IRS Form 941C - Supporting Statement to Correct Payroll Tax Information

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What’s New

Line A. Three new check boxes have been added to line A on page one for new Forms 944, 944(SP), and 944-SS. These forms are new for calendar year 2006. Filers of these forms who wish to make adjustments for prior years should check the appropriate box on line A and file Form 941c with Form 944, 944(SP), or 944-SS.

General Instructions

Purpose of form. Use Form 941c to provide background information and certifications supporting prior period adjustments to income, social security, and Medicare taxes reported on Form 941, 941-M, 941-SS, 943, 944, 944(SP), 944-SS, or Form 945. File it with the tax return on which you are claiming the adjustment (Form 941, 943, 944, 945, etc.). You may use Form 941c even though you filed the original return on magnetic media or electronically.

Do not use Form 941c as a supporting statement for current period adjustments (for example, adjustment for uncollected employee share of social security and Medicare taxes on tips). No supporting statement is required for the fractions-of-cents, group-term life insurance, and third-party sick pay adjustments. See your form instructions.

Federal income tax withholding errors. Generally, you are not permitted to correct federal income tax withholding errors made in a prior calendar year.

However, you may make an adjustment to correct an administrative error in a prior year. Refer to Pub. 15 (Circular E), Employer’s Tax Guide, for more information on correcting administrative errors.

More information. See Pub. 15 (Circular E), Pub. 51 (Circular A), Agricultural Employer’s Tax Guide, or your form instructions for more information about adjustments.

How to use Form 941c. Form 941c is not an amended return and must never be filed separately. You must make adjustments on the return (for example, Form 941) for the period during which you discovered the error. There is no limit to the number of adjustments that you can make, and these adjustments can be for corrections to more than one prior period. However, if you filed two or more types of tax returns that need correction (for example, Form 941 and Form 943), use a separate Form 941c for each type of return. The net adjustment increases or decreases your tax liability for the period in which the error was discovered and adjusted.

If your adjustment(s) results in an overpayment, you may apply for a refund using Form 843, Claim for Refund and Request for Abatement, instead of making an adjustment as discussed above. If you choose to file Form 843, you will receive a refund check (with interest) instead of reducing your current employment tax liability (no interest). When filing Form 843, attach Form 941c or an equivalent statement.

If you did not file a return for one or more return periods, do not use Form 941c to report the information. Instead, file the required returns.

Corrections not required. You are not required to correct errors previously reported as a monthly or daily tax liability. For example, do not use Form 941c to correct amounts reported in line 15 of Form 941, line

13 of Form 944, line 15 of Form 943, or on Schedule B (Form 941), Form 943-A and Form 945-A. Also, you are not required to correct amounts previously reported on lines 1 or 2 of Form 941 or Form 941-M; or line 1 of Form 941-SS or Form 943.

Statute of limitations. Generally, you may make an adjustment only within three years of the return due date or the date the return was filed, whichever is later. For the statute of limitations, the due date of Forms 941, 941-M, 941-SS, 943, 944, 944(SP), 944-SS, and 945 is April 15 of the year after the close of the tax year. For example, the four quarterly Forms 941 filed for 2004 are all treated as due on April 15, 2005. If they were filed on or before April 15, 2005, adjustments could be made for any of the quarterly returns for 2004 until April 15, 2008.

Specific Instructions

Complete all applicable columns on the line for each return period that you are correcting. Show the total amount paid to all employees, not the amount for each individual employee. If you need more space, use additional Forms 941c.

If you use additional Forms 941c as continuation pages, be sure that the total and net adjustment lines on the first form include the totals from the continuation pages. These lines are line 5 of Part II, lines 5 through 8 of Part III, and lines 5 through 7 of Part IV.

Line A. Check the box for the return that you are adjusting. Check only one box. Use a separate Form 941c for each type of return (for example, Form 941 and Form 945).

Line B. Show the return period in which you are reporting tax adjustment(s). For example, if you are making an adjustment on Form 941 for the quarter ending June 30, 2006, enter 06-2006. File Form 941c with Form 941 for this period. Do not show the return period(s) being corrected in this entry space.

Line C. Enter the date that you discovered the error(s). If you are making more than one correction and the errors were not discovered at the same time, leave line C blank and explain in Part V. The date that you discover the error(s) is the date that your tax liability increases or decreases. Your deposits for this date must be adjusted accordingly. See your form instructions for more information.

Part I—Signature and certification. Part I applies to wages only. If any adjustment is for an overpayment, it cannot be processed unless you check at least one box in Part I and you sign the certification. If you obtained written consents or statements from some employees but you could not locate or secure the cooperation of the remaining employees, check both the second and third boxes. Provide a summary in Part V of the amount of the adjustments for both the employees who provided statements and for those who did not.

You may make an adjustment for both the employer and employee shares of social security and Medicare taxes for those employees who provided the required written statement. But you may make adjustments for only the employer’s share for those employees who did not provide statements.

Part II—Federal Income Tax Withholding (Including Backup Withholding) Adjustment. Use this part to correct federal income tax withholding (including backup withholding) information that you previously reported. Show the total amount of income tax withheld or required to be withheld.

After the end of the year, you cannot adjust the amounts reported as income tax withheld (including backup withholding) unless it is to correct an administrative error. An administrative error is any error that does not change the amount of income tax that was actually withheld. For example, if the total income tax actually withheld was incorrectly reported due to a mathematical computation or transposition error, this is an administrative error.

Except to correct an administrative error, you will not be allowed a refund or credit for any prior year overpayment of income tax withheld (including backup withholding). This is because the amount of withholding shown on Form W-2, Wage and Tax Statement, Form W-2G, Certain Gambling Winnings, or Form 1099, is used as a credit on the employee’s or income recipient’s income tax return (Form 1040, etc.). If you are making an administrative error adjustment for a period during a prior calendar year, provide an explanation in Part V.

Part III—Social Security Tax Adjustment. Use this part to correct social security wages and tips information that you reported in an earlier period. You may make corrections to social security taxes reported in prior calendar years as long as the statute of limitations has not expired (see STATUTE OF LIMITATIONS on page 3). If you are reducing social security taxes, be sure to read and check the appropriate boxes in Part I.

Because Form W-2 is used by the Social Security Administration (SSA) to post an employee’s social security wages and tips to his or her earnings record,

you must file a Form W-2c, Corrected Wage and Tax Statement, with the SSA and give copies to the employee for any social security correction made after you filed his or her Form W-2 with the SSA. Do not send Form 941c (or a copy) to the SSA with Form(s) W-2c.

Part IV—Medicare Tax Adjustment. Use this part to correct Medicare wages and tips information that you reported in an earlier period. You may make corrections to Medicare taxes reported in prior calendar years as long as the statute of limitations has not expired (see STATUTE OF LIMITATIONS on page 3). If you are reducing Medicare taxes, be sure to read and check the appropriate boxes in Part I.

You must file a Form W-2c with the SSA and give copies to the employee for any Medicare correction made after you filed Form W-2 with the SSA.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by Code section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is 9 hours and 12 minutes.

If you have comments concerning the accuracy of this time estimate or suggestions for making this form simpler, we would be happy to hear from you. You can write to the IRS at the address shown in the Privacy Act and Paperwork Reduction Act Notice in the instructions of the tax return with which you file

Form 941c.