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Form 941-X CPA explains how to Correct Form 941 | Payroll | 941 instructions

Form 941-X CPA Wimington NC

Gary Bode, CPA: try to avoid correcting payroll reports by getting them right on the first submission. For a free phone consult, contact us at (910) 399-2705.

Every Form 941 CPA sees clients who need to correct their payroll reports with the IRS. The Form 941 instructions does a nice job, but mistakes happen. The IRS has a special payroll tax form to modify previously submitted Form 941s: Form 941-X. Let’s take a look at form 941-X and and the 941-X instructions. I’ll try to explain explain a few key points. Form 941-X is not as intuitively obvious like Form 941 is. So it’s prudent to read the 941-X instructions

Form 941-X: Adjustment or Claim Method?

We’ll assume that you over reported, and over paid, payroll taxes on a single Form 941. So we’ll use the claim method to request a refund. This is the most common payroll report error scenario.


We’ll assume you caught the error before submitting the  W-2s for the year. Again this is part of the most common Form 941 error scenario.

Therefore, we don’t have to file IRS Form W-2c to correct them.

“As a Form 941-X CPA, I’ll tell you preparing Form 941 correctly is easier than correcting it.” 
– Gary Bode, payroll CPA and tax accountant

Line 2 Check Boxes on Form 941-X

Let’s do the easiest example. You re-paid employees for your company’s over collections. Restated that means you’ve already reimbursed your employees for excess tax you collected from their paychecks. So, check box A.  Since you’re correcting payroll reported before the W-2s are prepared, we avoid the hassle of collecting employee statements saying they will not claim a refund. So already we’re seeing some IRS wrinkles in the Form 941-X reporting.

File just one Form 941-X

Since only one Form 941 was incorrect, your payroll CPA just prepares a single 941-X. But generally, payroll errors span calendar quarters and thus require multiple Form 941-X(s). So, one Form 941-X for each incorrect Form 941.

Finally, the Calculations on Form 941-X, page 2

I use a spreadsheet for the calculations. Any 941-X CPA will recommend reconciling the entire tax year, and checking the other Form 941s, before submitting Form 941-X. Everything has to jive for the IRS to accept 941-X(s).

The Explanation on IRS Form 941-X

A good Form 941-X CPA builds a defense into the explanation when possible. Let’s switch gears here and talk about under reporting payroll taxes as the cause for filing an amended Form 941. The taxes you withhold from paychecks are held in trust before depositing them with the IRS. So, it can be a criminal offense to not deposit them or to use them personally. Thus, the explanation on Form 941-X could be used to inadvertently incriminate your company. Be careful. If the company’s payroll processes has been modified to prevent future errors, say so. For example, “All payroll taxes are deposited into a separate account on pay-day to hold them until deposited through EFTPS.” I also think the magic words should include, “I now understand my payroll obligations and will stay in future compliance.”

Don’t Forget the State, Unemployment Taxes and Workman’s Compensation Insurance

Payoll errors often require amending multiple reports to multiple agencies. But we always start with Form 941-X.

I’m a payroll CPA with a virtual office to provide service for long distance clients and additional convenience for our local folks. There are hundreds of postings on this website, many on payroll issues. I hope reading a few of these helps you get a feel for how we approach client service. For a free initial phone consult, please call (910) 399-2705.

2 comments to Form 941-X CPA explains how to Correct Form 941 | Payroll | 941 instructions

  • Lori

    I have a simple administrative error on our 2nd Qtr 941 Form. Line 6 and the total on Schedule B balance. However, when entering the numbers I understated line 10 by $10.00. I also understated line 11 by $10.00. Deposits were indeed correct. I have the explanation on the 941-X Form complete; however, I can’t figure out what lines to fill out on the second page of the 941-X. Can you help?

    • That’s a bit too complex for a comment Lori. It’s probably something silly. I suggest putting it aside for a few days and look at it with fresh eyes. If still off you can engage me to fix it, maybe $205. So not really cost effective.

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