Refund Over-Collected FICA to Workers and Employers (or the State Client)

1. Immediately after the final payroll of a calendar year, F/EA identifies any employees who earned less than the FICA threshold for the calendar year in any employer/workers relationship
2. Remember that the FICA threshold must be tested for each employer for which an workers works
3. <<Insert process to create this report>>
4. Run a report of gross wages paid by employer to each workers for the calendar year working for an employer in a calendar year
5. For those employees who earned less than the FICA threshhold for a single employer, run a detailed payroll report showing their gross wages and FICA liabilities by quarter
6. Collect the information for affected employees for Quarter 1
7. Complete Form 941-X as follows:

Date discovered errors: 12/31/YYYY
Part 1, check Box 1 to apply the overdeposit to a future return (fastest way to get money)
Check Box 2 to get a check from the US Treasury (slow way to get money)
        If you choose this method, F/EA can only correct overreported amounts on this 941-X and F/EA must complete a     separate 941-X if F/EA is also correcting overreported amounts.
Part 2, check Box 3 and 3.a
Column 1 = F/EA's originally filed Form 941 less amounts for employees impacted by FICA Refunding

Column 2 = the amount originally filed on Form 941 for the quarter

Line 6: F/EA gross wages stay the same.  The workers were still paid.  It’s the Social Security and Medicare wages that will be adjusted.  Yes, workers were paid, but the wages were not Social Security or Medicare Taxable.
Column 3 = the difference.  This will also be F/EA's total amount for employees impacted by FICA refunding.
Line 8 – take it through like the other lines. 

Column 4 is the sum of F/EA total workers and employer refunded SS tax for the quarter

Line 10 – take it through like the other lines. 

Column 4 will also be the sum of F/EA total workers and employer refunded Medicare tax for the quarter
Lines 10 – 18 follow the remaining instructions on Form
The amount in line 18 is the amount of FICA refunded for the quarter
Half of this amount will be sent as a refund to the individual employees (their share of FICA)
Half of this amount will be refunded to the employer (almost always, this means refunding to the state)

Complete Section 21 to explain how you find the errors. 

1. <<Staff Title>> makes appropriate corrections in payroll system for each employer/workers budget and in  F/EA general ledger.
2. Participant budgets may be affected for the employer portion of FICA.
3. This complete 941-X process is completed for each quarter in the calendar year.

Also complete a Schedule R to accompany each Form 941-X.  The Schedule R should include ONLY those employers affected by refunded FICA in the quarter for which the Form 941-X is filed.  

1. List each employer that had an employee for whom refunded FICA applies for the quarter.
2. The Schedule R should list the employer's EIN and the wages paid and tax liabilities assuming FICA refunding has already taken place - that is show the wages and taxes on the Schedule R as though the employer did not pay the wages or have the liability for the taxes for which a FICA refund is now do.
3. Attach the Schedule R to the 941-X for the quarter and submit to the IRS.