We all make payroll mistakes: IRS Form 941-X

How to File IRS Form 941-X and Correct Your Payroll Taxes

If you made a mistake on your quarterly payroll tax return, you might need to file IRS Form 941-X to correct it. This form allows you to adjust the amounts of wages, tips, taxable compensation, income tax withholding, social security and Medicare taxes, and other payroll-related items that you reported on Form 941. In this article, we’ll explain what Form 941-X is, when you need to file it, how to fill it out, and what to do after you submit it.

Here’s a table of contents with links to help you navigate this article:

What is Form 941-X?

Form 941-X is an amended return that allows you to correct errors on a previously filed Form 941. Form 941 is the quarterly payroll tax return that most employers use to report their federal income tax withholding, social security and Medicare taxes, and other payroll taxes to the IRS.

Form 941-X can be used to correct both overreported and underreported amounts of taxes. If you overreported your taxes, you can either claim a refund or apply the excess amount to your next return. If you underreported your taxes, you will have to pay the additional amount due, plus interest and penalties if applicable.

When do you need to file Form 941-X?

You should file Form 941-X as soon as possible after you discover an error on your Form 941. However, there are some deadlines and limitations that you need to be aware of:

• You can only file one Form 941-X per quarter. If you need to correct more than one error for the same quarter, you must include all the corrections on one form.
• You can only file Form 941-X for the current year and the three previous years. For example, in 2023, you can file Form 941-X for quarters in 2020, 2021, and 2022, but not for quarters in 2019 or earlier.
• You must file Form 941-X within three years of the date you filed the original return or two years of the date you paid the tax reported on the original return, whichever is later. For example, if you filed your Form 941 for the first quarter of 2023 on April 30, 2023, and paid the tax due on May 15, 2023, you have until April 30, 2026 or May 15, 2026 (whichever is later) to file Form 941-X for that quarter.
• You must file Form 941-X before the IRS contacts you about an audit or examination of your return. If the IRS has already notified you of an audit or examination, you cannot use Form 941-X to correct errors for the quarters under review.

How do you fill out Form 941-X?

Filling out Form 941-X can be tricky because it requires you to compare the amounts reported on your original return with the corrected amounts and explain the reasons for each adjustment. Here are some general steps to follow and an example right below:

1. Download a copy of Form 941-X from the IRS website or use a software program that supports it.
2. Enter your basic information at the top of the form, such as your name, address, employer identification number (EIN), and contact person.
3. Check the box that indicates whether you are correcting an overreported or underreported amount of tax. You cannot correct both types of errors on the same form. If you have both types of errors for the same quarter, you must file two separate forms.
4. Enter the calendar year and quarter that you are correcting. You can only correct one quarter per form.
5. Fill out Part 1 of the form by entering the amounts reported on your original return and the corrected amounts for each line item. The difference between these two amounts is the adjustment that you are making. You must also enter a code that explains why you are making each adjustment. The codes are listed in the instructions for Form 941-X.
6. Fill out Part 2 of the form by answering some questions about your adjustments, such as whether they affect your employees’ income tax withholding, social security and Medicare wages, or tax deposits. Depending on your answers, you may have to fill out additional forms or schedules, such as Form W-2c, Schedule B, or Schedule R.
7. Fill out Part 3 of the form by signing and dating it. You must also provide your phone number and the best time to call you.
8. Attach any supporting documents or forms that are required for your adjustments, such as copies of your original and corrected Forms 941, Forms W-2c, or Schedule B.
9. Mail your completed Form 941-X and attachments to the address indicated in the instructions for Form 941-X. You cannot file Form 941-X electronically.

Example for extra clarity:

“Hey, I messed up my Form 941 for the first quarter of 2023 and I need to fix it. I realized that I forgot to include some tips that my employees received, so I owe more tax than I reported. Here’s what I did:

– I downloaded Form 941-X from the IRS website and opened it on my computer.
– I typed in my name, address, EIN, and contact person at the top of the form.
– I checked the box that says “Underreported amount of tax” because that’s what I did.
– I entered 2023 and 1 for the year and quarter that I’m correcting.
– I filled out Part 1 by comparing the amounts on my original Form 941 and the corrected amounts. For example, on line 2, I originally reported $10,000 as taxable social security wages, but the correct amount is $10,500. So I entered $10,000 in column 1, $10,500 in column 2, and $500 in column 3. That’s the adjustment that I’m making. I also entered code A in column 4, which means that I made a mistake in figuring wages or tips subject to social security tax. I did the same thing for lines 3, 5a, and 5c, because those are also affected by the tips. The total adjustment on line 9 is $153.30, which is the extra tax that I owe.
– I filled out Part 2 by answering some questions about my adjustments.

• For question 1, I checked “Yes” because my adjustments affect my employees’ income tax withholding.
• For question 2, I checked “Yes” because my adjustments affect my employees’ social security and Medicare wages.
• For question 3, I checked “No” because my adjustments do not affect any fractions of cents.
• For question 4, I checked “No” because my adjustments do not affect any sick pay.
• For question 5, I checked “No” because my adjustments do not affect any group-term life insurance.
• For question 6, I checked “No” because my adjustments do not affect any COBRA premium assistance payments.
• For question 7, I checked “No” because my adjustments do not affect any employee retention credit.
• For question 8, I checked “No” because my adjustments do not affect any qualified sick leave or family leave wages.
• For question 9, I checked “No” because my adjustments do not affect any nonqualified deferred compensation.
• For question 10, I checked “No” because my adjustments do not affect any third-party sick pay.
• For question 11, I checked “No” because my adjustments do not affect any advance payments of the earned income credit.
• For question 12, I checked “No” because my adjustments do not affect any backup withholding.
• For question 13, I checked “Yes” because my adjustments affect how much tax I deposited for the quarter.
• For question 14, I checked “No” because my adjustments do not affect any prior quarters or years.
• For question 15, I checked “No” because my adjustments do not affect any special additions to federal income tax.

– Because I answered “Yes” to questions 1 and 2 in Part 2, I also had to fill out Form W-2c for each employee who received tips and attach it to Form 941-X. On Form W-2c, I entered the corrected amounts for boxes 1, 3, 4, 5, and 6 to reflect the additional tips.
– Because I answered “Yes” to question 13 in Part 2, I also had to fill out Schedule B for Form 941-X and attach it to Form 941-X. On Schedule B, I entered the dates and amounts of my tax deposits for the quarter and the additional amount that I’m paying with Form 941-X.
– Finally, I filled out Part 3 by signing and dating the form. I also provided my phone number and the best time to call me in case the IRS has any questions. That’s it!”

What do you do after filing Form 941-X?

After you file Form 941-X, you should do the following:

• If you overreported your taxes, wait for the IRS to process your claim and issue a refund or apply the excess amount to your next return. You can check the status of your claim online using the Where’s My Amended Return? tool on the IRS website.
• If you underreported your taxes, pay the additional amount due as soon as possible to avoid interest and penalties. You can pay online using the Electronic Federal Tax Payment System (EFTPS) or by mail using a check or money order. Make sure to write “Form 941-X” and the quarter that you are correcting on your payment.
• If you made adjustments that affect your employees’ income tax withholding, social security and Medicare wages, or tips, provide them with corrected Forms W-2c as soon as possible. You must also file copies of Forms W-2c with the Social Security Administration (SSA).
• If you made adjustments that affect your state or local payroll taxes, contact your state or local tax agency to find out how to report and pay them.
• Keep copies of your Form 941-X and supporting documents for at least four years for your records.

We hope this article helped you understand how to file Form 941-X and correct your payroll taxes. If you need more help with payroll tax compliance, consider using a payroll service provider that can handle all the calculations, filings, and payments for you.