Justification of need for Form 945-X

REV. RUL. 2008–44 TABLE 1
TABLE OF INTEREST RATES
(Year of Valuation 2008)
Farm Credit System Bank Servicing State in
Which Property is Located

Rate

AgFirst, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.56

AgriBank, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.38

CoBank, ACB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.11

Texas, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.47

U.S. AgBank, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.09

REV. RUL. 2008–44 TABLE 2
TABLE OF FARM CREDIT SYSTEM BANK CHARTERED TERRITORIES
Farm Credit System Bank

Location of Property

AgFirst, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delaware, District of Columbia, Florida, Georgia, Maryland,
North Carolina, Pennsylvania, South Carolina, Virginia,
West Virginia.

AgriBank, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Arkansas, Illinois, Indiana, Iowa, Kentucky, Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio,
South Dakota, Tennessee, Wisconsin, Wyoming.

CoBank, ACB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alaska, Connecticut, Idaho, Maine, Massachusetts, Montana,
New Hampshire, New Jersey, New York, Oregon,
Rhode Island, Vermont, Washington.

Texas, FCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alabama, Louisiana, Mississippi, Texas.

U.S. Agbank, FCB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Arizona, California, Colorado, Hawaii, Kansas, New Mexico,
Nevada, Oklahoma, Utah.

Section 6205.—Special
Rules Applicable to Certain
Employment Taxes
26 CFR 31.6205–1: Adjustments of underpayments.

T.D. 9405
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 31 and 602
Employment Tax Adjustments
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.

August 11, 2008

SUMMARY: This document contains final regulations relating to employment
tax adjustments and employment tax refund claims. The final regulations modify
the process for making interest-free adjustments for both underpayments and
overpayments of Federal Insurance Contributions Act (FICA) and Railroad Retirement Tax Act (RRTA) taxes and Federal
income tax withholding (ITW) under sections 6205(a) and 6413(a), respectively, of
the Internal Revenue Code (Code). These
regulations also modify the process for
filing claims for refund of overpayments
of employment taxes under sections 6402
and 6414.
This document contains final regulations relating to the return requirements
under section 6011 to reflect the changes to
the adjustment and refund processes, and
to reflect additional statutory and process

293

updates. This document also contains final regulations under section 6302 to clarify deposit obligations with respect to interest-free adjustments of underpayments
and the effect of adjustments and refunds
on the deposit schedule of a Form 943 filer.
DATES: Effective Date: These final regulations are effective on January 1, 2009.
Applicability Date: With respect to
the regulations under Code sections 6205,
6402, 6413, and 6414, these final regulations apply to any error ascertained on or
after January 1, 2009.
FOR
FURTHER
INFORMATION
CONTACT: Ligeia M. Donis, (202)
622-0047 (not a toll-free number).

2008–32 I.R.B.

SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2097. The collection of
information in these proposed regulations is in §§31.6011(a)–1, 31.6011(a)–4,
31.6011(a)–5, 31.6205–1, 31.6402(a)–2,
31.6413(a)–1,
31.6413(a)–2,
and
31.6414–1. This information is required
by the IRS to verify compliance with
return requirements under section 6011,
employment tax adjustments under sections 6205 and 6413, and claims for refund
of overpayments of employment taxes
under sections 6402 and 6414. This information will be used to determine whether
the amount of tax has been reported and
calculated correctly.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Office of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
These final regulations are issued in
connection with the IRS’s development of
new forms to report adjustments to employment taxes which will replace the existing process of reporting adjustments of
employment taxes on regularly filed employment tax returns. These regulations
affect taxpayers that file employment tax
returns, including Form 941, “Employer’s
QUARTERLY Federal Tax Return,” Form
943, “Employer’s Annual Federal Tax Return for Agricultural Employees,” Form
944, “Employer’s ANNUAL Federal Tax
Return,” Form 945, “Annual Return of
Withheld Federal Income Tax,” and Form
CT–1, “Employer’s Annual Railroad Retirement Tax Return,” and any related
Spanish-language returns or returns for
U.S. possessions.

2008–32 I.R.B.

These final regulations are part of the
IRS’s effort to reduce taxpayer burden by
permitting employers to make employment tax adjustments on a separately filed
form as soon as an error is ascertained.
These regulations amend the Employment
Tax Regulations (26 CFR part 31) under
section 6011 relating to the requirement to
file a return, under sections 6205(a) and
6413(a) relating to the process for making
adjustments of underpayments and overpayments, respectively, of employment
taxes, under section 6302 relating to deposit obligations, and under sections 6402
and 6414 relating to the process of filing
a claim for refund for an overpayment
of employment taxes. For purposes of
these regulations, the term employment
taxes means the Federal Insurance Contributions Act (FICA) tax (both the social
security and Medicare portions) imposed
on both the employer and the employee,
the Railroad Retirement Tax Act (RRTA)
tax imposed on both the employer and
employee, and Federal income tax withholding (ITW). To the extent that other
types of withholding are treated as ITW
under section 3402(a) (that is, gambling
withholding, pension withholding, and
backup withholding as set forth in sections
3402(q)(7), 3405(f), and 3406(h)(10), respectively), these other types of withholding are included in the term employment
taxes.
Interest-free Adjustments
Generally, the Code requires that interest be paid to the IRS on any underpayment
of tax and that interest be allowed and
paid to the taxpayer on any overpayment
of tax. See sections 6601(a) and 6611(a),
respectively. An exception to the general
rule, however, applies uniquely to employment taxes. Where an amount other
than the correct amount of tax imposed by
sections 3101 (employee FICA tax), 3111
(employer FICA tax), 3201 (employee
RRTA tax), 3221 (employer RRTA tax),
or 3402 (ITW) is reported to the IRS with
respect to any payment of wages or compensation, sections 6205(a) and 6413(a)
permit employers to make interest-free
adjustments for underpayments and overpayments, respectively. Where the correct
amount of tax has been reported but not
paid, no adjustment to the amount reported

294

is necessary; accordingly, the interest-free
adjustment rules do not apply.
Claims for Refund
For overpayments of employment
taxes, section 6413(b) permits the filing
of a claim for refund when an interest-free
adjustment cannot be made. Under the
regulatory authority in section 6413(b),
the IRS has permitted taxpayers to choose
between filing a claim for refund pursuant
to section 6402(a) and making an interest-free adjustment pursuant to section
6413(a) to correct an overpayment of employment taxes.
Under section 6402(a), the IRS, within
the applicable period of limitations on
credit or refund, may credit the amount of
an overpayment, including any interest,
against any tax liability of the person who
made the overpayment and shall, subject
to certain offsets, refund any balance to
such person. A claim for refund under
section 6402(a) must be filed within the
period of limitations on credit or refund.
Section 6414 permits refunds of ITW only
to the extent the amount of the ITW overpayment was not actually deducted and
withheld from an employee.
Since 1960, the regulations under sections 6205 and 6413 have provided that
employment tax adjustments are made by
reporting the adjustment on an employer’s
current period employment tax return. Because the adjustment was reported on a
current period return, the amount of the adjustment was treated as part of the current
period’s liability. Such a process for making adjustments of employment taxes presented a number of problems for both employers and the IRS, in large part because
it required employers to make adjustments
for past periods in connection with the filing of their current period returns.
The IRS, as part of the Form 94X
Project initiated by the Office of Taxpayer
Burden Reduction and in response to the
request of employers and the payroll community, is developing new forms to be
used when making adjustments of employment taxes. The new forms will reduce the
employer’s burden in making and tracking
adjustments and increase the IRS’s ability
to ensure employment tax compliance.
The IRS is simultaneously revising the
process for claiming refunds. These final
regulations are issued in connection with

August 11, 2008

the IRS’s development of such new forms
which will be used by employers to make
overpayment and underpayment adjustments to employment taxes or to claim
refunds of overpaid employment taxes.
A notice of proposed rulemaking
(REG–111583–07, 2008–4 I.R.B. 319 [72
FR 74233]) was published in the Federal Register on December 31, 2007.
A correction to the notice of proposed
rulemaking was published in the Federal
Register on January 28, 2008 (73 FR
4765). No requests for a public hearing
were received, therefore, no public hearing was held. The IRS received written
and electronic comments responding to the
notice of proposed rulemaking, but none
of them requested substantive changes to
the proposed regulations. The proposed
regulations are adopted as amended by
this Treasury decision. The revisions are
discussed.

Overview of Final Regulations Under
Sections 6205 and 6413
The final regulations under sections
6205 and 6413 set forth the procedures
for making interest-free adjustments for
underpayments and overpayments of employment taxes, respectively. Like the
proposed regulations, the final regulations
under sections 6205 and 6413 have been
drafted to set up parallel structures according to the type of tax being adjusted and
when the error is ascertained. Accordingly, the final regulations under sections
6205 and 6413 are divided into provisions
dealing with FICA and RRTA taxes and
provisions dealing with ITW. The provisions are further broken down based
on when the error is ascertained, that is,
whether the error is ascertained before or
after a return has been filed.
Interest-free Adjustments

Summary of Comments and
Explanation of Provisions
Several positive comments were received on the proposed regulations. No
substantive changes to the regulations
were requested. Several commentators
suggested changes for the draft form,
Form 941X, “Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for
Refund,” which was released to the public on the IRS website (www.irs.gov) on
March 4, 2008, as a vision draft for comment. The Form 941X is the first of a
series of forms being developed by the IRS
in conjunction with these regulations. The
series of forms will correspond to Form
941, Form 943, Form 944, Form 945, and
Form CT–1 and will be used by employers
when making adjustments of employment
taxes or claiming refunds of employment
taxes. The comments on the draft Form
941X will be taken into account in preparing the final version of the form.
As the IRS has continued to prepare for
the implementation of the new adjustment
and refund claim processes for employment taxes, some necessary changes to the
proposed regulations were identified and
incorporated into these final regulations.
These changes to the proposed regulations
are discussed below.

August 11, 2008

The final regulations under section
6205 set forth the procedures for making
interest-free adjustments for underpayments of employment taxes. They provide
that if a return is filed and less than the
correct amount of employee or employer
portions of FICA or RRTA tax is reported,
and the employer discovers such error
after filing the return, the employer shall
adjust the resulting underpayment of tax
by reporting the additional amount due
on an adjusted return for the return period
in which the wages or compensation was
paid. The adjustment must be made by the
due date of the return for the return period in which the error is ascertained and
the amount of the underpayment must be
paid by the time the adjustment is made,
or interest will begin to accrue from that
date. An underpayment adjustment may
only be made within the period of limitations for assessment. For underpayments
of ITW where the incorrect amount was
withheld, subject to limited exceptions, an
adjustment may be made only for errors
ascertained during the calendar year in
which the wages were paid.
Under the final regulations interest-free
adjustments for underpayments of FICA
tax, RRTA tax, and ITW are available under certain circumstances where the underpayment arises because the employer
failed to file an original return or failed to
report and pay the correct type of tax. The

295

final regulations revise the processes set
forth in the proposed regulations to accommodate the various possibilities of errors in
these situations and to ensure the IRS can
process the adjustments.
Specifically, under the final regulations,
if an employer filed a return reporting
FICA tax when a return reporting RRTA
tax should have been filed, the employer
can make an interest-free adjustment by
filing an original return reporting the correct amount of RRTA tax and attaching an
adjusted return to correct the erroneously
reported FICA tax. Conversely, if an employer filed a return reporting RRTA tax
when a return reporting FICA tax should
have been filed, the employer can make an
interest-free adjustment by filing an original return reporting the correct amount
of FICA tax and attaching an adjusted
return to correct the erroneously reported
RRTA tax. In the latter situation, if the
employer already filed a return that is used
to report FICA tax in order to report ITW,
the employer can make an interest-free
adjustment by filing an adjusted return
to report the correct amount of FICA tax
with an adjusted return to correct the erroneously reported RRTA tax. The final
regulations also add a cross-reference to
the regulations under section 3503 which
provide that if an amount is paid under the
wrong chapter, that is, an employer erroneously pays FICA tax under chapter 21
instead of RRTA tax under chapter 22, or
RRTA tax instead of FICA tax, the amount
erroneously paid shall be credited against
the tax for which the employer is liable
and any balance refunded.
In addition, the final regulations provide the process by which an employer can
make an interest-free adjustment if the employer failed to file a return for a return
period solely because the employer failed
to treat any individuals as employees. The
employer can make an interest-free adjustment to report the tax due with respect to
the reclassified workers by filing an original return and an attached adjusted return
reporting the correct amount of tax, in accordance with the instructions for the adjusted return.
Generally, such reporting will constitute an interest-free adjustment in each of
these situations if the original return and/or
adjusted return(s) are filed by the due date
of the correct return for the return period in
which the error is ascertained. The amount

2008–32 I.R.B.

reported must be paid by the time the original return and/or adjusted return(s) are
filed or interest will accrue from that date.
The final regulations under section
6413(a) set forth the procedures for making interest-free adjustments for overpayments of employment taxes. They provide
that, if an employer ascertains an overpayment error within the applicable period
of limitations on credit or refund, the employer is required to repay or reimburse
its employees the amount of overcollected
employee FICA tax or employee RRTA
tax prior to the expiration of the applicable
period of limitations on credit or refund.
However, the requirement to repay or
reimburse does not apply to the extent
that taxes were not withheld from the
employee or if, after reasonable efforts,
the employer cannot locate the employee;
in such case, the employer may make an
adjustment for only the employer share
of FICA or RRTA tax. An interest-free
adjustment for an overpayment may not
be made once a claim for refund has been
filed.
The final regulations under section
6413(a) further provide that once an employer repays or reimburses an employee
to the extent required, the employer may
report both the employee and employer
portions of FICA or RRTA tax as an
overpayment on an adjusted return. The
employer must certify on the adjusted return that it has repaid or reimbursed its
employees to the extent required.
Under the final regulations, the reporting of the overpayment constitutes an interest-free adjustment if the overpayment
is reported on an adjusted return filed before the 90th day prior to expiration of
the period of limitations on credit or refund. Similar rules apply for making interest-free adjustments for overpayments
of ITW, except that an interest-free adjustment may only be made if the employer
ascertains the error and repays or reimburses its employees within the same calendar year that the wages were paid and reports the adjustment on an adjusted return.
Unlike the proposed regulations, the final regulations do not require the employer
to repay or reimburse the employee or to
adjust the overpayment by the due date of
the return for the return period following
the return period in which the error is ascertained. Upon further consideration, the
IRS determined there was insufficient rea-

2008–32 I.R.B.

son to impose a timing restriction other
than the period of limitations on credit or
refund of taxes.
For both underpayments and overpayments, interest-free adjustments are made
by reporting the error on a separately filed
adjusted return. The new adjusted return
will not be filed as an attachment to a current return and will not affect the liability
reported on the current return. In addition,
the regulations provide that the forms used
to accept an assessment of employment
taxes after an examination (that is, Form
2504, “Agreement to Assessment and Collection of Additional Tax and Acceptance
of Overassessment (Excise or Employment
Tax)”, and Form 2504–WC, “Agreement to
Assessment and Collection of Additional
Tax and Acceptance of Overassessment in
Worker Classification Cases (Employment
Tax)”) constitute adjusted returns for purposes of permitting the assessment to be
treated as an interest-free adjustment.
The IRS intends to issue guidance to
provide examples of how the final regulations under sections 6205, 6402, 6413, and
6414 apply in different factual scenarios.
Deposits, Payments, and Credits
The final regulations under section
6302 provide that an employer making
an interest-free adjustment must pay the
amount of the adjustment by the time it
files an adjusted return; such timely payment will satisfy the employer’s deposit
obligations with respect to the adjustment.
Conversely, if the amount of the adjustment is not paid by the time the adjusted
return is filed, a penalty under section
6656 for failure to deposit may apply because the deposit obligation for such taxes
is not deemed to be satisfied and the employer may not have otherwise satisfied
its deposit obligations for accumulated
employment taxes.
In addition, the final regulations governing agricultural employers (Form 943
filers) provide that for purposes of determining the amount of accumulated taxes
in the employer’s lookback period (which
determines the employer’s deposit schedule), adjustments to tax liability made pursuant to the filing of adjusted returns or
claims for refund will not be taken into
account. This rule is consistent with the
rule already in effect with respect to Form
941 and Form 944 filers that adjustments

296

to prior return periods are not taken into account in determining the employment tax
liability for such prior return period. See
§31.6302–1T(b)(4). The final regulations
also added language to clarify that new
agricultural employers are treated as having employment tax liabilities of zero for
any lookback period before the date the
employer started or acquired its business,
which is consistent with the current rule
governing the lookback period for Form
941 and Form 944 filers.
The adjusted overpayment amount will
be applied as a credit toward payment of
the employer’s liability for the calendar
quarter (or calendar year for annual returns
being adjusted) in which the adjusted return is filed, unless the IRS notifies the employer that the employer is not entitled to
the adjustment (that is, because there is no
overpayment or because the requirements
for making an adjustment were not satisfied) or that the credit will be applied to a
different return period.
Refunds for Overpayments
In lieu of making an interest-free adjustment for an overpayment, employers
may file a claim for refund pursuant to
section 6402 or 6414 for the amount of
the overpayment. Furthermore, if an employer cannot make an interest-free adjustment with respect to an overpayment because the period of limitations for claiming a credit or refund for such overpayment will expire within 90 days or because the IRS has otherwise notified the
employer that it is not entitled to the adjustment, the employer may recover the overpayment only by filing a claim for refund.
The final regulations under section
6402(a) set out the procedures for filing
a claim for refund of overpaid FICA and
RRTA taxes. The regulations permit an
employer to file a claim for refund of an
overpayment of FICA or RRTA tax, but
require the employer to certify as part of
the claim process that the employer has
repaid or reimbursed the employee’s share
of FICA or RRTA tax to the employee
or has secured the written consent of the
employee to allowance of the refund or
credit. However, the employer is not required to repay or reimburse the employee
or obtain the written consent of the employee to the extent that the overpayment
does not include taxes withheld from the

August 11, 2008

employee or, after reasonable efforts, the
employer cannot locate the employee or
the employee, once contacted, will not
provide the requested consent.
The final regulations under section
6414 set out the procedures for filing a
claim for refund of overpaid ITW which
are similar to the procedures for filing
a claim for refund of overpaid FICA or
RRTA tax, except that an employer may
not file a claim for refund of an overpayment of ITW for an amount the employer
deducted or withheld from an employee.
Tax Returns or Statements
The final regulations for reporting employment taxes under section 6011 reflect
the changes to the adjustment and refund
processes. The final regulations are updated to conform to current law due to the
enactment of section 3510, added to the
Code by section 2(b)(1) of the Social Security Domestic Employment Reform Act of
1994 (Public Law 103–387), which mandates annual returns for domestic service
employment taxes, and to reflect the current use of Schedule H (Form 1040) as
the generally prescribed form for reporting wages for domestic service in a private
home paid in calendar years beginning after December 31, 1994.
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations.
In accordance with the Regulatory
Flexibility Act (5 U.S.C. chapter 6), this
regulation will not have a significant economic impact on a substantial number of
small entities.
The final regulations under sections
6011, 6205, 6402, 6413, and 6414 affect
all taxpayers that file employment tax returns. Therefore, the IRS has determined
that these regulations will have an impact
on a substantial number of small entities.
The IRS has determined, however, that
the impact on entities affected by the final regulations will not be significant. The
regulations require taxpayers to provide

August 11, 2008

certain information if they file adjusted returns to make interest-free adjustments to
their employment taxes for either underpayments or overpayments or file claims
for refund for an overpayment of employment tax. The taxpayer must provide an
explanation setting forth the basis for the
correction or the claim in detail, designating the return period in which the error
was ascertained and the return period being corrected, and setting forth such other
information as may be required by the instructions to the form. In addition, for adjustments of overpayments and for claims
for refund, taxpayers must also obtain and
retain the written receipt of the employee
showing the date and amount of the repayment, evidence of reimbursement, or
the written consent of the employee. For
purposes of overpayment adjustments and
claims for refund of employee FICA and
RRTA tax overcollected in an earlier year,
the employer must also obtain and retain
the employee’s written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of the amount.
This collection of information is not
new to the final regulations and has been
in existence since the 1960’s when the previous regulations were promulgated. In
addition, the amendments to the regulations are being made in conjunction with
a project of the Office of Taxpayer Burden Reduction which seeks to revise the
process for making corrections to employment tax returns to make it less burdensome to taxpayers. The filing of a claim for
refund and the making of an interest-free
adjustment pursuant to the final regulations are voluntary on the part of taxpayers.
Based on these facts, the IRS hereby
certifies that the collection of information
contained in these regulations will not
have a significant economic impact on a
substantial number of small entities. Accordingly, a regulatory flexibility analysis
is not required.
Pursuant to section 7805(f) of the Code,
the proposed regulations preceding these
regulations were submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment on its
impact on small business.

297

Drafting Information
The principal author of these regulations is Ligeia M. Donis of the Office of the
Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the
IRS and Treasury Department participated
in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 31 and 602
are amended as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT THE SOURCE
Paragraph 1. The authority citation for
part 31 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par.
2.
Section 31.6011(a)–1 is
amended by revising the text of paragraphs
(a)(2), (a)(3), and the section heading and
text of paragraphs (a)(4) and (c) to read as
follows:
§31.6011(a)–1 Returns under Federal
Insurance Contributions Act.
(a) * * *
(2) Employers of agricultural workers.
Every employer who pays wages for agricultural labor with respect to taxes imposed by the Federal Insurance Contributions Act must make a return for the first
calendar year in which the employer pays
such wages and for each subsequent calendar year (whether or not wages are paid)
until the employer has filed a final return
in accordance with §31.6011(a)–6. Form
943, “Employer’s Annual Federal Tax Return for Agricultural Employees,” is the
form prescribed for making the annual return required by this section, except that,
if the employer’s principal place of business is in Puerto Rico, or if the employer
has employees who are subject to income
tax withholding for Puerto Rico, the return
must be made on Form 943–PR, “Planilla
para la Declaración ANUAL de la Contribución Federal del Patrono de Empleados Agrícolas.” However, Form 943 is the
form prescribed for making such return

2008–32 I.R.B.

in the case of every employer of agricultural workers who is required pursuant to
§31.6011(a)–4 to make a return of income
tax withheld from wages.
(3) Employers of domestic workers.
Schedule H (Form 1040), “Household Employment Taxes,” is the form prescribed for
use by every employer in making a return
as required under paragraph (a)(1) of this
section in respect of wages, as defined in
the Federal Insurance Contributions Act,
paid by the employer in any calendar year
for domestic service as defined in section
3510. Schedule H (Form 1040) is generally filed as an attachment to an income
tax return; however, if the employer does
not otherwise have an obligation to file
an income tax return, Schedule H (Form
1040) may be filed as a separate return. If,
however, the employer is required under
paragraph (a)(1) of this section to make a
return on Form 941, “Employer’s QUARTERLY Federal Tax Return,” or under
paragraph (a)(2) of this section to make
a return on Form 943, “Employer’s Annual Federal Tax Return for Agricultural
Employees,” or under paragraph (a)(5)
of this section to make a return on Form
944, “Employer’s ANNUAL Federal Tax
Return,” the employer may choose instead
to report wages with respect to domestic
workers on such Form 941, Form 943, or
Form 944. If such wages are included on
Form 941, Form 943, or Form 944, the
employer must also include Federal unemployment tax for the employee(s) on Form
940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” under the
provisions of §31.6011(a)–3.
(4) Employers in Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa,
or the Commonwealth of the Northern
Mariana Islands. Form 941–PR, “Planilla
para la Declaración Federal TRIMESTRAL del Patrono,” (or Form 944–PR,
“Planilla para la Declaración Federal
ANUAL del Patrono,” if the IRS notified the employer that the Form 944–PR
must be filed in lieu of Form 941–PR)
is the form prescribed for use in making the return required under paragraph
(a)(1) (or (a)(5)) of this section in the
case of every employer whose principal place of business is in Puerto Rico,
or if the employer has employees who
are subject to income tax withholding
for Puerto Rico. Form 941–SS, “Employer’s QUARTERLY Federal Tax Return

2008–32 I.R.B.

(American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
and the U.S. Virgin Islands),” (or Form
944–SS, “Employer’s ANNUAL Federal
Tax Return (American Samoa, Guam, the
Commonwealth of the Northern Mariana
Islands, and the U.S. Virgin Islands),”
if the IRS notified the employer that
Form 944–SS must be filed in lieu of
Form 941–SS) is the form prescribed for
use in making the return required under
paragraph (a)(1) (or (a)(5)) of this section
in the case of every employer whose
principal place of business is in the U.S.
Virgin Islands, Guam, American Samoa,
or the Commonwealth of the Northern
Mariana Islands, or if the employer has
employees who are subject to income tax
withholding for these U.S. possessions.
However, Form 941 (or Form 944 if the
IRS notified the employer that Form 944
must be filed in lieu of Form 941) is the
form prescribed for making such return
in the case of every such employer who
is required pursuant to §31.6011(a)–4 to
make a return of income tax withheld from
wages.
*****
(c) Adjustments and refunds. For rules
applicable to adjustments and refunds
of employment taxes, see sections 6205,
6402, 6413, and 6414, and the applicable
regulations.
*****
Par.
3.
Section 31.6011(a)–4 is
amended by revising paragraph (a)(2) to
read as follows:
§31.6011(a)–4 Returns of income tax
withheld.
(a) * * *
(2) Wages paid for domestic service.
Schedule H (Form 1040), “Household Employment Taxes,” is the form prescribed
for making the return required under paragraph (a)(1) of this section with respect to
income tax withheld, pursuant to an agreement under section 3402(p), from wages
paid for domestic service as defined in section 3510. Schedule H (Form 1040) is generally filed as an attachment to an income
tax return; however, if the employer does
not otherwise have an obligation to file
an income tax return, Schedule H (Form
1040) may be filed as a separate return.
The preceding sentence shall not apply in

298

the case of an employer who has chosen under §31.6011(a)–1(a)(3) to use Form
941, “Employer’s QUARTERLY Federal
Tax Return,” Form 943, “Employer’s Annual Tax Return for Agricultural Employees,” or Form 944, “Employer’s ANNUAL
Federal Tax Return,” as the return with
respect to such payments for purposes of
the Federal Insurance Contributions Act.
For the requirements relating for Schedule H (Form 1040) with respect to qualified State individual income taxes, see
§301.6361–1(d)(3)(iv).
*****
Par.
4.
Section 31.6011(a)–5 is
amended by revising paragraph (a) to read
as follows:
§31.6011(a)–5 Monthly returns.
(a) In general—(1) Requirement. The
provisions of this section are applicable
in respect of the taxes reportable on returns required pursuant to §31.6011(a)–1
or §31.6011(a)–4. An employer (or other
person) who is required by §31.6011(a)–1
or §31.6011(a)–4 to make quarterly or annual returns on any such form shall, in
lieu of making such quarterly or annual returns, make returns of such taxes in accordance with the provisions of this section if the employer is so notified in writing by the IRS. Every employer (or other
person) notified by the IRS shall make a
return for the calendar month in which the
notice is received, for each of the prior calendar months in the return period, and for
each calendar month afterwards (whether
or not wages are paid in any such month)
until the employer has filed a final return or
is required to make quarterly or annual returns pursuant to notification as provided
in paragraph (a)(2) of this section. Each
return required under this section shall be
made on the form prescribed for making
the return which would otherwise be required of the employer (or other person)
under the provisions of §31.6011(a)–1 or
§31.6011(a)–4, except that, if some other
form is furnished by the IRS for use in lieu
of such prescribed form, the return shall be
made on such other prescribed form. The
IRS may notify any employer (or other person)—
(i) Who by reason of notification as
provided in §301.7512–1, is required
to comply with the provisions of such
§301.7512–1; or

August 11, 2008

(ii) Who failed to—
(A) Make any return required pursuant
to §31.6011(a)–1 or §31.6011(a)–4;
(B) Pay tax reportable on any such
form; or
(C) Deposit any such tax as required
under the provisions of §31.6302–1.
(2) Termination of requirement. The
IRS, in its discretion, may notify the employer in writing that the employer shall
discontinue the filing of monthly returns
under this section. If the employer is so
notified, the IRS will provide the employer with instructions for filing the
final monthly return. Afterwards, the
employer shall make quarterly or annual
returns in accordance with the provisions
of §31.6011(a)–1 or §31.6011(a)–4.
*****
Par. 5. Section 31.6205–1 is amended
to read as follows:
§31.6205–1 Adjustments of
underpayments.
(a) In general. (1) An employer who
has underreported and underpaid employee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employer FICA tax under section 3111,
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201 or employer RRTA tax under section 3221, or
income tax required under section 3402 to
be withheld, with respect to any payment
of wages or compensation, shall correct
such error as provided in this section. Such
correction may constitute an interest-free
adjustment as provided in paragraph (b) or
(c) of this section.
(2) No correction will be eligible for interest-free adjustment treatment if the failure to report relates to an issue that was
raised in an examination of a prior return
period or if the employer knowingly underreported its employment tax liability.
(3) Every correction under this section
of an underpayment of tax with respect to
a payment of wages or compensation shall
be made on the form prescribed by the IRS
that corresponds to the return being corrected. The form, filed in accordance with
this section and the instructions, will constitute an adjusted return for the return period being corrected.
(4) Every adjusted return on which an
underpayment is corrected pursuant to this
section shall designate the return period in

August 11, 2008

which the error was ascertained and the
return period being corrected, explain in
detail the grounds and facts relied upon to
support the correction, and set forth such
other information as may be required by
the regulations in this section and by the
instructions relating to the adjusted return.
(5) For purposes of this section, an error
is ascertained when the employer has sufficient knowledge of the error to be able to
correct it.
(6) No correction will be eligible for interest-free adjustment treatment pursuant
to this section after the earlier of the following:
(i) Receipt from the IRS of notice and
demand for payment thereof based upon an
assessment.
(ii) Receipt from the IRS of a Notice
of Determination of Worker Classification
(Notice of Determination) in connection
with such underpayment. Prior to receipt
of a Notice of Determination, the taxpayer
may, in lieu of making a payment, make a
cash bond deposit that would have the effect of stopping the accrual of any interest,
but would not deprive the taxpayer of its
right to receive a Notice of Determination
and to petition the Tax Court under section
7436.
(7) Subject to the exceptions specified
in paragraphs (a)(2) and (a)(6) of this
section, Form 2504, “Agreement to Assessment and Collection of Additional Tax and
Acceptance of Overassessment (Excise
or Employment Tax),” Form 2504–WC,
“Agreement to Assessment and Collection of Additional Tax and Acceptance of
Overassessment in Worker Classification
Cases (Employment Tax),” and such other
forms as may be prescribed by the IRS,
constitute adjusted returns for purposes of
this section.
(8) For provisions related to furnishing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(9) For the period of limitations upon
assessment and collection of taxes, see
§301.6501(a)–1.
(b) Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)

299

Undercollection ascertained before return
is filed. If an employer collects less than
the correct amount of employee FICA or
RRTA tax from an employee with respect
to a payment of wages or compensation,
and if the employer ascertains the error
before filing the return on which the employee tax with respect to such wages or
compensation is required to be reported,
the employer shall nevertheless report on
the return and pay to the IRS the correct
amount of employee tax. If the employer
does not report the correct amount of tax
in these circumstances, the employer may
not later correct the error through an interest-free adjustment.
(2) Error ascertained after return is
filed. (i) If an employer files a return on
which FICA tax or RRTA tax is required to
be reported, and reports on the return less
than the correct amount of employee or
employer FICA or RRTA tax with respect
to a payment of wages or compensation,
and if the employer ascertains the error
after filing the return, the employer shall
correct the error through an interest-free
adjustment as provided in this section.
The employer shall adjust the underpayment of tax by reporting the additional
amount due on an adjusted return for the
return period in which the wages or compensation was paid, accompanied by a
detailed explanation of the amount being
reported on the adjusted return and any
other information as may be required by
this section and by the instructions relating
to the adjusted return. The reporting of the
underpayment on an adjusted return constitutes an adjustment within the meaning
of this section only if the adjusted return
is filed within the period of limitations for
assessment for the return period being corrected, and by the due date for filing the
return for the return period in which the
error is ascertained. For purposes of the
preceding sentence, the due date for filing
the adjusted return is determined by reference to the return being corrected, without
regard to the employer’s current filing
requirements. For example, an employer
with a current annual filing requirement
who is correcting an error on a previously
filed quarterly return must file the adjusted return by the due date for filing a
quarterly return for the quarter in which
the error is ascertained. The amount of
the underpayment adjusted in accordance
with this section must be paid to the IRS

2008–32 I.R.B.

by the time the adjusted return is filed. If
an adjustment is reported pursuant to this
section, but the amount of the adjustment
is not paid when due, interest accrues from
that date (see section 6601).
(ii) If an employer files a return reporting FICA tax for a return period although
the employer was required to file a return reporting RRTA tax, and if the employer ascertains the error after filing the
return, the employer shall correct the error
through an interest-free adjustment as provided in this section. The employer shall
adjust the underpayment of RRTA tax by
reporting the correct amount of RRTA tax
on an original return for reporting RRTA
tax for the return period for which the incorrect return was filed, accompanied by
an adjusted return corresponding to the
incorrect return that was filed to correct
the erroneously reported and paid FICA
tax. The adjusted return must include a
detailed explanation of the amounts being reported on the original return and the
adjusted return and any other information
as may be required by the regulations in
this section and by the instructions relating to the adjusted return. The reporting
of the correct amounts for the period constitutes an adjustment within the meaning
of this section only if the returns are filed
by the due date of the return for reporting the RRTA tax for the return period in
which the error is ascertained. Pursuant
to §31.3503–1, the amount of erroneously
paid FICA tax will be credited against the
underpaid RRTA tax. Any remaining underpayment of RRTA tax adjusted in accordance with this section must be paid to
the IRS by the time the returns are filed in
accordance with this paragraph. If an adjustment is reported pursuant to this section, but the amount of the remaining underpayment is not paid when due, interest
accrues from that date (see section 6601).
(iii) If an employer files a return reporting RRTA tax for a return period although
the employer was required to file a return
reporting FICA tax, and if the employer ascertains the error after filing the return, the
employer shall correct the error through an
interest-free adjustment as provided in this
section. The employer shall adjust the underpayment of FICA tax by reporting the
correct amount of FICA tax on an original return for reporting FICA tax for the
return period for which the incorrect return was filed (or an adjusted return for

2008–32 I.R.B.

reporting the FICA tax if an original return was already filed for such return period to report the income tax required to
be withheld under section 3402), accompanied by an adjusted return corresponding to the incorrect return that was filed to
correct the erroneously reported and paid
RRTA tax. The adjusted return(s) must include a detailed explanation of the amount
being reported on the original return and/or
the adjusted return(s) and any other information as may be required by the regulations in this section and by the instructions relating to the form. The reporting
of the correct amounts for the period constitutes an adjustment within the meaning
of this section only if the returns are filed
by the due date of the return for reporting the FICA tax for the return period in
which the error is ascertained. Pursuant
to §31.3503–1, the amount of erroneously
paid RRTA tax will be credited against the
underpaid FICA tax. Any remaining underpayment of FICA tax adjusted in accordance with this section must be paid to the
IRS by the time the returns are filed in accordance with this paragraph (b)(2)(iii). If
an adjustment is reported pursuant to this
section, but the amount of the remaining
underpayment is not paid when due, interest accrues from that date (see section
6601).
(3) Return not filed because of failure
to treat individual as employee. If an employer fails to file a return for a return period solely because the employer failed to
treat any individuals properly as employees for the return period (and, therefore,
failed to withhold and pay any employer
or employee FICA or RRTA tax with respect to wages or compensation paid to
the employees) and if the employer ascertains the error after the due date of the return, the employer shall correct the error
through an interest-free adjustment as provided in this section. The employer shall
report the amount due by filing an original return required to be filed to report the
tax for the return period for which the employer failed to file a return, accompanied
by an adjusted return as provided in the instructions to the adjusted return. The adjusted return must include a detailed explanation of the amount being reported on the
original return and adjusted return and any
other information as may be required by
this section and by the instructions relating
to the adjusted return. The reporting of the

300

correct amount of tax for the return period
constitutes an adjustment within the meaning of this section only if the original and
adjusted returns are filed by the due date
of the return for reporting such tax for the
return period in which the error is ascertained. For purposes of the preceding sentence, the due date for filing the adjusted
return is determined by reference to the
return being corrected, without regard to
the employer’s current filing requirements.
For example, an employer with a current
annual filing requirement who is correcting an error on a previously filed quarterly
return must file the adjusted return by the
due date for filing a quarterly return for the
quarter in which the error is ascertained.
The amount of the underpayment adjusted
in accordance with this section must be
paid to the IRS by the time the returns are
filed in accordance with this paragraph. If
an adjustment is reported pursuant to this
section, but the amount of the adjustment
is not paid when due, interest accrues from
that date (see section 6601).
(c) Income tax required to be withheld
from wages—(1) Undercollection ascertained before return is filed. If an employer collects less than the correct amount
of income tax required to be withheld from
wages under section 3402, and if the employer ascertains the error before filing the
return on which the withheld tax is required to be reported, the employer shall
nevertheless report on the return and pay to
the IRS the correct amount of tax required
to be withheld. If the employer does not
report the correct amount of tax in these
circumstances, the employer may not correct the error through an interest-free adjustment.
(2) Error ascertained after return is
filed. If an employer files a return on
which income tax required to be withheld
from wages is required to be reported and
reports on the return less than the correct amount of income tax required to be
withheld, and if the employer ascertains
the error after filing the return, the employer shall correct the error through an
interest-free adjustment as provided in
this section. The employer shall adjust the
underpayment of tax by reporting the additional amount due on an adjusted return
for the return period in which the wages
were paid, accompanied by a detailed explanation of the amount being reported on
the adjusted return and any other informa-

August 11, 2008

tion as may be required by this section and
by the instructions relating to the adjusted
return. The reporting of the underpayment
on an adjusted return constitutes an adjustment within the meaning of this section
only if the adjusted return is filed by the
due date for filing the return for the return
period in which the error is ascertained.
For purposes of the preceding sentence,
the due date for filing the adjusted return
is determined by reference to the return
being corrected, without regard to the employer’s current filing requirements. For
example, an employer with a current annual filing requirement who is correcting
an error on a previously filed quarterly
return must file the adjusted return by the
due date for filing a quarterly return for the
quarter in which the error is ascertained.
However, an adjustment may only be reported pursuant to this section if the error
is ascertained within the same calendar
year that the wages to the employee were
paid, unless the underpayment is attributable to an administrative error (that is,
an error involving the inaccurate reporting
of the amount actually withheld), section
3509 applies to determine the amount of
the underpayment, or the adjustment is reported on a Form 2504 or Form 2504–WC.
The amount of the underpayment adjusted
in accordance with this section must be
paid to the IRS by the time the adjusted
return is filed. If an adjustment is reported
pursuant to this section, but the amount
of the adjustment is not paid when due,
interest accrues from that date (see section
6601).
(3) Return not filed because of failure
to treat individual as employee. If an employer fails to file a return for a return period solely because the employer failed to
treat any individuals properly as employees for the return period (and, therefore,
failed to withhold and pay any income tax
required to be withheld from wages), the
employer shall correct the error through
an interest-free adjustment as provided in
this section. The employer shall report the
amount due by filing an original return for
the return period for which the employer
failed to file a return, accompanied by an
adjusted return as provided in the instructions to the adjusted return. The adjusted
return must include a detailed explanation
of the amount being reported on the original and adjusted returns and any other information as may be required by this sec-

August 11, 2008

tion and by the instructions relating to the
adjusted return. The reporting of the correct amount of tax for the return period
constitutes an adjustment within the meaning of this section only if the original and
adjusted returns are filed by the due date
of the return for reporting such tax for the
return period in which the error is ascertained. For purposes of the preceding sentence, the due date for filing the adjusted
return is determined by reference to the
return being corrected, without regard to
the employer’s current filing requirements.
For example, an employer with a current
annual filing requirement who is correcting an error on a previously filed quarterly
return must file the adjusted return by the
due date for filing a quarterly return for the
quarter in which the error is ascertained.
However, an adjustment may only be reported pursuant to this section if the error is ascertained within the same calendar year that the wages to the employee
were paid, or if section 3509 applies to determine the amount of the underpayment,
or if the adjustment is reported on a Form
2504 or Form 2504–WC. The amount of
the underpayment adjusted in accordance
with this section must be paid to the IRS
by the time the returns are filed in accordance with this paragraph. If an adjustment is reported pursuant to this section,
but the amount of the adjustment is not
paid when due, interest accrues from that
date (see section 6601).
(d) Deductions from employee—(1)
Federal Insurance Contributions Tax Act
and Railroad Retirement Tax Act. If an
employer collects less than the correct
amount of employee FICA or RRTA
tax from an employee with respect to a
payment of wages or compensation, the
employer must collect the amount of the
undercollection by deducting the amount
from remuneration of the employee, if
any, paid after the employer ascertains the
error. Such deductions may be made even
though the remuneration, for any reason,
does not constitute wages or compensation. The correct amount of employee tax
must be reported and paid, as provided in
paragraph (b) of this section, whether or
not the undercollection is corrected by a
deduction made as prescribed in this paragraph (d)(1), and even if the deduction is
made after the return on which the employee tax must be reported is due. If such
a deduction is not made, the obligation

301

of the employee to the employer with respect to the undercollection is a matter for
settlement between the employee and the
employer. If an employer makes an erroneous collection of employee tax from two
or more of its employees, a separate settlement must be made with respect to each
employee. An overcollection of employee
tax from one employee may not be used
to offset an undercollection of such tax
from another employee. For provisions
relating to the employer’s liability for the
tax, whether or not it collects the tax from
the employee, see §31.3102–1(d). This
paragraph (d)(1) does not apply if section
3509 applies to determine the employer’s
liability.
(2) Income tax required to be withheld
from wages. If an employer collects less
than the correct amount of income tax required to be withheld from wages during
a calendar year, the employer must collect the amount of the undercollection on
or before the last day of the year by deducting the amount from remuneration of
the employee, if any, paid after the employer ascertains the error. Such deductions may be made even though the remuneration, for any reason, does not constitute wages. The correct amount of income
tax must be reported and paid, as provided
in paragraph (c) of this section, whether or
not the undercollection is corrected by a
deduction made as prescribed in this paragraph (d)(2), and even if the deduction is
made after the return on which the tax must
be reported is due. If such a deduction is
not made, the obligation of the employee to
the employer with respect to the undercollection is a matter for settlement between
the employee and the employer within the
calendar year. If an employer makes an erroneous collection of income tax from two
or more of its employees, a separate settlement must be made with respect to each
employee. An overcollection of income
tax from one employee may not be used to
offset an undercollection of such tax from
another employee. For provisions relating to the employer’s liability for the tax,
whether or not it collects the tax from the
employee, see §31.3403–1. For provisions
relating to the employer’s liability for an
underpayment of tax unless the employer
can show that the income tax against which
the tax under section 3402 may be credited
has been paid, see §31.3402(d)–1. This
paragraph (d)(2) does not apply if section

2008–32 I.R.B.

3509 applies to determine the employer’s
liability.
Par. 6. Section 31.6302–0 is amended
by adding new entries for §31.6302–1
paragraphs (c)(7) and (g)(4)(i) and (ii) to
read as follows:
§31.6302–0 Table of contents.
*****
§31.6302–1 Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992.
*****
(c) * * *
(7) Exception to the monthly and semiweekly deposit rules for employers making interest-free adjustments.
*****
(g) * * *
(4) * * *
(i) In general.
(ii) Adjustments and Claims for Refund.
*****
Par. 7. Section 31.6302–1 is amended
by adding paragraph (c)(7) and revising
paragraph (g)(4) to read as follows:
§31.6302–1 Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992.
*****
(c) * * *
(7) Exception to the monthly and semiweekly deposit rules for employers making
interest-free adjustments. An employer filing an adjusted return under §31.6205–1
to report taxes that were accumulated in a
prior return period shall pay the amount of
the adjustment by the time it files the adjusted return, and the amount timely paid
will be deemed to have been timely deposited by the employer. The payment
may be made by a check or money order with the adjusted return, by electronic
funds transfer, or by other methods of payment as provided by the instructions relating to the adjusted return.

2008–32 I.R.B.

*****
(g) * * *
(4) Lookback period—(i) In general.
For purposes of this paragraph (g), the
lookback period for Form 943 taxes is the
second calendar year preceding the current calendar year. For example, the lookback period for calendar year 1993 is calendar year 1991. New employers shall be
treated as having employment tax liabilities of zero for any lookback period before
the date the employer started or acquired
its business.
(ii) Adjustments and Claims for Refund.
The employment tax liability reported on
the original return for the return period is
the amount taken into account in determining whether the amount of Form 943
taxes accumulated in the lookback period
exceeds $50,000. Any amounts reported
on adjusted returns or claims for refund
pursuant to sections 6205, 6402, 6413 and
6414 filed after the due date of the original return are not taken into account when
determining the amount of Form 943 taxes
accumulated in the lookback period. However, prior period adjustments reported on
Form 943 for 2008 and earlier years are
taken into account in determining the employment tax liability for the return period
in which the adjustments are reported.
*****
Par.
8.
Section 31.6402(a)–1 is
amended by revising paragraph (a) to read
as follows:
§31.6402(a)–1 Credits or refunds.
(a) In general. For regulations under section 6402 of special application to
credits or refunds of employment taxes,
see §§31.6402(a)–2, 31.6402(a)–3, and
31.6414–1. For regulations under section
6402 of general application to credits or refunds, see §§301.6402–1 and 301.6402–2.
For provisions relating to adjustments
without interest of overpayments of taxes
under the Federal Insurance Contributions Act or the Railroad Retirement
Tax Act or income tax withholding, see
§§31.6413(a)–1 and 31.6413(a)–2.
*****
Par.
9.
Section 31.6402(a)–2 is
amended by revising paragraph heading
and text of paragraph (a) and removing
paragraph (c) to read as follows:

302

§31.6402(a)–2 Credit or refund of tax
under Federal Insurance Contributions
Act or Railroad Retirement Tax Act
(a) Claim by person who paid tax to
IRS—(1) In general. (i) Any person may
file a claim for credit or refund for an
overpayment (except to the extent that the
overpayment must be credited pursuant
to §31.3503–1) if the person paid to the
IRS more than the correct amount of employee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employer FICA tax under section 3111,
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201, employee
representative RRTA tax under section
3211, or employer RRTA tax under section 3221, or interest, addition to the tax,
additional amount, or penalty with respect
to any such tax.
(ii) The claim for credit or refund must
be made in the manner and subject to the
conditions stated in this section. The claim
for credit or refund must be filed on the
form prescribed by the IRS and must designate the return period to which the claim
relates, explain in detail the grounds and
facts relied upon to support the claim, and
set forth such other information as may
be required by this section and by the instructions relating to the form used to make
such claim. No refund or credit pursuant
to this section for employer tax will be
allowed unless the employer has first repaid or reimbursed its employee or has secured the employee’s consent to the allowance of the claim for refund and includes a claim for the refund of such employee tax. However, this requirement
does not apply to the extent that the taxes
were not withheld from the employee or,
after the employer makes reasonable efforts to repay or reimburse the employee
or secure the employee’s consent, the employer cannot locate the employee or the
employee will not provide consent. No refund or credit of employee FICA or RRTA
tax overcollected in an earlier year will be
allowed if the employee has claimed a refund or credit of the amount of the overcollection which has not been rejected or
if the employee has taken the amount of
such tax into account in claiming a credit
against or refund of the employee’s income
tax, including instances in which the employee has included an overcollection of

August 11, 2008

employee FICA or RRTA tax in computing a special refund (see §31.6413(c)–1).
(iii) For adjustments without interest of
overpayments of FICA or RRTA taxes, see
§31.6413(a)–2.
(iv) For corrections of FICA and
RRTA tax paid under the wrong chapter, see §31.6205–1(b)(2)(ii) and (iii) and
§31.3503–1.
(v) For provisions related to furnishing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(vi) For the period of limitations
on credit or refund of taxes, see
§301.6511(a)–1.
(2) Statements supporting employer’s
claims for employee tax. (i) Every employer who files a claim for refund or
credit of employee FICA tax under section
3101 or employee RRTA tax under section
3201 collected from an employee must
certify as part of the claim process that
the employer has repaid or reimbursed the
tax to its employee or has secured the employee’s written consent to allowance of
the filing of the claim for refund except to
the extent that the taxes were not withheld
from the employee. The employer must
retain as part of its records the written
receipt of the employee showing the date
and amount of the repayment, evidence of
reimbursement, or the written consent of
the employee, whichever is used in support of the claim.
(ii) Every employer who files a claim
for refund or credit of employee FICA tax
under section 3101 or employee RRTA tax
under section 3201 collected from an employee in a calendar year prior to the year
in which the credit or refund is claimed,
also must certify as part of the claim
process that the employer has obtained the
employee’s written statement that the employee has not claimed refund or credit of
the amount of the overcollection, or if so,
such claim has been rejected, and that the
employee will not claim refund or credit
of the amount. The employer must retain
the employee’s written statement as part
of the employer’s records.

August 11, 2008

*****
Par. 10. Section 31.6413(a)–1 is revised to read as follows:
§31.6413(a)–1 Repayment or
reimbursement by employer of tax
erroneously collected from employee.
(a) Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Overcollection ascertained before return
is filed. (i) If an employer during any
return period collects from an employee
more than the correct amount of employee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201, and if the
employer ascertains the error before filing
the return on which the employee tax is
required to be reported, repays or reimburses the amount of the overcollection
to the employee before filing the return
for such return period, and obtains and
keeps as part of its records the written
receipt of the employee showing the date
and amount of the repayment or evidence
of reimbursement, the employer shall not
report on any return or pay to the IRS the
amount of the overcollection.
(ii) Any overcollection not repaid or
reimbursed to the employee as provided in
paragraph (a)(1)(i) of this section shall be
reported and paid to the IRS on the return
for reporting such tax for the return period in which the overcollection is made.
However, the reporting and payment of
the overcollection may subsequently be
treated as an overpayment error ascertained after the return is filed for purposes
of paragraph (a)(2) of this section.
(iii) For purposes of this paragraph
(a)(1), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(2) Error ascertained after return is
filed. (i) If an employer files a return
for a return period on which FICA tax
or RRTA tax is reported, collects from
an employee and pays to the IRS more
than the correct amount of the employee
FICA or RRTA tax, and if the employer
ascertains the error after filing the return
and within the applicable period of limitations on credit or refund, the employer
shall repay or reimburse the employee in
the amount of the overcollection prior to
the expiration of such limitations period.

303

However, this paragraph (a)(2) does not
apply to the extent that, after reasonable
efforts, the employer cannot locate the employee, or the employee does not provide
the employer with the written statement
required by §31.6413(a)–1(a)(2)(iv). This
paragraph (a)(2) has no application in any
case in which an overcollection is made
the subject of a claim by the employer
for refund or credit under the procedure
provided in §31.6402(a)–2.
(ii) If the employer repays the amount
of the overcollection to an employee, the
employer shall obtain and keep as part of
its records the written receipt of the employee, showing the date and amount of the
repayment.
(iii) If the employer reimburses the
amount of the overcollection to an employee, the employer shall keep as part
of its records evidence of reimbursement.
The employer shall reimburse the employee by applying the amount of the
overcollection against the employee FICA
or RRTA tax which attaches to wages or
compensation paid by the employer to the
employee prior to the expiration of the
applicable period of limitations on credit
or refund. If the amount of the overcollection exceeds the amount so applied against
such employee tax, the excess amount
shall be repaid to the employee as required
by this section.
(iv) If, in any calendar year, an employer repays or reimburses an employee
in the amount of an overcollection of
employee FICA or RRTA tax that was
collected from the employee in a prior
calendar year, the employer shall obtain
from the employee and keep as part of
its records a written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of such amount. For this purpose, a
claim for refund or credit by the employee
includes instances in which the employee
has included an overcollection of employee FICA or RRTA tax in computing a
special refund (see §31.6413(c)–1).
(v) For purposes of this paragraph
(a)(2), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(vi) For the period of limitations
on credit or refund of taxes, see
§301.6511(a)–1.

2008–32 I.R.B.

(vii) For corrections of FICA and
RRTA tax paid under the wrong chapter, see §31.6205–1(b)(2)(ii) and (iii) and
§31.3503–1.
(b) Income tax withheld from
wages—(1) Overcollection ascertained
before return is filed. (i) If an employer
during any return period collects from an
employee more than the correct amount
of tax required to be withheld from wages
under section 3402, and if the employer
ascertains the error before filing the return on which such tax is required to be
reported, repays or reimburses the amount
of the overcollection to the employee before filing the return for such return period
and before the end of the calendar year in
which the overcollection was made, and
obtains and keeps as part of its records the
written receipt of the employee showing
the date and amount of the repayment or
evidence of reimbursement, the employer
shall not report on any return or pay to the
IRS the amount of the overcollection.
(ii) Any overcollection not repaid or
reimbursed to the employee as provided in
paragraph (b)(1)(i) of this section shall be
reported and paid to the IRS on the return
for reporting such tax for the return period in which the overcollection is made.
However, the reporting and payment of
the overcollection may subsequently be
treated as an overpayment error ascertained after the return is filed for purposes
of paragraph (b)(2) of this section.
(iii) For purposes of this paragraph
(b)(1), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(2) Error ascertained after return is
filed. (i) If an employer files a return for
a return period on which tax required to
be withheld from wages is reported, collects from an employee and pays to the
IRS more than the correct amount of the
tax required to be withheld from wages,
and if the employer ascertains the error
after filing the return but before the end
of the calendar year in which the wages
were paid, the employer shall repay or
reimburse the employee in the amount of
the overcollection prior to the end of the
calendar year. However, this paragraph
does not apply to the extent that, after
reasonable efforts, the employer cannot
locate the employee.
(ii) If the employer repays the amount
of the overcollection to an employee, the

2008–32 I.R.B.

employer shall obtain and keep as part of
its records the written receipt of the employee, showing the date and amount of the
repayment.
(iii) If the employer reimburses the
amount of the overcollection to an employee, the employer shall keep as part
of its records evidence of reimbursement.
The employer shall reimburse the employee by applying the amount of the overcollection against the tax under section
3402, which otherwise would be required
to be withheld from wages paid by the
employer to the employee in the calendar
year in which the overcollection is made.
If the amount of the overcollection exceeds the amount so applied against such
tax, the excess amount shall be repaid to
the employee as required by this section.
(iv) For purposes of this paragraph
(b)(2), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
Par. 11. Section 31.6413(a)–2 is revised to read as follows:
§31.6413(a)–2 Adjustments of
overpayments.
(a) In general. (1) An employer who
has overcollected or overpaid employee
Federal Insurance Contributions Act
(FICA) tax under section 3101 or employer FICA tax under section 3111, employee Railroad Retirement Tax (RRTA)
tax under section 3201 or employer RRTA
tax under section 3221, or income tax required under section 3402 to be withheld,
and has repaid or reimbursed the amount
of the overcollection of such tax to the
employee, shall correct such error as provided in this section. Such correction may
constitute an interest-free adjustment as
provided in paragraph (b) or (c) of this
section.
(2) Every correction under this section
of an overpayment of tax shall be made on
the form prescribed by the IRS that corresponds to the return being corrected. The
form, filed in accordance with this section
and the instructions, will constitute an adjusted return for the return period being
corrected.
(3) Every adjusted return on which an
overpayment is corrected pursuant to this
section shall certify that the employer has
repaid or reimbursed its employee, except
where taxes were not withheld from the

304

employee or where, after reasonable efforts, the employer cannot locate the employee. Every adjusted return shall designate the return period in which the error
was ascertained and the return period being corrected, explain in detail the grounds
and facts relied upon to support the correction, and set forth such other information as may be required by this section and
§31.6413(a)–1 and by the instructions relating to the adjusted return. Every adjusted return, filed by an employer, for
overpayment of employee FICA tax under section 3101 or employee RRTA tax
under section 3201 collected from an employee in a calendar year prior to the year
in which the adjusted return is filed, must
also certify that the employer has obtained
the employee’s written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of the amount.
(4) For purposes of this section, an error
is ascertained when the employer has sufficient knowledge of the error to be able to
correct it.
(5) For provisions related to furnishing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(b) Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Overcollection ascertained before return
is filed. If an employer collects more than
the correct amount of employee FICA
or RRTA tax from an employee, and if
the employer ascertains the error before
filing the return on which the employee
tax with respect to such wages or compensation is required to be reported, and
repays or reimburses the employee under
§31.6413(a)–1(a)(1), the employer shall
not report on any return or pay to the IRS
the amount of the overcollection. If the
employer does not repay or reimburse
the amount of the overcollection under
§31.6413(a)–1(a)(1) before filing the return, the employer must report the amount
of the overcollection on the return. However, the payment of the overcollection

August 11, 2008

may subsequently be treated as an overpayment error ascertained after the return
is filed for purposes of paragraph (b)(2) of
this section.
(2) Error ascertained after return is
filed—(i) Employee tax. If an employer
files a return for a return period on which
FICA tax or RRTA tax is required to be reported and reports on the return more than
the correct amount of employee FICA or
RRTA tax, and if the employer ascertains
the error after filing the return, and repays
or reimburses the employee the amount
of the overcollection of employee tax,
as provided in §31.6413(a)–1(a)(2), the
employer may correct the error through
an interest-free adjustment as provided
in this section. The employer shall adjust the overpayment of tax by reporting
the overpayment on an adjusted return
for the return period in which the wages
or compensation was paid, accompanied
by a detailed explanation of the amount
being reported on the adjusted return as
required by paragraph (a)(3) of this section. Except as provided in paragraph (d)
of this section, the reporting of the overpayment on an adjusted return constitutes
an adjustment within the meaning of this
section only if the adjusted return is filed
before the expiration of the period of limitations on credit or refund. The employer
shall take the adjusted amount as a credit
towards payment of employment tax liabilities for the return period in which the
adjusted return is filed unless the IRS notifies the employer that the adjustment is
not permitted under paragraph (d) of this
section.
(ii) Employer tax. If an employer files
a return for a return period on which FICA
or RRTA tax is required to be reported and
reports on the return more than the correct
amount of employer FICA or RRTA tax,
and if the employer ascertains the error after filing the return, the employer may correct the error through an interest-free adjustment as provided in this section. The
employer must first repay or reimburse the
employee the amount of any overcollection of employee tax, if any, as required
by §31.6413(a)–1(a)(2), before making the
adjustment for the employer tax. The employer shall adjust the overpayment of tax
by reporting the overpayment on an adjusted return for the return period in which
the wages or compensation was paid, accompanied by a detailed explanation of the

August 11, 2008

amount being reported on the adjusted return as required by paragraph (a)(3) of this
section. Except as provided in paragraph
(d) of this section, the reporting of the
overpayment on an adjusted return constitutes an adjustment within the meaning of
this section only if the adjusted return is
filed before the expiration of the period of
limitations on credit or refund. The employer shall take the adjusted amount as a
credit towards payment of employment tax
liabilities for the return period in which the
adjusted return is filed unless the IRS notifies the employer that the adjustment is not
permitted under paragraph (d) of this section.
(c) Income tax withheld from
wages—(1) Overcollection ascertained
before return is filed. If an employer
collects more than the correct amount of
income tax required to be withheld from
wages, and if the employer ascertains the
error before filing the return on which
the tax is required to be reported, and
repays or reimburses the employee under §31.6413(a)–1(b)(1), the employer
shall not report on any return or pay to
the IRS the amount of the overcollection.
If the employer does not repay or reimburse the amount of the overcollection
under §31.6413(a)–1(b)(1) before filing
the return, the employer must report the
amount of the overcollection on the return. However, the reporting and payment
of the overcollection may subsequently
be treated as an overpayment error ascertained after the return is filed for purposes
of paragraph (c)(2) of this section.
(2) Error ascertained after return is
filed. If an employer files a return for a return period on which income tax required
to be withheld from wages is required
to be reported and reports on the return
more than the correct amount of income
tax required to be withheld, and if the employer ascertains the error after filing the
return, and repays or reimburses the employee in the amount of the overcollection
as provided in §31.6413(a)–1(b)(2), the
employer may correct the error through
an interest-free adjustment as provided in
this section. The employer shall adjust
the overpayment of tax by reporting the
overpayment on an adjusted return for the
return period in which the wages were
paid, accompanied by a detailed explanation of the amount being reported on
the adjusted return as required in para-

305

graph (a)(3) of this section. Except as
provided in paragraph (d) of this section,
the reporting of the overpayment on an
adjusted return constitutes an adjustment
within the meaning of this section. If
the amount of the overcollection is not
repaid or reimbursed to the employee
under §31.6413(a)–1(b)(2), there is no
overpayment to be adjusted under this
section. However, the employer may adjust an overpayment of tax attributable to
an administrative error, that is, an error
involving the inaccurate reporting of the
amount withheld, pursuant to this section. The employer shall take the adjusted
amount as a credit towards payment of
employment tax liabilities for the return
period in which the adjusted return is
filed unless the IRS notifies the employer
that the adjustment is not permitted under
paragraph (d) of this section.
(d) Adjustments not permitted—(1)
In general. If an adjustment cannot be
made, a claim for refund or credit may be
filed in accordance with §31.6402(a)–2 or
§31.6414–1.
(2) 90-day exception. No adjustment in
respect of an overpayment may be made
if the overpayment relates to a return period for which the period of limitations on
credit or refund of such overpayment will
expire within 90 days of filing the adjusted
return.
(3) No adjustment after claim for refund
filed. No adjustment in respect of an overpayment may be made after the filing of a
claim for credit or refund of such overpayment under §31.6402(a)–2.
(4) No adjustment after IRS notification. No adjustment may be made upon
notification by the IRS that the adjustment
is not permitted.
Par. 12. Section 31.6414–1 is amended
by revising paragraph (a) to read as follows:
§31.6414–1 Credit or refund of income
tax withheld from wages.
(a) In general. (1) Any employer who
pays to the IRS more than the correct
amount of income tax required to be withheld from wages under section 3402 or
interest, addition to the tax, additional
amount, or penalty with respect to such
tax, may file a claim for refund of the
overpayment in the manner and subject
to the conditions stated in this section on

2008–32 I.R.B.

the form prescribed by the IRS. The claim
for refund must designate the return period to which the claim relates, explain in
detail the grounds and facts relied upon
to support the claim, and set forth such
other information as may be required by
the regulations in this section and by the
instructions relating to the form used to
make such claim. No refund to the employer will be allowed under this section
for the amount of any overpayment of tax
which the employer deducted or withheld
from an employee.
(2) For provisions related to furnishing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and

6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(3) For interest-free adjustments of
overpayments of income tax withheld
from wages, see §31.6413(a)–2.

Authority: 26 U.S.C. 7805.
Par. 14. In §602.101, paragraph (b)
is amended by adding the following entry
in numerical order to the table to read as
follows:
§602.101 OMB Control numbers
*****
(b) * * *

*****
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 13. The authority citation for part
602 continues to read in part as follows:

CFR part or section where
identified and described
*****
31.6011(a)–1
31.6011(a)–4
31.6011(a)–5
31.6205–1
31.6402(a)–2
31.6413(a)–1
31.6413(a)–2
31.6414–1

Current OMB
control No.
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................

1545–2097
1545–2097
1545–2097
1545–2097
1545–2097
1545–2097
1545–2097
1545–2097

*****
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved June 23, 2008.
Eric Solomon,
Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register on June 30, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 1, 2008, 73 F.R. 37371)

Section 6402.—Authority to
Make Credits or Refunds
Final regulations modify the process for making
claims for refund of overpayments of Federal Insurance Contribution Act (FICA) and Railroad Retirement Tax Act (RRTA) taxes under section 6402 of the
Code. See T.D. 9405, page 293.

Section 6413.—Special
Rules Applicable to Certain
Employment Taxes

Insurance Contribution Act (FICA) and Railroad Retirement Tax Act (RRTA) taxes and Federal income
tax withholding (ITW) under section 6413(a) of the
Code. See T.D. 9405, page 293.

Section 6414.—Income
Tax Withheld
Final regulations modify the process for making
claims for refund of overpayments of Federal income
tax withholding (ITW) under section 6414 of the
Code. See T.D. 9405, page 293.

Final regulations modify the process for making
interest-free adjustments for overpayments of Federal

2008–32 I.R.B.

306

August 11, 2008