IRS addresses claims for adjustments made after calendar year

An employer may file a Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, after the calendar year end depending on whether the employer discovered the withholding error and repaid or reimbursed the employee prior to the end of the calendar year. While there may be varied scenarios of when and how an employer may file a Form 941-X, the primary focus hinges on whether or not the discovery of the error and the corresponding repayment/reimbursement occurred by the end of the calendar year.

A confusion regarding the timing of filing the Form 941-X results largely because of the use of imprecise terms, including “claim” and “adjustment.” Particularly, it seems misleading to use the phrase “claim an adjustment” given that the claim process and the adjustment process are different. An employer cannot file a “claim” for income taxes except for administrative errors, in which the amount reported on Form 941, line 3 (Federal income tax withheld from wages, tips, and other compensation), does not agree with the amount the employer withheld. However, the employer can file an “adjusted return” if the error is discovered in the same calendar year employer paid the wages and if the employer also repaid or reimbursed the employees in the same year. (Chief Counsel Advice Memorandum 201822028, May 14, 2018.)

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