In the event an error involves overpaid FICA taxes from a previous quarter in the same calendar year or a pervious calendar year, or over collected federal income tax from a previous quarter in the same calendar year there are a few steps that need to be taken to fix the error.
Filing Form 941
The first thing that needs to be done is file a Form 941 (Employer’s Quarterly Federal Tax Return) for the quarter in which the error occurred. Assuming that this step has already been done, you can move on to the next two steps.
These two steps include:
1. The business needs to settle with the employee that has been affected for the amount of over collected taxes. The employer has two options; they can either reimburse the effected employee or obtain written consent from the effected employee to file a claim for refund on their behalf.
2. The second step is to claim a refund or credit on Form 941-X (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund). This refund or credit will include the amount of over collected tax plus the employer’s share of FICA taxes for employees that have been affected by the error.
Keep in mind that the IRS will not send the employer a refund check right away. The refund check will be sent only after the close of the quarter in which the error occurred and after a quarterly return is filed.