IRS Form 941 Failure to pay
Form 941-x Late on payroll taxes and under payment of taxes

Form 941-x Late on Payroll taxes? Found an underpayment error? Here’s how to correct it without paying fines.

IRS Form 941 Failure to payEmployers can have a hard time keeping track of the complex rules of supplemental wages, deferred compensation plans, and other compensation arrangements.  Mistakes can be made when completing an employee’s taxable wages and calculating FICA payroll tax and income tax withholding. If an error is discovered, employers should act quickly to correct employment tax reporting errors and make an interest-free adjustment, in line with IRC section 6205 and 6414.

The IRS regulations state that “an error is ascertained when the employer has sufficient knowledge of the error to be able to correct it.” To make timely corrections, follow the directions below:

  1. Employer files a quarterly employment tax return and finds an error that result in an underpayment or overpayment of employment tax.
  2. Employer completes Form 941-X – Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund to correct the error through an interest-free adjustment. Form 941X relates line-by-line with Form 941, the Employer’s Quarterly Federal Tax Return.  You can file Form 941-X at any time when you discover an error, rather than having to wait to file it at the end of the quarter with the next employment tax return.
  3. Employer files Form 941-X by the due date for the quarterly period when the error is discovered. This filing essentially amends the original quarterly employment tax return. See the chart below showing the corresponding “X” forms listed below to correct employment tax errors as soon as they are discovered.
  4. To request an IRS Tax abatement of assessed penalties and interest, employer must fill out and submit Form 843.

Form 941-X Download Some helpful hints in filling out

  • Form 941-X can only be used for one quarter.  If there are errors in additional quarters, separate forms must be used and filled out.
  • Written consent must be obtained from each employee if the error concerns employee withholding.  Each employee must certify that they will not claim a refund or credit for any over-collection.
  • On Form 941-X, for each item, the total corrected amount must be filled out along with the previously reported amount, and the difference.
  • A detailed explanation must be provided of how you arrived at the corrected amounts.
  • For legal guidance in correcting payroll errors:  (1) Treasury Decision 9405 (TD 9405) was issued to amend the process for making interest-free adjustments of employment taxes under sections 6413 and 6205, and claiming refunds of employment taxes under sections 6402 and 6414.  (2)  Revenue Ruling 2009-39 applies the interest-free adjustment and claim for refund processes under the final regulations issued by Treasury Decision 9405 (TD 9405).

The following table is an IRS guide to the corresponding forms in amending employment taxes errors:

Form 941X Series Adjusted Tax Forms

Return previously filedCorresponding 94X series form
Form 941, Employer’s Quarterly Federal Tax Return (PDF)Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund (PDF), Instructions (PDF)
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees (PDF)Form 943-X, Adjusted Employer’s Annual Federal Tax Return for Agricultural Employees or Claim for Refund(PDF), Instructions (PDF)
Form 944, Employer’s Annual Federal Tax Return (PDF)Form 944-X, Adjusted Employer’s Annual Federal Tax Return or Claim for Refund (PDF), Instructions (PDF)
Form 945, Annual Return of Withheld Federal Income Tax (PDF)Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund (PDF), Instructions (PDF)
Form CT-1, Employer’s Annual Railroad Retirement Tax Return(PDF)Form CT-1X, Adjusted Employer’s Annual Railroad Retirement Tax Return or Claim for Refund (PDF),Instructions (PDF)

The majority of errors are found after the close of the calendar year, when wages are already paid to an employee, so correcting an error in the current quarter should be a relatively easy process. However, the timing of these types of errors can lead to confusion and possibly more mistakes.

If an error is found, it should be corrected as soon as possible because the IRS will inevitably start an investigation and determine interest and penalties. The IRS takes Payroll tax debt very seriously.  To make sure the entire process is completed without mistakes, it is advisable to hire a tax attorney for help.  Please call for a no-cost tax attorney consultation at (619) 639-3336.

This blog post is not intended as legal advice and should be considered general information only.

 
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