Publication 5717: Correcting Common Business Tax Errors

The Internal Revenue Service provides Publication 5717, an action guide for business owners, to assist in identifying and correcting common tax filing and deposit errors. This publication offers a clear path for businesses to achieve compliance with tax regulations. It also serves as a user guide for the Information Returns Intake System (IRIS) Taxpayer Portal, which facilitates the electronic filing of 1099 series forms.

Common Errors Addressed in Publication 5717

Publication 5717 and related IRS guidance highlight several frequent mistakes made by businesses. A primary category involves employment tax reporting, with errors often appearing on Form 941, Employer’s QUARTERLY Federal Tax Return. These can include misclassifying workers as independent contractors, which affects withholding obligations. Other common issues include underreporting or overreporting wages and tips, or miscalculating the employer’s share of Social Security and Medicare taxes.

Federal tax deposit errors are another common issue. These occur when a business fails to deposit its employment taxes on time, deposits an incorrect amount, or does not use the required Electronic Federal Tax Payment System (EFTPS). The timeliness and accuracy of these deposits are monitored by the IRS, and failures can lead to penalties.

Mistakes on information returns, such as Form W-2 and the Form 1099 series, are also common. These documents report payments to employees and non-employees, and errors can affect both the business and the recipient. Common problems include incorrect names, Social Security Numbers (SSNs), or dollar amounts. Businesses that file 10 or more information returns in total are required to file them electronically.

Gathering Information and Completing Correction Forms

To correct mistakes on employment tax returns like Form 941, a business must use Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund. A business will need its original Form 941 for the quarter in question. On Form 941-X, the filer must enter the amounts originally reported, the correct amounts, and the difference, along with a detailed explanation for each correction.

For an incorrect Form W-2, an employer must file Form W-2c, Corrected Wage and Tax Statement. This form is used to update previously reported data for items such as employee wages, tax withholdings, or personal details. A transmittal form, Form W-3c, must accompany any Forms W-2c sent to the Social Security Administration. For the Form 1099 series, corrections are made by filing a new form with the “CORRECTED” box checked.

Submitting Corrections to the IRS

For paper-filed forms like Form 941-X, the instructions provide specific mailing addresses based on the location of the business. If a payment is due with the correction, it should be made payable to the “United States Treasury” and include the business’s Employer Identification Number (EIN), the form number, and the tax period on the payment.

Electronic filing is an option for several correction forms, including Form 941-X and corrected 1099s through the IRIS portal. E-filing is recommended as it provides faster confirmation of receipt, often within 48 hours, and can expedite processing. This method reduces mail-related delays and provides a secure way to transmit sensitive information.

The IRS may take up to 16 weeks to process a paper-filed amended return, while electronically filed returns are often processed faster. Following processing, the business may receive correspondence from the IRS. This could be a notice confirming the correction, a bill for any additional tax, interest, or penalties, or a refund check if an overpayment was approved.