Form 941-X and Instructions Updated for 2015

Author: Rena Pirsos, XpertHR Legal Editor

April 6, 2015

The Internal Revenue Service (IRS) has released Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, and the Instructions for Form 941-X, updated for 2015. Employers are required to use Form 941-X to correct errors they have made on a previously filed Form 941, Employer's Quarterly Federal Tax Return. Employers must file Form 941-X on paper and use a separate copy for each Form 941 they wish to correct.

New for 2015

The updated Instructions to Form 941-X include new information regarding the IRS's recent guidance provided in Notice 2015-15 on the requirements for employee consents used to support claims for refund of over-collected Social Security and Medicare (FICA) tax. The Notice clarifies the basic requirements for an employer to request consent and for the employee consent itself, and permits employers to request, furnish and retain consents electronically as an alternative to a paper format. Notice 2015-15 also guides employers as to what constitutes reasonable efforts if an employer cannot obtain employee consent to claim a refund of its share of over-collected FICA tax.

The updated Instructions to Form 941-X also now refer to procedures for correcting the amount of FICA tax withheld and reported on Form 941 in 2014 on excess transit benefits due to the retroactive increase in excludable monthly transit benefits (under the Tax Increase Prevention Act of 2014) from $130 to $250 per participating employee for the period from January 1, 2014, through December 31, 2014.

Reminders

  • Social Security tax rate. The employee and employer Social Security tax rates for 2014 were 6.2% each (12.4% total). In 2011 and 2012, the employee share was 4.2% and the employer share was 6.2% (10.4% total). Employers are reminded to use the correct rate when correcting amounts reported on Form 941-X (on lines 8 and 9).
  • Claiming the COBRA premium assistance credit. The updated Form 941-X instructions remind employers that the Consolidated Omnibus Budget Reconciliation Act (COBRA) premium assistance credit that was available to employers for premiums paid on behalf of employees who were involuntarily terminated after May 31, 2010, is no longer available, other than in rare circumstances such as when COBRA eligibility was delayed because an employer provided health insurance coverage following an employee's termination. An employer that is eligible to claim the credit should do it on Form 941-X (lines 19a and 19b) and file the form after filing Form 941 for the quarter. Filing Form 941-X before Form 941 for the quarter may result in processing errors or delays in obtaining the credit.
  • Time limit to make certain corrections expired. Generally, an employer may correct over-reported taxes on a previously filed Form 941 if the employer files Form 941-X within three years of the date it filed Form 941, or two years from the date the employer paid the tax reported on Form 941, whichever is later. For purposes of this time limit, Forms 941 for a calendar year are considered filed on April 15 of the succeeding year if filed before that date. The time limit within which an employer may correct its Hiring Incentives to Restore Employment Act (HIRE Act) Social Security tax exemption and advance earned income credit payments expired on April 15, 2014, for most employers. The lines formerly used for these corrections have been removed from the 2015 Form 941-X. Thus, if an employer's period of limitations for any of these corrections is still open, the employer should file the April 2013 version of Form 941-X, rather than the April 2015 version.
  • Correcting Additional Medicare Tax (AMT) withholding. Since the first quarter of 2013, employers have been required to report wages and tips subject to AMT withholding on Form 941 (line 5d). Any errors discovered on a previously filed Form 941 must be corrected on Form 941-X, line 11. The instructions for line 11 of the 2015 Form 941-X provide more information on the types of errors an employer can correct, and how to report them, on Form 941-X.
  • Correcting the COBRA premium assistance credit. For tax periods ending before January 1, 2014, employers that made COBRA premium assistance payments for assistance-eligible individuals were allowed a credit on their Form 941. Any errors discovered on a previously filed Form 941 for this credit must be corrected on Form 941-X (lines 19a and 19b). Effective for tax periods beginning after December 31, 2013, employers are required to use Form 941-X both to report the total COBRA premium assistance credit they are entitled to claim and to correct any previously reported credit. More information is included in the Instructions to Form 941-X for lines 19a and 19b.
  • Aggregate Form 941 filers. Agents that are IRS-approved must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when correcting an aggregate Form 941. Agents must complete Schedule R only for those employer-clients that have corrections to report on Form 941-X. Schedule R should be filed as an attachment to Form 941-X. To request approval to act as an agent for an employer, agents must file Form 2678, Employer/Payer Appointment of Agent, with the IRS.
  • Future developments. The IRS has established a web page where employers can keep abreast of developments related to Form 941-X and the Instructions, such as legislation enacted after they were published.