Presentation on theme: "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."— Presentation transcript:
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 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 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 self- adjust 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
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 html
Questions? Contact Information Rosemarie Fraumeni, CPP