Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has issued guidance regarding how an employer corrects employment tax reporting errors using the interest-free adjustment and refund claim processes under Code Secs. 6205, 6402, 6413 and 6414 in a number of situations. The guidance refers to corrections made pursuant to Code Secs. 6205 and 6413 of underpayments or overpayments, respectively, resulting from employment tax reporting errors as having been made using the adjustment process. It also refers to corrections made pursuant to Code Secs. 6402 and 6414 of overpayments resulting from employment tax reporting errors as having been made using the refund claim process, and analyzes the applicable regulations.

  Situations. Ten situations were analyzed: (1) an underpayment of Federal Insurance Contributions Act (FICA) tax and income tax withholding (ITW) when the error is not ascertained in the year the wages were paid; (2) an overpayment of ITW when the error is ascertained in the same year the wages were paid; (3) both an overpayment and an underpayment of FICA tax for the same tax period; (4) an underpayment of FICA tax when the employer's filing requirement has changed; (5) an underpayment of FICA tax and ITW resulting from a failure to file an employment tax return because the employer failed to treat any workers as employees; (6) an overpayment of FICA tax on wages paid to a household employee; (7) an overpayment of FICA tax when the error is ascertained close to the expiration of the period of limitations on credit or refund; (8) an underpayment of FICA tax and ITW ascertained in the course of an employment tax examination; (9) an underpayment of FICA tax and ITW ascertained in the course of the appeals process; and (10) an underpayment of FICA tax and ITW resulting from the misclassification of employees ascertained in the course of the appeals process.

  As a result of T.D. 9405 and the new guidance, Rev. Rul. 75-464, 1975-2 CB 474, is no longer determinative of when interest-free adjustments are made in the context of an employment tax examination and is obsolete.

Rev. Rul. 2009-39, 2009FED ¶46,556

Other References:

 
Code Sec. 6205

  CCH Reference - 2009FED ¶37,523.10

 
Code Sec. 6402

  CCH Reference - 2009FED ¶38,519.395

 
Code Sec. 6413

  CCH Reference - 2009FED ¶38,770.35

 
Code Sec. 6414

  Tax Research Consultant

  CCH Reference - TRC IRS: 33,108
CCH Reference - TRC PAYROLL: 9,308