Employers who believe they have overpaid employment taxes, have a limited amount of time in which to file a claim for a credit or refund. Employers can claim a credit or refund by filing the “X” form that corresponds to the return being corrected.
Use the Form 94X series
The “X” forms (e.g., Form 941-X, “Adjusted Employer” QUARTERLY Federal Tax Return or Claim for Refund and Form 944-X, Adjusted Employer’s ANNUAL Federal Tax Return or Claim for Refund) are used to claim refunds, make adjustments, and request abatements of employment taxes. A separate claim must be made for each return for each tax period in which there was an error. Visit the IRS website at www.irs.gov and enter the keywords “Correcting Employment Taxes” for links to the X forms and to Revenue Ruling 2009-39, which provides examples showing how the claim for refund process operates.
Filing time limits
Generally, a claim for a credit or refund must be files within 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. A special rule applies to returns reporting social security and Medicare taxes or Federal income tax withholding. Returns for a calendar year are considered filed on April 15 of the succeeding year if filed before that date.
For example, if 2012 fourth quarter Form 941 was filed on January 25, 2013, the IRS treats the return as if it were filed on April 15, 2013. To file a timely claim, Form 941-X must be filed by April 15, 2016. If the claim is not filed within this period, a credit or a refund may not be available. If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is considered filed on time if it is filed on the next business day.
If the right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, a protective claim for a refund can be filed on the appropriate “X” form. Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. A protective claim preserves the right to claim a refund when the contingency is resolved. A protective claim does not have to state a particular dollar amount. It is suggested that $1 be entered if the exact amounts are not known. If the amounts are known, that amount, or $1, can be recorded. To be valid, a protective claim must:
• Be in writing and be signed,
• Include name, address, taxpayer identification number, and other contact information,
• Identify and describe the contingencies affecting the claim, and
• Identify the specific tax periods for which a refund is sought.
In this situation, the IRS should be alerted that a “Protective Claim” is being filed and describe the contingency or anticipated tax law change that is causing the claim to be made. To do this, it is strongly recommended that “Protective Claim” be written on the top of the first page of the “X” form in addition to including it in the description. If the claim is not clearly marked as “protective” any amounts reflected may be incorrectly processed, causing unnecessary problems with the taxpayer’s account.
Contingency must be resolved
Generally, the IRS will delay action on the protective claim until the contingency is resolved. Once the contingency is resolved, the IRS will request perfected information (e.g., perfected claim amounts). This perfected information will be used to process the claim as appropriate (i.e., allowed in full, allowed in part or disallowed in full).
An employer has a duty to assure that its employee’s rights to recover over-collected social security and Medicare taxes are protected by repaying or reimbursing over-collected amounts. Alternatively, an employer may obtain the employee’s consent to the filing of the refund claim.
An employer need not repay or reimburse its employees, or obtain the employees’ consents for the filing of a refund claim prior to filing the claim, in order for the claim to be valid. However, the employer must repay or reimburse its employees or obtain the employees’ consents before the IRS can grant the claim.
A claim ban be filed by mailing it to the address shown in the instructions for the ”X” form. (SSA/IRS Reporter, Winter 2014.)
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