The problems of attempting to develop summary explanations for training purposes (like this article) of tax material was discussed in Chief Counsel Email 201822028.  A person inside the IRS was raising questions about IRS training materials related to the question of when an employer may “claim” an “adjustment” for income tax withholding and additional Medicare tax.

Specifically, the email begins by noting the matter that had led to the request for clarification:

Your initial inquiry was whether certain training materials were correct in stating that “[a]n employer CANNOT claim an adjustment for [Income Tax Withholding] and additional Medicare taxes after the close of the calendar year for the employee.” The training materials cite to § 31.6413(a)-2(c)(2).

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In emailed advice (Chief Counsel Email 201727008), the IRS Chief Counsel’s office discussed the limitation on the use of Form 941-X, specifically looking at what qualifies as “administrative error” for which the Form 941-X can be used to address issues on prior year’s payroll tax reports related to federal income tax withheld.

People do make mistakes, and at time those errors involve payroll tax issues, including tax withholding.  Form 941-X was created to allow employers to deal with some errors—but the form has very specific limitations on its use.  As a practical matter, once a year has ended and the employee has been given a W-2, the consequences of, say, overwithholding or underwitholding federal income taxes gets “passed on” to the employee since that number is claimed as a credit on the employee’s own income tax return.

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