With the major revisions made to Form 941, the IRS is in the process of revising Form 941-X for making corrections to the quarterly federal tax return.  While the IRS has issued a draft of the Form 941-X on July 27, 2020,[1] until such time as that form is released in final form the IRS has provided special instructions to be used in filing for adjustments prior to that date on the IRS website.[2]

The website notes that the revised Form 941-X is expected to be released in final form in late September.  The new form allows for corrections to be made to the new lines found on the Form 941 that was released for filings for the second quarter of 2020 to take into account the various payroll tax credits and the deferral of old age, survivor and disability employer taxes found in provisions of the Families First Coronavirus Protection Act (FFCPA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES).

For those looking to file the adjustments prior to the release of the revised Form 941-X, the website provides the following instructions:

• If adjusting 1Q 2020 or earlier, you may use the existing Form 941-X.

• If adjusting 2Q (or later) and not making any increase or decrease to the employer share of social security tax or any of the new COVID-related lines that were added to the Q2 Form 941, we strongly recommend that you not use the existing Form 941-X but rather wait for the new Form 941-X revision to be released.

• If adjusting 2Q (or later) and making any increase or decrease to the employer share of social security tax or any of the new COVID-related lines, do not use the existing Form 941-X; instead, wait for the new Form 941-X revision.

• Do not send a Form 941 with “Amended” (or similar notation) written on it in an attempt to adjust any quarter.

• If you have already done either of the prior two procedures, you’ll need to wait for correspondence from the IRS to find out if your return was processable or had to be rejected. Given the backlog of paper forms and correspondence due to COVID-19, the IRS states it is unable to approximate how long that may be.

Basically, the IRS believes it’s a really bad idea to file an adjustment for a second quarter Form 941 before the new Form 941-X is released.  However, if the employer is not changing any of the items affected by the FFCRA or CARES Acts, the IRS stops short of absolutely telling employers not to use the current version of Form 941-X (though presumably things may not go well if the employer does that—but you have been warned).

The IRS uses stronger language for any changes that impact the FFCRA or CARES Act revised lines on the second quarter Form 941-X, as well as ever attempting to revise a quarterly filing by simply writing “Amended” or something similar on a Form 941. The IRS clearly states not to take those actions, going well beyond simply strongly advising against taking the actions.

If an employer either has already taken one of those actions or does so in the future the IRS warns the employer:

• There is no option but to wait and see how this turns out;

• It is possible that the IRS may either be able to process the form or it may reject the filing; and

• Due to the backlog at the IRS, you may have a long wait before finding out if your request will be processed or not.

So, basically, employers should take this away from the guidance:

• If you are revising the first quarter 2020 or earlier, you can file using either form (so no need to wait for the revised form to be issued—just use the old version).

• If you are revising the second quarter of 2020, just wait for the revised Form 941-X to be issued.

[1] Draft Form 941-X, Adjutsed Employer’s QUARTERLY Federal Tax Return or Claim for Refund, Draft as of July 27, 2020, https://www.irs.gov/pub/irs-dft/f941x--dft.pdf (retrieved August 21, 2020)

[2] “Information about filing Form 941-X for 2020 2nd Quarter,” IRS website, August 17, 2020 https://www.irs.gov/forms-pubs/information-about-filing-form-941-x-for-2020-2nd-quarter (retrieved August 21, 2020)