The ABCs and XYZs of Correcting IRS Forms Presented on Tuesday, March 1, 2016

Transcription

1 The ABCs and XYZs of Correcting IRS Forms Presented on Tuesday, March 1,

2 2015 The Payroll Advisor 2

3 Housekeeping 3 Credit Questions Today s topic Speaker 2015 The Payroll Advisor

4 To earn RCH credit you must 4 Stay on the webinar, online for the full 60 minutes Be watching using your unique URL Certificates delivered by , to registered , by April 1 st

5 Our Focus For Today 5 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

6 About the Speaker Vicki M. Lambert, CPP, is President and Academic Director of The Payroll 6 Advisor, a firm specializing in payroll education and training. The company s Vicki M. Lambert, website CPP, President and Academic Director offers of The Payroll a subscription Advisor, a firm payroll specializing news service in payroll which education and training. keeps The payroll company s professionals website up-to-date on latest rules and offers regulations. 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.

7 Adjusted Employer s QUARTERLY Federal Return or Claim for Refund 7 Form 941-X

8 General Filing Rules 8 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 overreported 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

9 Due Dates 9 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

10 Due Date Underreported Tax 10 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 April, May, June July July, August, September October October, November, December January 31 The dates shown in this table apply only to corrections of underreported amounts.

11 Due Date Underreported Tax 11 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

12 Due Date Underreported Tax--Example 12 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 30 th, the amount owed must be paid by the time the form is filed

13 Due Date Over-reported Taxes 13 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

14 Due Date Over-reported Taxes 14 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.

15 Filing Deadlines 15 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

16 Filing Deadlines 16 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

17 Filing Deadlines-Example 17 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

18 Filing Deadlines-Example 18 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

19 Filing Deadlines-Example 2 19 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

20 Completing the Form 20 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 Part 5: Signature

21 Info Area 21 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

22 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

23 Part 1: Select ONLY one process 23 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

24 Part 1: Select ONLY one process 24 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

25 Part 2: Complete the certifications 25

26 Part 2: Complete the certifications 26 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

27 Part 2: Complete the Certifications 27 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

28 Part 2: Complete the certifications 28 Check the appropriate box for line 4 It may be appropriate to check more than one box

29 Part 2: Employee Statements 29 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

30 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. 30

31 Part 2: Box 5 31 If filing claim for refund or abatement of overreported 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

32 32 Part 3: Enter the Corrections for this Quarter 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 underreported 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

33 Part 3: Line 6 33 This line is to correct the wages, tips and other compensation reported on line 2 of the Form 941

34 Part 3: Lines 7, 8, 9, 10 & 11 34

35 Part 3: Line 11-Example 1 35 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

36 Part 3: Line 11-Example 2 36 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 th quarter because the error is an administrative error

37 Part 3: Lines 12, 13, & 18 37

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

39 Part 4: Lines 22 & 23 39

40 And Finally You Must Sign 40

41 Adjusted Employer s Annual Federal Tax Return 41 Form 944-X

42 Basics of Form 42 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

43 43

44 44

45 45

46 Corrected Wage and Tax Statement 46 Form W-2c

47 47

48 Purpose of the Form W-2c 48 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

49 Filing the Form 49 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 Due as soon as the error is discovered See instructions for addresses for paper filing

50 Correcting the Form W-2 50 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

51 When to Use Form W-2c 51 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 version But if you use paper forms

52 Correcting Paper Forms 52 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

53 Correcting Name Change 53 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

54 Correcting Name and Addresses 54 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

55 Completing the Form W-2c Boxes a-i 55 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

56 Completing the Form W-2c Boxes 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

57 Completing the Form W-2c Boxes Complete to correct state or local wages and tax information only If these are the only changes to not send to SSA

58 De minimis Errors 58 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

59 De minimis Errors 59 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

60 Transmittal of Corrected Wage and Tax Statements 60 Form W-3c

61 Completing the Form W-3c 61 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

62 Employer s Annual Federal Unemployment (FUTA) Tax Return 62 Amending Form 940

63 Amending Form 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

64 Amending Form This is a replacement form for the original Sign the form Attach a letter of explanation as to why the return is being amended

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