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IRS didn't understand 941-X and sent refund in error

Client filed a 941 in 2016 with a typo. Wages were $144, but they put $1440 in the Medicare wages box. Tax was entered and paid correctly, though. They got a letter that Medicare wages on 941s didn't match Medicare wages on W-2. We filed a 941-X in which that box was corrected and the tax correction box left blank as there was no change. In the explanation I put that it was simply a typo in one box and there was no change to tax.

Today the client received a refund of the difference in Medicare tax. Should we file another 941-X and pay it back? Not sure how I will fill it out though.


  • Patrick HaggertyPatrick Haggerty ✭✭✭
    edited March 6

    On the original Form 941, did the employer pay $4.18 or $41.76 for Medicare? Was there any notice of a discrepancy between the amount deposited and the amount reported? If the 941-X was prepared correctly, there should not have been a change in tax reported - only a change in wages - That is, the computation on line 10 of Form 941-X should not have been done. The explanation on Line 24 should have explained why there was no computation on line 10. If you did that, that should serve as documentation that the refund was incorrect. I would not prepare a new 941-X. I would contact the IRS and tell them the refund was likely in error and ask how they want you to send it back.

    Also, for future reference - it is possible that the mismatch between the 941 and the W-2 should have been handled by reconciliation rather than a 941-X. That is, an explanation as to the difference in wages between the two documents sent in response to the letter. The 941-X does not change things at the SSA - the W-2-c does that, The employee's account was correct - so there was no need to change the 941 wages to reconcile the IRS 941 info to the W-2 - just indicate that there was an error on the 941.

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