Correcting an employment Tax Return

The Correct “Process” for Correcting an employment Tax Return

Mike Habib, EA

Even the best of us can make a mistake on a quarterly Form 941 (or on a Form W-2, which often creates an error on the 941). The IRS has introduced a new form for correcting the dollar amounts on a previously filed 941: Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

The American Payroll Association offers the following guidance in your first step on the form: choosing the correct process. Remember, the 941-X is a stand-alone amendment to a Form 941 from a previous quarter. Near the top of the form, you’ll indicate which quarter and year you are correcting.

For each correctable line on the 941, there is a corresponding line on Form 941-X. You’ll indicate the corrected amount (i.e., what you would have reported had the error not occurred), the originally reported amount, and the difference. There are also “X” forms for each of Forms 943, 944, 945, and CT-1.

Adjusted return or “Claim”, after filling in your identifying information, you are asked to select your process. “Adjusted employment tax return:”
If you owe money to IRS, you will make a payment as you file Form 941-X.

If the IRS owes you money, you’ll include the amount in the “Total deposits” (line 11) on your current quarter’s 941. However, you won’t have to attach the 941-X to that 941.

“Claim:” If the IRS owes you money, it will issue a refund of the amount it owes you. Or, if IRS had sent you a balance due notice for that same quarter, it will apply the amount against that balance.

Crucial timing for an “adjusted return”, If the IRS owes you money and you want to use the adjusted return process (applying the amount as a deposit on a Form 941), IRS advises you to file the 941-X in the first two months of a quarter. This will give IRS enough time to process the 941-X and post the credit before you file the 941. For example, if in December 2009 you discover IRS owes you money, and you want to use the adjusted return process, you should wait until January 2010 to file Form 941-X and record the credit as a “deposit” on the 941 for the first quarter of 2010.

Corrections in both directions for one quarter, If, for one quarter, you owe money to IRS (e.g., income tax withholding), and IRS owes you money (e.g., social security tax), it’s a little more complicated.

> Use the adjusted return process if the net of the corrections is that you owe IRS, or if the net result is that IRS owes you and you want to apply the credit to your next 941. (Interestingly, you cannot “claim” a refund, even if the net result is that IRS owes you.)

> Or, file two separate Forms 941-X. Use the adjust-ed return process for the amount you owe IRS (and make a payment). Use the claim process for the amount IRS owes you (and IRS will send a refund). Be sure to also see the new expanded instructions for this form, which include lots of examples.

Client Reviews
★★★★★
Mike has given us peace of mind! He helped negotiate down a large balance and get us on a payment plan that we can afford with no worries! The stress of dealing with the IRS is huge and Mike helped us through it all. The peace of mind is invaluable, thank you Mike!April S.
★★★★★
Mike Habib - Thank you for being so professional and honest and taking care of my brothers IRS situation. We are so relieved it is over and the offer in compromise process went just as you said. Mike is very professional and will give you honest answers to the OIC process and you can really trust him. You won't be sorry you chose him!Joe and Deborah V.
★★★★★
Mike is a true professional. He really came thru for me and my business. Dealing with the IRS is very scary. I'm a small business person who works hard and Mike helped me see that they are not that scary after all. He was always there with the answers I needed and was very good about calling me back which I appreciated since your first reaction is to freak out and ask a million questions. He solved a messy case and worked very hard to resolve it. His rates are VERY reasonable for the amount of work he does! I give him my highest recommendation!Marcie R.
★★★★★
Mike was incredibly responsive to my IRS issues. Once I decided to go with him (after interviewing numerous other tax professionals), he got on the phone with the IRS immediately (as in the same day I signed with him) to squash an impending issue. And he worked directly with them to quickly come to a resolution I am very happy with. I'd highly recommend reaching out to Mike to see if he can help you with any IRS issues. I'm very satisfied!Marshall W.
★★★★★
I’ve seen and heard plenty of commercials on TV and radio for businesses offering tax help. I did my research on many of them only to discover numerous complaints and unresolved tax issues. I found Mike Habib through my own online search and contacted him. He was very professional with great communication, always answering my questions and concerns. Mike resolved my complicated tax problem just as he said he would. I would definitely recommend his services to family and friends.Nancy & Sal V.

BBB Accredited Business
Trust Link
California Society of Enrolled Agents
NAEA
NATP
Enrolled Agent