The IRS is looking for stakeholder input on a new form and process, planned to begin in 2009, that will improve the way employers and payers correct errors on previously filed employment tax returns.
The agency has posted a "vision draft" of new Form 941X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, for public review. Proposed regulations establishing the new process for making interest-free adjustments for both underpayments and overpayments, and clarifying the process for claiming refunds are in Internal Revenue Bulletin 2008-4,/strong>. Comments on both the draft form and the proposed regulations are due March 27, 2008.
After finalizing the new Form 941X, the IRS will continue developing additional forms for the remaining returns in the employment tax series. The entire set of forms will be available in early 2009 for use in correcting errors on employment tax returns discovered on or after Jan. 1, 2009.
The IRS Office of Taxpayer Burden Reduction (TBR) initiated the Adjusted Employment Tax Returns (Forms 94X) Project to reduce burden associated with correcting information previously reported on various types of employment tax returns. Currently, employers and payers use one form – Form 941c, Supporting Statement to Correct Information – to correct the amounts they previously reported on Forms 941, 943, 944, and 945. Form 941c is not a stand-alone tax return. Presently, filers must attach Form 941c to their current employment tax return when making adjustments, or to Form 843 when claiming a refund of overpaid employment taxes.
Form 941c is complex and does not correspond directly to any employment tax return. Consequently, taxpayers often make mistakes completing and filing it, resulting in processing errors and delays. Additionally, because the taxpayer files Form 941c with the current employment tax return when making an adjustment, the IRS adjusts the tax for the current tax period but adjusts the wages for the calendar year being corrected. This makes it difficult for employers and the IRS to track taxpayers' account activity.
Changes for 2009
A new set of dual-purpose forms for adjustments and refunds will reduce burden for employers, payers and the IRS. The IRS, with stakeholder input, is making the new forms as user-friendly as possible and implementing more accurate procedures for adjustments and refunds of employment taxes.
Forms: Each stand-alone form will correspond to, and relate line-by-line with, the employment tax return it is correcting. For example, an employer who discovers an underpayment or overpayment error on a previously filed Form 941 will use Form 941X to make a correction. Since the Form 941X is a stand-alone form, the employer will be able to file Form 941X when an error is discovered, rather than having to wait to file it at the end of the quarter with the next employment tax return.
The new forms being developed will correspond with Form 941, Employer's QUARTERLY Federal Tax Return; Form 943, Employer's Annual Federal Tax Return for Agricultural Employees; Form 944, Employer's ANNUAL Federal Tax Return; Form 945, Annual Return of Withheld Federal Income Tax and Form CT-1, Employer's Annual Railroad Retirement Tax Return. Spanish versions of the new forms are being developed for Forms 941-PR, 944-PR, and 944(SP).
The IRS will also revise Form 941 and other employment tax returns for the 2009 tax year to eliminate prior period adjustment lines no longer needed after the implementation of the new forms.
Note: Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, is not being revised. Employers can continue to use Form 940 to file amended returns.
Process: Under the proposed regulations, Form 941X will be used to make adjustments and claim refunds. If an employer is correcting an overpayment for a Form 941, the employer will be able to either make an adjustment or claim a refund. If an adjustment is made the amount of the overpayment will be applied as a credit to the quarter in which the Form 941X is filed. Employers correcting underpayments of employment taxes that result in a balance due, can pay using EFTPS, credit card, or send a check along with Form 941X. The IRS will make both the tax and wage corrections to the actual tax period being corrected, resulting in a more accurate record.
The IRS wants to hear from you!
Please provide any comments you have by March 27, 2008.
To comment on the vision draft of Form 941X:
To comment on the proposed regulations:
E-mail: through Regulations.gov. Include “IRS-REG-111583-07” in the subject line.
Send mail to: CC:PA:LPD:PR (REG–111583–07), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044, or
Hand deliver Monday through Friday between 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG–111583–07), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC
All comments on the proposed regulations will be available for public inspection and copying.