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12. Section 3121(q) Notice and Demand—Tax

Be sure to explain the reasons for this correction on line 23.

on Unreported Tips

14–17. Special Additions to Wages for Federal

Enter any corrections, including amounts reported on Form 941,

Income Tax, Social Security Taxes, Medicare

line 5e (for quarters ending in 2011 or 2012), and amounts

Taxes, and Additional Medicare Tax

reported on Form 941, line 5f (for quarters ending after 2012), to

the tax due from a Section 3121(q) Notice and Demand on

Section 3509 provides special rates for the employee share of

line 12. The IRS issues a Section 3121(q) Notice and Demand to

income tax, social security tax, Medicare tax, and Additional

advise an employer of the amount of tips received by employees

Medicare Tax withholding when workers are reclassified as

who failed to report or underreported tips to the employer. An

employees in certain circumstances. The applicable rate

employer is not liable for the employer share of the social

depends on whether you filed required information returns. An

security and Medicare taxes on unreported tips until a Section

employer cannot recover any tax paid under this provision from

3121(q) Notice and Demand for the taxes is made to the

the employees. The full employer share of social security tax and

employer by the IRS.

Medicare tax is due for all reclassifications.

13. Tax Adjustments

Note. Section 3509 rates are not available if you intentionally

disregarded the requirements to withhold taxes from the

Use line 13 to correct any adjustments reported on Form 941,

employee, or if you withheld income tax but did not withhold

lines 7–9. Enter in column 1 the total corrected amount for Form

social security and Medicare taxes. Section 3509 rates are also

941, lines 7–9.

not available for certain statutory employees.

Enter in column 2 the total originally reported or previously

On lines 14–17 enter only corrections to wages resulting from

corrected amounts from Form 941, lines 7–9. In column 3, enter

reclassifying certain workers as employees when section 3509

the difference between columns 1 and 2.

rates are used to calculate the taxes.

line 13 (column 1)

If the employer issued the required information returns, use

-line 13 (column 2)

the section 3509 rates as follows.

For social security taxes, use the employer rate of 6.2% plus

line 13 (column 3)

20% of the employee rate of 6.2% (4.2% for 2011 and 2012), for

a total rate of 7.44% (7.04% for 2011 and 2012) of wages.

For Medicare taxes, use the employer rate of 1.45% plus 20%

You may need to report negative numbers in any

of the employee rate of 1.45%, for a total rate of 1.74% of

column. Make sure that the difference you enter in

TIP

wages.

column 3 accurately represents the change to

For Additional Medicare Tax; 0.18% (20% of the employee

adjustments originally reported or previously corrected on Form

rate of 0.9%) of wages subject to Additional Medicare Tax.

941, lines 7–9.

For income tax withholding, the rate is 1.5% of wages.

Copy the amount in column 3 to column 4. Include any minus

If the employer did not issue the required information returns,

sign shown in column 3.

use the section 3509 rates as follows.

On line 23, describe what you misreported on Form 941. Tell

For social security taxes, use the employer rate of 6.2% plus

us if your adjustment is for fractions of cents, third-party sick pay,

40% of the employee rate of 6.2% (4.2% for 2011 and 2012), for

tips, or group-term life insurance.

a total rate of 8.68% (7.88% for 2011 and 2012) of wages.

For Medicare taxes, use the employer rate of 1.45% plus 40%

Example—Current quarter's third-party sick pay

of the employee rate of 1.45%, for a total rate of 2.03% of

underreported. You reported $6,900 (shown as “-6,900.00”) as

wages.

a third-party sick pay adjustment (reduction to tax) on line 8 of

For Additional Medicare Tax; 0.36% (40% of the employee

your 2014 second quarter Form 941. You did not report any

rate of 0.9%) of wages subject to Additional Medicare Tax.

amounts on lines 7 and 9. Your third-party sick pay adjustment

should have been $9,600 (shown as “-9,600.00”) because your

For income tax withholding, the rate is 3.0% of wages.

third-party sick pay payer withheld that amount of social security

Unlike other lines on Form 941-X, enter in column 1 only the

and Medicare taxes from your employees. You discovered the

corrected wages for workers being reclassified, not the amount

error in April of 2015. To correct the error, figure the difference

paid to ALL employees. Enter in column 2 previously reported

on Form 941-X as shown.

wages (if any) to reclassified employees. To get the amount for

column 4, use the applicable section 3509 rates. If you filed the

Column 1 (corrected amount)

-9,600.00

required information returns for some employees but did not file

Column 2 (Form 941, line 8)

- (6,900.00)

them for other employees, be sure to use the applicable rates for

each employee when calculating the amounts in column 4 and

Column 3 (difference)

-2,700.00

show your calculations on line 23. The tax correction in column 4

will be a positive number if you increased the amount of wages

Here is how you would enter the numbers on Form 941-X.

you previously reported. See the instructions for line 22, later, for

more information.

Column 1

Column 2

Column 3

18. Subtotal

(corrected amount) (Form 941, line 8)

(difference)

Combine the amounts from column 4 on lines 7–17.

-9,600.00

-6,900.00

-2,700.00

Report “-2,700.00” as your correction in column 4.

In this example, you are claiming a credit for $2,700 in

overreported tax for your 2014 second quarter Form 941. Always

enter the same amount in column 4 (including any minus sign)

that you enter in column 3.

-10-

Instructions for Form 941-X (Rev. 4-2015)

Instructions For Form 941-X - Adjusted Employer'S Quarterly Federal Tax Return Or Claim For Refund - 2017 Page 10

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