© 2022 American Payroll Institute, Inc. APA Asks the IRS to Resolve Forms 941, 941‑X Processing Issues The APA Government Relations Task Force Federal Issues Subcommittee contacted the IRS in June with questions regarding the backlog in processing Forms 941, Employer’s Quarterly Federal Tax Return, and 941‑X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. The APA recognized the significant burden placed upon the IRS because of the COVID‑19 pandemic as well as other congressionally mandated measures and acknowledged the IRS is working diligently to catch up on paper‑filed Forms 941‑X. Historically, the IRS has reconciled an employer’s filed Form 941 with immediate past tax returns and modified claims, as needed. For example, if an employer requests a refund but owes taxes from the previous quarter, the refund would be reduced. Under normal circumstances, the IRS would examine an employer’s filed Form 941‑X in this process. With the backlog of unprocessed Forms 941‑X, an employer’s tax return and electronic record may appear inaccurate. Questions posed to the IRS Here are some of the questions the APA asked the IRS: Electronic filing and processing of Form 941‑X: (1) When will the employer filing and IRS processing of Form 941‑X become automated? (2) Is there a way for payroll software developers to get a head start on implementation? (3) How can the APA assist the IRS to accomplish the goal of automation? APA supports adding the Form 941‑X to its automated systems, which should reduce the number of paper forms filed with the IRS. This would greatly reduce the potential for a backlog. For payroll professionals, automation would reduce the administrative burden and increase the potential for timely return processing and accuracy of employer federal tax records. Employer return records: (1) When reviewing filed Forms 941 and 941‑X, does the IRS have the capability to post multiple forms sequentially based on the date submitted, or is only the immediate past form posted? (2) Can the IRS add a place for a version number to Forms 941 and 941‑X so the IRS will be able to review the forms in sequential order? (3) If the IRS has reduced a refund because of taxes owed and then processes a Form 941‑X that shows the full refund was owed, what is the process for the IRS to adjust an employer’s record? Employers may file multiple Forms 941‑X for the same quarter. If the IRS’s systems can track multiple returns, employers’ records would be more complete. The result could be fewer misperceived errors by the IRS. In turn, the administrative burden on employers and the IRS would be reduced. Outreach to the IRS for assistance: (1) If an employer perceives an error in processing of its Forms 941 and 941‑X, what is the process for contacting the IRS? (2) Can the IRS dedicate one or more employees to address Forms 941 and 941‑X problems so employers can get through more effectively? (3) Can the IRS establish a post office box dedicated to receiving Forms 941‑X? The greatest frustration for payroll professionals is the inability to reach an IRS employee who can assist in resolving a problem with an employer’s tax record. The IRS is working to resolve this issue. Although the IRS is hiring more employees, it will take time to train them and to recover from COVID‑19 impacts. Finally, the APA asked to meet virtually with appropriate IRS employees to discuss processing issues for Forms 941 and 941‑X and what the APA and the IRS can do together to ease the problems. APA Urges Elimination of Dual Reporting on Forms 1099‑MISC, 1099‑NEC The APA submitted comments to the IRS to ask the agency to resolve duplicate information reporting on Form 1099‑MISC, Miscellaneous Information, and Form 1099‑NEC, Nonemployee Compensation. The APA recommended that the reporting of nonemployee excess golden parachute payments and IRC §409A noncompliance (nonqualified deferred compensation, NQDC) be placed only on Form 1099‑NEC. The APA was clear that it was not asking the IRS to eliminate either Forms 1099‑MISC or 1099‑NEC. Instead, the APA asked the IRS to: move Box 14 (excess golden parachute payments) on Form 1099‑MISC to Form 1099‑NEC move Boxes 12 (IRC §409A deferrals) and 15 (NQDC) from Form 1099‑MISC to Form 1099‑NEC and clarify in the instructions whether reporting of NQDC plan distributions is required only in Box 1 on Form 1099‑NEC and not reported in Box 15 on Form 1099‑MISC. July 2022 A Supplement to Payroll Currently, Issue 7, Volume 30
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