

The statements are not sent to the IRS

Must be retained as part of the permanent record

for 4 years plus current

https://www.irs.gov/irb/2017-14_IRB/ar09.html

https://www.irs.gov/irb/2017-14_IRB/ar09.html


An employee consent must meet the following requirements:

(1) Contain the name, address, and social security number of the employee;

(2) Contain the name, address, and employer identification number of the

employer;

(3) Contain the tax period(s), type of tax (e.g., social security and Medicare

taxes), and the amount of tax for which the employee consent is provided;

(4) Affirmatively state that the employee authorizes the employer to claim a

refund for the overpayment of the employee share of tax;

(5) For refund claims for employee tax overcollected in prior years, include

the employee’s written statement;

(6) Identify the basis of the claim (e.g., request for refund of the social

security and Medicare taxes withheld with regard to excess transit benefits

provided in 2014 due to a retroactive legislative change); and

(7) Be dated and contain the employee’s signature under penalties of

perjury. The penalties of perjury statement should be located immediately

above the required signature.

Part 3: Enter the Corrections for this

Quarter


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This is where the corrections are entered

Enter all the amounts for all of the employees not just the amounts being corrected

Enter both over-reported amounts and under-reported amounts—explain the details on line 23

Column 1 is the total corrected amount

Column 2 is the amount originally reported

Column 3 is the difference between the two

Column 4 is the tax correction

Part 3: Line 6


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This line is to correct the wages, tips and other

compensation reported on line 2 of the Form 941

Part 3: Line 7, 8, 9, 10 & 11


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Part 3: Line 11-Example 1


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Employee Ralph’s wages exceeded the $200,000 threshold in December 2016 but no Additional Medicare Tax Withholding was withheld from a total of $220,000 paid in wages

The $180 that should have been withheld was not and nothing was reported on line 5d of the fourth quarter Form 941

The error is discovered on March 16, 2017

File Form 941-X to correct wages and tips subject to Additional Medicare Tax for 4th Quarter 2016 but do not correct column 4 for tax withheld

Part 3: Line 11-Example 2


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Employee Ralph’s wages exceeded the $200,000

threshold in November 2016 with a total of $270

being withheld from a total of $230,000 paid in

wages

On the 4th quarter Form 941 the amount of $3,000

is reported on line 5d column 1 in error with the

corresponding tax of $27.00 on line 5d column 2

The error is discovered on March 16, 2017

The Form 941-X can be filed to correct the 2016 4th

quarter because the error is an administrative error

Part 3: Line 12, 13, 14, 15-18 & 19


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Part 3: Line 20a, 20b & 21


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Part 3: Line 22


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Check the box on line 22 if any corrections made

on line 7-20a, column 3 reflect both underreported

and over-reported amounts

Example: An increase to social security wages of

$15,000 for Employee Jones and a decrease to

social security wages of $5,000 for Employee Smith

results in an entry of $10,000 on line 8 column 3

Part 4: Line 23


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Were any workers reclassified? This box is

checked

Part 4: Line 24


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You must explain all corrections made

And no “made an error” will no longer work

Must give details including all the facts relied upon

to support each correction entered on lines 6-18

and 20a and 20b

Attach additional sheets if more space is needed

Must describe the events that caused the

overpayment or underpayment

Part 4: Line 24


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Cannot just use “social security was overstated”

Provide the following for each correction:

Form 941-X line number(s) affected

Date error was discovered

Difference (amount of error)

Cause of the error

May report in paragraph form

For lines 15-18, column 3, explain why correction was necessary and attach any notices received from IRS

Part 4: Line 24--Example


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There was an administrative error made. The $1,000 difference shown in column 3 on lines 6,

8, and 10 was discovered on May 15, 2017, during an internal payroll audit. We discovered

that we included $1,000 of wages for one of our employees twice. This correction removes the

reported wages that were never paid

And Finally You Must Sign


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Adjusted Employer’s Annual Federal Tax Return

Form 944-X52


Basics of Form


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Use Form 944-X to correct previously submitted

Form 944

Latest version is February 2016

Same deadlines apply as for Form 941-X

Same filing requirements as Form 941-X

Complete the form basically the same as the

Form 941-X

Corrected Wage and Tax Statement

Form W-2c57


Purpose of the Form W-2c

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Use to correct errors on Forms W-2, W-2AS, W-

2CM, W-2GU, W-2V or W-2c filed with the Social

Security Administration

Copies also provided to employees

May require corrections to previously filed

quarterly returns

Do not use to report corrections to back pay

Do not use to correct Form W-2G


Filing the Form

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May file using paper version

Must use Form W-3c to accompany Copy A of

form to SSA

Encouraged to use BSO website to file

electronically

http://www.socialsecurity.gov/bso/services.htm

Due as soon as the error is discovered

See instructions for addresses for paper filing


http://www.socialsecurity.gov/bso/services.htm

Correcting the Form W-2

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If prior to processing

then correct the original

If prior to disbursement to the employee

Then correct the original

If after given to employee but not yet submitted to

SSA—As of 2017 this could be the same date!

Then replace the original and correct the

“employer submission version”


When to Use Form W-2c

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If the Form W-2 has been given to employee and submitted to SSA then issue Form W-2c

If given to employee but the file is not correctable

Be sure to use 8-2014 version

But if you use paper forms…


Correcting Paper Forms

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If error discovered after given to employee but

before sending to SSA

Prepare new Form W-2 with correct information

Mark void box on old form

Write “CORRECTED” on employee’s new copies

(B, C, & 2) but not on Copy A of the new form

Send both voided and new Copy A to SSA


Correcting Name Change

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If SSA issues employee a

replacement card after a name

change or a new card with a

different SSN the following applies:

File a Form W-2c to correct the

name/SSN reported on the most

recently filed Form W-2 only

It is not necessary to correct all

the prior years


Correcting Name and Addresses

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When correcting a name or SSN only complete Form W-2c

for boxes d – i only Do not complete boxes 1 – 20

If the address is wrong but nothing else is– do not file a Form

W-2c with SSA but do one of the following:

Issue a new corrected Form W-2 with “Reissued

Statement on the new copies or;

Issue W-2c that has correct address or;

Reissue the W-2 in a envelope with the new address

showing

Do not send any forms to the SSA


Completing the Form W-2c—Boxes a-i

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Always complete boxes a, b, c, d, h, and i

Only complete others if they apply such as in a name

change or SSN correction


Completing the Form W-2c—Boxes 1-14

67

Complete boxes that apply leave others blank

Only put in “0” if that is the result of the math

Put what was previously on old form and what should be on the new form


Completing the Form W-2c—Boxes 15-20

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Complete to correct state or local wages and tax

information only

If these are the only changes to not send to SSA


De minimis Errors

69

Due to the new due date, penalties for errors have been updated

Even if you can’t show reasonable cause you may not be penalized of small number of errors if:

Filed forms on time

Either failed to include information or included incorrect information

Filed corrected returns by August 1

>10 or ½ of 1% to total forms filed

Does not apply to TIN, payee surname or $ amount


De minimis Errors

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Incorrect $ amounts may fall under safe harbor

No single amount in error differs form the correct

amount by more than $100

No single amount reported for tax withheld differs

from the correct amount by more than $25

If safe harbor applies you do not have to correct

form…

Unless employee asks for corrected form


Transmittal of Corrected Wage and Tax Statements

Form W-3c71


Completing the Form W-3c

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Must accompany Form W-2c

even if filing only one form

Total of the forms being

submitted for all boxes used

Be sure to identify type of payer

and kind of employer

Enter total number of W-2c’s

being submitted

Explain decreases


Employer’s Annual Federal Unemployment (FUTA)

Tax Return

Amending Form 94073


Amending Form 940

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Use the same tax year form to

correct the same tax year—

example use the 2015 Form 940

to file the amended return for

2015

Use a paper return to amend

even if filed electronically

Check amended return box

Fill in the amounts that should

have been on original form


Amending Form 940

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This is a replacement

form for the original

Sign the form

Attach a letter of

explanation as to why

the return is being

amended


Are There Any Questions?


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How Can Ascentis Help Me?

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Ascentis can help you with correcting returns in a number

of ways.

• Don’t want to have to file these forms yourself? Use

our tax service for depositing taxes and filing returns

and amendments.

• Warning messages stop you from accidentally posting

wages in the wrong quarter or after returns have

already been filed.

• Retain control of when past quarter adjustments are

entered and amendments filed.

To earn RCH credit you must


78

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Be watching using your unique URL

Certificates delivered by email, to registered email,

by August 13th

On-Demand Webinars


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Sharing the Education


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Contact Us


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[email protected]

www.ascentis.com

800.229.2713

the abcs and xyzs of correcting irs forms - ascentis · the abcs and xyzs of correcting irs forms...

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