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IRS Issues Form 941 Filing Guidance

Monday February 2nd 2015

In order to reduce the burden on employers to file and report on the retroactive increased exclusion for 2014 transit benefits ($130 to $250), the IRS released Notice 2015-2 that explains how employers can correct FICA tax overpayments and report proper amounts on Forms 941 and the W-2.  Although issued at the eleventh hour, this guidance was needed for employer fourth quarter Form 941 filings are due by February 2.

Special administrative procedure

The Notice provides a special administrative procedure for the 2014 transit benefit retroactive increase.  Employers that provided transit benefits and treated the excess as income and wages must act quickly to take advantage of the special administrative procedure.  Employers that repay or reimburse the over collected FICA taxes (all four quarters of 2014) before filing their fourth quarter Form 941, can reduce the fourth quarter amounts from:

  • Wages, tips and compensation (line 2)
  • Taxable Social Security wages (line 5a)
  • Taxable Medicare wages and tips (line 5c)
  • Taxable wages & tips subject to additional Medicare tax withholding (line 5d)

This special administrative procedure provides employer relief:

  • Eliminates filing Form 941-X to correct error
  • Eliminates obtaining employee written statements confirming they did not/will not make claims on the over collected FICA tax

Employees are prohibited from retroactively increasing their 2014 compensation reduction elections in order to use the higher transit limit.  Neither can employees reduce their 2015 compensation by more than $130 per month (statutory 2015 monthly limit) in order to receive any permissible transit benefit reimbursement incurred in 2014.

Notice 2015-2 states if the Form W-2 has not been provided to the employees, the forms must be adjusted to reflect the proper amounts.

If you’ve already filed Form 941

The special administrative procedure cannot be used by employers that have already filed their fourth quarter Form 941.  The procedure also cannot be used if the over collection has not been repaid or reimbursed when the fourth quarter Form 941 is filed.  The employer must then use Form 941-X and follow procedures for overpayments.

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