The ABCs and XYZs of Correcting IRS Forms€¦ · · 2018-01-27The ABCs and XYZs of Correcting IRS Forms Presented on Tuesday, March 1, 2016 ©2015 The Payroll Advisor 2 . Housekeeping

©2016 The Payroll Advisor 1

The ABCs and XYZs of Correcting IRS Forms

Presented on Tuesday, March 1, 2016

2 ©2015 The Payroll Advisor

Housekeeping

©2015 The Payroll Advisor

3

Credit Questions Today’s

topic Speaker

To earn RCH credit you must


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Stay on the webinar, online for the full 60 minutes

Be watching using your unique URL

Certificates delivered by email, to registered email,

by April 1st

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-X 7


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: Use Form 843, Claim for Refund and Request for Abatement

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 February 11, 2016 an error is discovered

The payroll department under-reported $10,000 of social security and Medicare wages on their fourth quarter 2015 Form 941

Because the error is discovered in the first quarter of 2016, the Form 941-X and the total tax owed must be filed and paid by April 30, 2016

If filing earlier than April 30th, 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 2012 Form 941 on January 27, 2013 and the payments were made on time

The IRS treats this return as if it were filed on April 15, 2013

On January 22, 2016 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, 2016 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 15, 2016 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, 2015 the payroll department discovers that it over-reported the tax on its 2014 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 1, 2015 and the credit taken on the third quarter 2015 Form 941

Completing the Form


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It is a five-section form plus the employer information area

23 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 – 20

Part 4: Explanations of corrections Lines 21 – 23

Part 5: Signature

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 22


Indicate the return

being corrected

Check the box for

one quarter being

corrected

Enter the calendar

year of the Form 941

being corrected

Enter date the error is discovered

Part 1: Select ONLY one process


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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

Part 1: Select ONLY one process


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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 20

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

Part 2: Complete the Certifications


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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: 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

http://www.irs.gov/irb/2015-9_IRB/ar07.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 amounts collected in a prior year, 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 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

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: Lines 7, 8, 9, 10 & 11 34


Part 3: Line 11-Example 1


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Employee Ralph’s wages exceeded the $200,000 threshold in December 2015 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, 2016

The Form 941-X cannot be filed to correct the 2015 fourth quarter because the error involves a previous year

Part 3: Line 11-Example 2


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Employee Ralph’s wages exceeded the $200,000 threshold in November 2015 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 February 16, 2016

The Form 941-X can be filed to correct the 2015 4th quarter because the error is an administrative error

Part 3: Lines 12, 13, 14-17 & 18 37


Part 3: Lines 19a, 19b, 20 & 21 38


Part 4: Lines 22 & 23 39


And Finally You Must Sign


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Adjusted Employer’s Annual Federal Tax Return

Form 944-X 41


Basics of Form


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Use Form 944-X to correct previously submitted Form 944

Latest version is February 2015

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-2c 46



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


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

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

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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

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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-3c 60


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 940 62


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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The ABCs and XYZs of Correcting IRS Forms€¦ · · 2018-01-27The ABCs and XYZs of Correcting IRS Forms Presented on Tuesday, March 1, 2016 ©2015 The Payroll Advisor 2 . Housekeeping