How to Correct IRS Form 941 Errors

An Employee Retention Credit (ERC) is available to qualified employers to keep employees on their payroll.

Legislation of December 2020 extended this tax credit until June 30, 2021, which means that the ERC can be claimed in the first and second quarters of 2021. The credit was extended again in March 2021 with the approval of the American Rescue Plan Act, extending until the end of 2021.

The employer uses Form 941 to report wages eligible for this credit. Employers can also use Form 941 to report wages eligible for employee sick leave and family sick leave credits. The same legislation that extended the ERC also extended sickness and family leave credits until December 31, 2021.

Form 941 was amended for 2020 to include items related to this tax credit.

Make sure you are using the correct version of Form 941 and Form 941-X. The most recent revisions to these forms, dated March 2021 (Form 941) or October 2020 (Form 941-X), include line items to record income for employee withholding credit, sick leave / family leave, and other credits. COVID-19 - Related Tax Credits.

What is Form 941?

Internal Revenue Service (IRS) Form 941 is the employer's quarterly federal income tax return. Employers must file it every quarter to report income taxes and FICA (Social Security and Medicare) taxes that were withheld from employee pay. It also reports FICA taxes owed by the employer.

Form 941 is not a payment form. Documents the information you need to provide the IRS about your payroll tax obligations and payments. The form includes:

The total amounts withheld from the employee pay FICA taxes and federal income taxes from the previous quarter.
Amounts to be paid by the employer for their share of FICA taxes
Amounts already deposited for these payroll taxes from the previous quarter

Form 941 must be submitted to the IRS within 30 days of the end of each quarter.

Use Form 941-X to Correct Form 941 Errors

The form you should use to correct Form 941 errors is Form 941-X. If you compare Form 941 to Form 941-X, you will see that much of Form 941-X is a copy of the original form. That's because the IRS designed it that way. This form is a series of "X" forms that the IRS has created to report adjustments to most employment tax forms, including Form 941.

What you can fix with Form 941-X

You can use Form 941-X to correct:

Wages, tips, and other compensation and income taxes withheld from these payments
Wages subject to Social Security taxes
Taxable tips from Social Security
Wages and tips subject to Medicare tax
Taxable wages and tips subject to Medicare backup withholding
Small Business Payroll Tax Credit Qualified to Increase Research Activities
COBRA Premium Assistance Payment Credits (COBRA premium assistance payments are being phased out, but you can correct a previous claim using the 2017 revision of Form 941-X)

The IRS defines two different types of errors and when you can correct them depends on the type.

Clerical errors are transposition errors (number shuffling) or mathematical errors that involve inaccurate reporting of a quantity withheld. If you just want to correct a clerical error, you can do so at any time, unless it results in underreported or exaggerated taxes.

You can only correct federal withholding errors if you discover them in the same calendar year that you paid wages. You can set federal income tax withholding only if it has also been refunded or refunded.

When does Form 941-X expire?

The due date for filing Form 941-X depends on when you discover an error and whether you have reported too little or too little taxes.

If you reported an excess tax, you can make an interest-free adjustment on a future quarterly Form 941 or you can file a request for a refund or reduction. Use Form 843, Request for Refund and Request for Reduction. The process is different depending on when you file Form 941-X.

How do I file Form 941-X?

You can submit your Form 941-X. The postal address depends on the location of your business. Use this list in "Where to File Your Taxes" (for Form 941-X) to get the correct location.

Form 941X Summary
Form 941X has five parts.
Part 1 asks if this form is for an adjusted return or a claim. You cannot verify both.

Part 2 asks you some questions about why you are completing this form and to learn more about whether you are requesting a refund or an adjustment.

Part 3 includes copies of the original Form 941 and asks you to correct the sections that were done incorrectly. It must include the total corrected amount, the amount previously entered and the difference. Be sure to check your math when completing this section.

Part 4 asks for a detailed explanation of why you are making these corrections.

Part 5 requires your subscription and subscription from a paid preparer if you used one.

More about Form 941-X

You can only use the form for one quarter. If you are reporting errors for more than one quarter, you must use a separate form for each one.

If your mistake affected employee retention, you must obtain the written consent of each affected employee. You must certify this statement:

"I have a written statement from each employee that he or she has not claimed (or the claim has been denied) and will not claim a refund or credit for the overcharge."

If you are unable to obtain the written consent of each employee, you can only make changes by the employer.

It should include a detailed explanation of how you determined your arrangements.

This article is intended to provide an overview of this form, but is not intended to be tax or legal advice. Form 941-X is complicated and every tax situation is different. Get help with this form from your accountant or a payroll service. You can also call the IRS Business and Specialty Tax Line at 1-800-829-4933, Monday through Friday, 7:00 a.m. to 4:00 p.m. M. At 7:00 p. M., Local time.

We hope you enjoy watching this video about how to fill out IRS Form 941

Source: Fundera by NerdWallet

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