Correcting a W-2:
From W-2c
to 941-X
and More
Maine Association of Payroll Professionals
Date:
November 30, 2012
Presented By:
Rosemarie Fraumeni, CPP
Rosemarie Fraumeni, CPP
Manager, Payroll - American Dental Partners
• Biography
• Certified Payroll Professional since 2000
• BS in Accounting
• Involved in payroll since 1991
• Member of APA’s
• National Speakers Bureau
• Certification Advisory Board – CPP Committee
• Government Affairs Task Force
• Member of the APA Boston Local Chapter
• Current Vice President
• Member of the New England Payroll Conference Committee
• Current Conference Chair and Treasurer
• APA Awards
• 2010 Payroll Woman of the Year
• Special Recognition 2008
• Meritorious Service 2005
Form W-2c
• Devise forms for employees to complete:
• Include a schedule of when they will be processed
• One for replacements
• One for corrections
• Have an employee indicate what he/she thinks is wrong
• Have employee attach supporting documents: copy of W-2, last pay
stub, etc.
• Have employee sign and date the form – very important!
Form W-2 Replacements
• Wrong address and it comes back:
• Make a copy of the return envelop for proof of mailing
• Put original in new envelope
• Doesn’t require W-2c
• Completely lost:
• Reprint, indicate “Reissued Statement” on the top – not required
by IRS, but good practice
• You’re allowed to charge for this! (as well as replacements for
prior year Forms W-2)
Form W-2, Corrected Not W-2c
• Issued before W-2s are filed with government, and assumes
that you can change the W-2 file that you’ll submit to SSA (but
you might still need to file Form 941-X)
• Indicate “Corrected” on the top of the W-2 paper form
• Form 941-X may be required
Review: Form W-2c
• Boxes a-d and h-I are mandatory
• Boxes e-g depend on circumstance
• Can’t correct federal/state/local income tax withholding
• Exception: an administrative error – such as “withheld $500, but
reported $600, and now must correct W-2 to reflect what actually
happened”
Review: Form W-2c
• Refunds to employees:
• You may refund FICA, but not FIT/SIT/LIT
• And you can request employer FICA too, on 941-X
• Review boxes:
• Just complete boxes (as reported, as corrected) for anything you
are correcting
• Don’t zero-fill other boxes
• Box 12 codes: indicate code letter
Only Changing State of Local
Data?
• Do not send it to SSA! They have no need to see it, and it just
adds to their processing load.
• You can correct wages, but not taxes, unless it’s an
administrative error (see slide 6, above)
Review: Form W-3c
• Form W-3c is required to be filed with any submission of
paper Form(s) W-2c.
• Boxes a-e are mandatory; f is optional; g is for correcting
state/local info; h-j depend on circumstance
• Review boxes:
• Just complete boxes (as reported, as corrected) for anything you
are correcting – this is a summary of all W-2c forms being
submitted with this W-3c
Review: Form W-3c, Cont.
• Don’t zero-fill other boxes
• Box 12a: for deferred compensation, enter only the total of
codes D-H, S, Y, AA, BB and EE; don’t enter code letters
• Box 12b: for HIRE exempt wages & tips
• Explain decreases: keep it simple. If many different reasons,
use a different W-3c for each batch
• “Has an adjustment been made…?” Check a box. If “yes,”
indicate date of Form 941-X on which you take the
adjustment.
Form 941-X (effective 1/1/09)
• Replaces Form 941c and Form 843
• One Form 941-X for each Form 941 that you are correcting
• Stand alone form – do not attach to Form 941
• Form 941 will no longer have adjustment lines for correcting prior
quarter errors
• If correcting both underreported and over reported amounts for
same tax period, use a single Form 941-X to report both
Form 941-X, Cont.
• Two processes to choose from: adjustment process or claim
process
• Adjustment process is used to apply a credit (over reporting) to
your next Form 941 or reporting an underpayment
• Claim process is used to file for a refund
• Form and instructions contain a chart and several examples to
help with choosing and completing appropriate process
Form 941-X, Cont.
• Deadlines for filing Form 941-X:
• If you are correcting an underreported tax, the 941-X must be
filed by the due date of the 941 for the period in which you
discover the error
• If you are correcting an over reported tax, the 941-X is due before
the period of limitations expires (within 3 years of date 941 was
filed or 2 years from date you paid the tax, whichever is later)
• Note: The adjustment process cannot be used in last 90 days of
period of limitations – must use claim process and receive refund
Form 941-X, Cont.
• Part 3: Just complete boxes (as reported, as corrected, etc.) for
anything you are correcting, don’t zero-fill other boxes
• Caution! Be sure to use the appropriate tax rates for the
year being corrected. (6.2% vs. 4.2%)
• Part 4 – Explanation: Keep it brief, match W-3c explanation
Where do you get the forms?
• Social Security Administration’s Business Services Online
• www.socialsecurity.gov/bso/bsowelcome.htm
• Create, store, and electronically file with SSA up to 5 forms at a
time
• Print copies for employees and state/local filing
• But can’t use it for forms correcting only state/local information
• APA’s fill-in-and-print W-2c, W-3c and 941-X
• http://www.americanpayroll.org/members/Forms-Pubs/
• Fill-in pdf; print out all copies, save paper copies as cannot save
pdf
Form W-2c Checklist
• W-2c Checklist:
•
•
•
•
Employee info
Source error documentation
Correction resolution
Journal entries
Change of Name or SSN
•
•
•
•
Example: Sheila Fortune
Generally, one W-2c will suffice for multiple years
No need for Form 941-X
Don’t forget you will need a Form W-3c
Refunding Over Collected SS Tax
• Example: Dwight Ellis
• Involves Form 941-X
• When to complete Form 941-X
• If no $ involved, not needed: change of name, SSN, Box 10, Box
12 codes, state or local wages
• But if changing federal wages and taxes, do it!
Form 941-X Review
• Mandatory: name, FEIN, address, return correcting info, date
error discovered
• Period corrected: not the period when you discovered error, but
the period in which the error took place
• Review process choices in Part 1
• Review certifications in Part 2: depends on circumstances of
correction
• Part 3: depends on the taxes being adjusted
Form 941-X, Part 3
• Column 1: Correct wages for the period
• Column 2: Wages previously reported: from the 941 of the period
being corrected
• From W-3c, calculate increase (decrease) in taxable wages
Form 941-X, Part 3, Cont.
• Column 3: Difference (Col. 1 minus Col. 2)
• Column 4: Tax Correction
• For FICA taxes, use rates shown if correcting both employee and
employer share
• If correcting employer share of FICA only, use rates noted with
asterisk
Make sure you are using the
correct form. Current Version:
April 2012
Form 941-X, Part 4
• Explanation
• Brief, concise
• Group like errors together
• Use similar explanation as on W-3c
General Ledger Entries
• Example: Ellis
• A/P Manual check: don’t run it through payroll, or it will affect
current year tax balances on the W-2 (or your system will selfadjust and recollect)
• GL entry for refund check to employee
• GL entry for deposit of IRS refund
Reversing Wages From a Check That
Was Never Given to Employee
• Example Brian Looney
• Involves Form 941-X
• Period corrected: not the period when you discovered error, but
the period in which the error took place
• Wages previously reported: from the 941 of the period being
corrected
• This is considered an administrative error!
Reversing Wages
• Example: Looney
• From the W-3c, calculate the increase (decrease) in taxable
wages
• Add/subtract that to/from column 2 to get column 1
General Ledger Entries
• Example: Looney
• GL entry to back out wages
• GL entry to back out deductions you have a chance of getting
back
• GL entry to set up receivable for expected tax refunds
• GL entries for deposits of tax refunds
Under Reported Wages From a
Manual Check
• Example Martin McFarland
• Involves Form 941-X
• Period corrected: not the period when you discovered error, but
the period in which the error took place
• Part 2: Check only Line 3 – no refunds involved
• Wages previously reported: from the 941 of the period being
corrected
• Calculate the increase in taxable wages
Under Reported Wages
• Example: McFarland
• Add that to column 2 to get column 1
• For FICA taxes, use rates shown as correcting both employee and
employer share
• Make deposit immediately
• GL Entry
Correcting Form 940
• Redo the return, making changes as appropriate
• Check the “amended return” box, right above Part I
• There will definitely be changes in Part I, line 1, and possibly on
other lines.
• Unlikely that this will affect tax that is due, unless there was a
change for someone who earned less than $7,000 (FUTA wage
base)
State Impact
• Revenue (SIT)
• Every state is different
• Check out your coupon book (amended or corrected annual
recon)
• Some states have you use the same form and write “amended”
• Check out state rules: call or go to websites
• www.americanpayroll.org/states.html
State Impact, Cont.
• Unemployment Insurance
• Check first if it’s a state that wants gross wages in addition to
taxable wages (If not, and the person exceeded taxable wage
base, you don’t have to go any further!)
• Every state is different
• Check out what forms the state has for amending a return
• Check out state rules: call or go to websites
• www.americanpayroll.org/states. html
Questions? Contact Information
• Rosemarie Fraumeni, CPP
• rfraumeni@comcast.net
• 978-621-0270