Prior-Period Adjustments

Forms for prior-period adjustments.

Use Form 941-X, Form 943-X, or Form 944-X to make a correction after you discover an error on a previously filed Form 941, Form 943, or Form 944. There are also Form 945-X and Form CT-1 X to report corrections on the corresponding returns. Use Form 843 when requesting a refund or abatement of assessed interest or penalties.

See Revenue Ruling 2009-39, 2009-52 I.R.B. 951, for examples of how the interest-free adjustment and claim for refund rules apply in 10 different situations. You can find Revenue Ruling 2009-39 at IRS.gov/irb/2009-52_IRB#RR-2009-39 .

Background.

Treasury Decision 9405 changed the process for making interest-free adjustments to employment taxes reported on Form 941, Form 943, and Form 944 and for filing a claim for refund of employment taxes. Treasury Decision 9405, 2008-32 I.R.B. 293, is available at IRS.gov/irb/2008-32_IRB#TD-9405 . You’ll use the adjustment process if you underreported employment taxes and are making a payment, or if you overreported employment taxes and will be applying the credit to the Form 941, Form 943, or Form 944 period during which you file Form 941-X, Form 943-X, or Form 944-X. You’ll use the claim process if you overreported employment taxes and are requesting a refund or abatement of the overreported amount. We use the terms “correct” and “corrections” to include interest-free adjustments under sections 6205 and 6413, and claims for refund and abatement under sections 6402, 6414, and 6404.

Correcting employment taxes.

When you discover an error on a previously filed Form 941, Form 943, or Form 944, you must:

Correct that error using Form 941-X, Form 943-X, or Form 944-X;

File a separate Form 941-X, Form 943-X, or Form 944-X for each Form 941, Form 943, or Form 944 you’re correcting; and

File Form 941-X, Form 943-X, or Form 944-X separately. Don’t file with Form 941, Form 943, or Form 944.

Report current quarter adjustments for fractions of cents, third-party sick pay, tips, and group-term life insurance on Form 941 using lines 7–9, on Form 943 using line 10, and on Form 944 using line 6. See Current Period Adjustments , earlier in this section.

Report the correction of underreported and overreported amounts for the same tax period on a single Form 941-X, Form 943-X, or Form 944-X unless you’re requesting a refund. If you’re requesting a refund and are correcting both underreported and overreported amounts, file one Form 941-X, Form 943-X, or Form 944-X correcting the underreported amounts only and a second Form 941-X, Form 943-X, or Form 944-X correcting the overreported amounts.

See the chart on the last page of Form 941-X, Form 943-X, or Form 944-X for help in choosing whether to use the adjustment process or the claim process. See the Instructions for Form 941-X, the Instructions for Form 943-X, or the Instructions for Form 944-X for details on how to make the adjustment or claim for refund or abatement.

E-file.

The IRS e-file program allows a taxpayer to electronically file Form 941-X, Form 943-X, and Form 945-X. For more information, go to IRS.gov/EmploymentEfile or call 866-255-0654.

Income tax withholding adjustments.

In a current calendar year, correct prior-quarter income tax withholding errors by making the correction on Form 941-X when you discover the error.

You may make an adjustment only to correct income tax withholding errors discovered during the same calendar year in which you paid the wages. This is because the employee uses the amount shown on Form W-2 or, if applicable, Form W-2c, as a credit when filing their income tax return (Form 1040, etc.).

You can’t adjust amounts reported as income tax withheld in a prior calendar year unless it is to correct an administrative error or section 3509 applies. An administrative error occurs if the amount you entered on Form 941, Form 943, or Form 944 isn’t the amount you actually withheld. For example, if the total income tax actually withheld was incorrectly reported on Form 941, Form 943, 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, Form 943, or Form 944 to agree with the amount actually withheld from employees and reported on their Forms W-2.

Additional Medicare Tax withholding adjustments.

Generally, the rules discussed earlier in this section under Income tax withholding adjustments apply to Additional Medicare Tax withholding adjustments. That is, you may make an adjustment to correct Additional Medicare Tax withholding errors discovered during the same calendar year in which you paid wages. You can’t adjust amounts reported in a prior calendar year unless it is to correct an administrative error or section 3509 applies. If you have overpaid Additional Medicare Tax, you can’t file a claim for refund for the amount of the overpayment unless the amount wasn’t actually withheld from the employee’s wages (which would be an administrative error).

If a prior-year error was a nonadministrative error, you may correct only the wages and tips subject to Additional Medicare Tax withholding.

Collecting underwithheld taxes from employees.

If you withheld no income, social security, or Medicare tax, or less than the correct amount from an employee’s wages, you can make it up from later pay to that employee. But you’re the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. Underwithheld income tax and Additional Medicare 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 ).

Refunding amounts incorrectly withheld from employees.

If you withheld more than the correct amount of income, social security, or Medicare tax from wages paid, repay or reimburse the employee the excess. Any excess income tax or Additional Medicare 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 didn’t repay or reimburse the employee, you must report and pay each excess amount when you file Form 941 for the quarter (or Form 943 or Form 944 for the year) in which you withheld too much tax.

Correcting filed Forms W-2 and W-3.

When adjustments are made to correct wages and social security and Medicare taxes because of a change in the wage totals reported for a previous year, you also need to file Form W-2c and Form W-3c with the SSA. Up to 25 Forms W-2c per Form W-3c may be filed per session online, with no limit on the number of sessions. For more information, go to the SSA’s Employer W-2 Filing Instructions & Information webpage at SSA.gov/employer .

Exceptions to interest-free corrections of employment taxes.

A correction won’t be eligible for interest-free treatment if:

The failure to report relates to an issue raised in an IRS examination of a prior return, or

The employer knowingly underreported its employment tax liability.

A correction won’t be eligible for interest-free treatment after the earlier of the following.

Receipt of an IRS notice and demand for payment after assessment.

Receipt of an IRS notice of determination under section 7436.