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 Previous Page: Publication 15 - Circular E, Employer's Tax Guide - 12. Filing Form 941 or Form 944 Next Page: Publication 15 - Circular E, Employer's Tax Guide - 14. Federal Unemployment (FUTA) Tax
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taxmap/pubs/p15-015.htm#TXMP74d86c04 |
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There are two types of adjustments reported on Form 941 and Form 944: current period adjustments and prior period adjustments to correct errors. See the Instructions for Form 941 (or the Instructions for Form 944) and the Instructions for Form 941c, Supporting Statement to Correct Information, for more information on how to report these adjustments.
taxmap/pubs/p15-015.htm#TXMP0ef9f827 |
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In certain cases, amounts reported as social security and Medicare taxes in column 2 of lines 5a, 5b, and 5c of Form 941 (column 2 of lines 4a, 4b, and 4c for Form 944) must be adjusted to arrive at your correct tax liability (for example, excluding amounts withheld by a third-party payor or amounts you were not required to withhold). Current period adjustments are reported on lines 7a, 7b, and 7c of Form 941 (line 6a of Form 944) and include the following:
taxmap/pubs/p15-015.htm#TXMP64da7761 |
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If, by the 10th of the month after the month you received an employee's report on tips, you do not have enough employee funds available to withhold the employee's share of social security and Medicare taxes, you no longer have to collect it. However, report the entire amount of these tips on lines 5b (social security tips) and 5c (Medicare wages and tips) (lines 4b and 4c of Form 944). Include as a negative adjustment on line 7c (line 6a of Form 944) the total uncollected employee share of the social security and Medicare taxes.
taxmap/pubs/p15-015.htm#TXMP3981c418 |
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The employee share of social security and Medicare taxes on group-term life insurance over $50,000 for a former employee is paid by the former employee with his or her tax return and is not collected by the employer. However, include all social security and Medicare taxes for such coverage on lines 5a and 5c (social security and Medicare taxes) (lines 4a and 4c of Form 944), and back out the amount of the employee share of these taxes as a negative adjustment on line 7c (line 6a of Form 944). See Publication 15-B for more information on group-term life insurance.
taxmap/pubs/p15-015.htm#TXMP579ec0af |
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Report both the employer and employee shares of social security and Medicare taxes for sick pay on lines 5a and 5c of Form 941 (lines 4a and 4c of Form 944). Show as a negative adjustment on line 7b (line 6a of Form 944) the social security and Medicare taxes withheld on sick pay by a third-party payor. See section 6 of Publication 15-A for more information.
taxmap/pubs/p15-015.htm#TXMP3133f1fc |
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If there is a small difference between total taxes after adjustment for advance EIC (line 10) (line 9 of Form 944) and total deposits (line 11) (line 10 of Form 944), it may have been caused, all or in part, by rounding to the nearest cent each time you computed payroll. This rounding occurs when you figure the amount of social security and Medicare tax to be withheld and deposited from each employee's wages. The IRS refers to rounding differences relating to employee withholding of social security and Medicare taxes as "fractions-of-cents" adjustments. If you pay your taxes with Form 941 (or Form 944) instead of making deposits because your total taxes for the quarter (year for Form 944) are less than $2,500, you also may report a fractions-of-cents adjustment.
To determine if you have a fractions-of-cents adjustment, multiply the total wages and tips for the quarter subject to:
 | For the above adjustments, prepare and retain a brief supporting statement explaining the nature and amount of each. Do not attach the statement to Form 941 or Form 944. |
Cedar, Inc. was entitled to the following current period adjustments.
Cedar, Inc. reported these adjustments on line 7 of
Form 941 as shown in the Current Period Adjustment Example on page 27.
taxmap/pubs/p15-015.htm#TXMP00e43327 |
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Do not make any changes to your record of federal tax liability reported on line 15 or Schedule B (Form 941) (line 13 or Form 945-A for Form 944 filers) for current period adjustments. The amounts reported on the record reflect the actual amounts you withheld from employees' wages for social security and Medicare taxes. Because the current period adjustments make the amounts reported on lines 5a, column 2, 5b, column 2, and 5c, column 2 of Form 941 (lines 4a, 4b, and 4c of column 2 for Form 944) equal the actual amounts you withheld (the amounts reported on the record), no additional changes to the record of federal tax liability are necessary for these adjustments.
taxmap/pubs/p15-015.htm#TXMP23e67807 |
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Generally, you can correct errors on prior period Forms 941 by making an adjustment on your Form 941 (or Form 944) for the quarter (year for Form 944) during which the error was discovered. For example, if you made an error in reporting social security tax on your second quarter 2007 Form 941 and discovered the error during March 2008, correct the error by making an adjustment on your first quarter 2008 Form 941.
The adjustment increases or decreases your tax liability for the quarter in which it is reported (that is, the quarter the error is discovered) and is interest-free. The net adjustments reported on Form 941 or Form 944 may include any number of corrections for one or more previous return periods, including both overpayments and underpayments.
You are required to provide background information and certifications supporting prior quarter adjustments. File Form 941c with Form 941 or Form 944, or attach a statement that shows:
taxmap/pubs/p15-015.htm#TXMP3f49c793 |
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The IRS will not be able to process your adjustments on Form 941 or Form 944 without this supporting information. See the instructions for Form 941c for more information.
taxmap/pubs/p15-015.htm#TXMP7ff37705 |
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Correct prior quarter income tax withholding errors by making an adjustment on line 7d of Form 941 for the quarter during which you discovered the error.
You may make an adjustment to correct income tax withholding errors only for quarters during the same calendar year. This is because the employee uses the amount shown on Form W-2 as a credit when filing his or her income tax return (Form 1040, etc.).
You cannot adjust amounts reported as income tax withheld in a prior calendar year unless it is to correct an administrative error. An administrative error occurs if the amount you entered on Form 941 or Form 944 is not the amount you actually withheld. For example, if the total income tax actually withheld was incorrectly reported on Form 941 or Form 944 due to a mathematical or transposition error, this would be an administrative error. The administrative error adjustment corrects the amount reported on Form 941 or Form 944 to agree with the amount actually withheld from employees.
taxmap/pubs/p15-015.htm#TXMP7ce53c94 |
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Correct prior quarter social security and Medicare tax errors by making an adjustment on line 7e of Form 941 (line 6c of Form 944) for the quarter during which you discovered the error. You may report adjustments on the current quarter Form 941 for previous quarters in the current and prior years; the current year Form 944 for previous years.
taxmap/pubs/p15-015.htm#TXMP5fa7c064 |
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Adjustments to correct errors in prior quarters or years must be taken into account on either Form 941, line 15, or on Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors (or Form 944, line 13 or on Form 945-A).
If the adjustment corrects an underreported liability in a prior period, report the adjustment on the entry space corresponding to the date the error was discovered. If the adjustment corrects an overreported liability, use the adjustment amount as a credit to offset subsequent liabilities until it is used up.
Example of reporting prior period adjustments. Elm Co., a monthly schedule depositor, discovered on January 8, 2008, that it overreported social security tax on a prior quarter return by $5,000. Its total tax liabilities for the first quarter of 2007 were: January—$4,500, February—$4,500, and March—$4,500. Elm Co. completed line 15 of Form 941 as shown in the Prior Period Adjustment Example on page 28.
The adjustment for the $5,000 overreported liability offset the January liability, so the $4,500 liability was not deposited and a "-0-" liability was reported on line 15, Month 1. The remaining $500 of the $5,000 adjustment credit was used to partially offset the liability for February, so only $4,000 of the $4,500 liability was deposited and reported on line 15, Month 2.
taxmap/pubs/p15-015.htm#TXMP241c0f0b |
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If you discover an error on a prior quarter return resulting in a tax overpayment, you may file Form 843, Claim for Refund and Request for Abatement, for a refund. This form also can be used to request an abatement of an overassessment of employment taxes, interest, and/or penalties. You must file Form 941c, or an equivalent statement, with Form 843. See the Instructions for Form 843.
taxmap/pubs/p15-015.htm#TXMP7713a522 |
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If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you are the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. Underwithheld income tax must be recovered from the employee on or before the last day of the calendar year. There are special rules for tax on tips (see section 6) and fringe benefits (see section 5).
taxmap/pubs/p15-015.htm#TXMP42fb9ee5 |
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If you withheld more than the correct amount of income, social security, or Medicare taxes from wages paid, repay or reimburse the employee the excess. Any excess income tax withholding must be repaid or reimbursed to the employee before the end of the calendar year in which it was withheld. Keep in your records the employee's written receipt showing the date and amount of the repayment or record of reimbursement. If you did not repay or reimburse the employee, you must report and pay each excess amount when you file Form 941 for the quarter (or Form 944 for the year) in which you withheld too much tax.
taxmap/pubs/p15-015.htm#TXMP181afa2f |
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When adjustments are made to correct social security and Medicare taxes because of a change in the wage totals reported for a previous year, you also may need to file Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statements, with the SSA. Up to five Forms W-2c per Form W-3c may now be filed per session over the Internet, with no limit on the number of sessions. For more information, visit the Social Security Administration's Employer W-2 Filing Instructions & Information webpage at
www.socialsecurity.gov/employer.
taxmap/pubs/p15-015.htm#TXMP3d258e3d |
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Form 941 includes lines (lines 7f and 7g) (lines 6d and 6e on Form 944) to report special additions to federal income tax and social security and Medicare tax. However, these lines are specifically reserved for special circumstances and are to be used only if the IRS sends the employer a notice instructing the employer to use them.
taxmap/pubs/p15-015.htm#TXMP3cbc1d2f |
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If an employee repays you for wages received in error, do not offset the repayments against current-year wages unless the repayments are for amounts received in error in the current year.
taxmap/pubs/p15-015.htm#TXMP09660259 |
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If you receive repayments for wages paid during a prior quarter in the current year, report adjustments on Form 941 to recover income tax withholding and social security and Medicare taxes for the repaid wages (as discussed earlier). Report the adjustments on Form 941 for the quarter during which the repayment occurred.
taxmap/pubs/p15-015.htm#TXMP515c29c2 |
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If you receive repayments for wages paid during a prior year, report an adjustment on the Form 941 or Form 944 for the period during which the repayment was made to recover the social security and Medicare taxes. Instead of making an adjustment on Form 941 or Form 944, you may file a claim for these taxes using Form 843. You may not make an adjustment for income tax withholding because the wages were paid during a prior year.
You also must file Forms W-2c and W-3c with the SSA to correct social security and Medicare wages and taxes. Do not correct wages (box 1) on Form W-2c for the amount paid in error. Give a copy of Form W-2c to the employee.
taxmap/pubs/p15-015.htm#TXMP7716e5ea Employee reporting of repayment.(p29) |
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The wages paid in error in the prior year remain taxable to the employee for that year. This is because the employee received and had use of those funds during that year. The employee is not entitled to file an amended return (Form 1040X) to recover the income tax on these wages. Instead, the employee is entitled to a deduction (or credit in some cases) for the repaid wages on his or her income tax return for the year of repayment.
Previous Page:
Publication 15 - Circular E, Employer's Tax Guide - 12. Filing Form 941 or Form 944Next Page:
Publication 15 - Circular E, Employer's Tax Guide - 14. Federal Unemployment (FUTA) Tax
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