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Part 4. Examining Process

Chapter 4. AIMS Processing

Section 10. Employment/Excise Tax Adjustments

4.4.10  Employment/Excise Tax Adjustments

4.4.10.1  (02-08-1999)
Introduction

  1. This chapter contains procedures related to employment and excise tax adjustments.

4.4.10.2  (02-08-1999)
Processing and Maintenance of Form 4668 (Employment Tax Form Audit Changes)

  1. When employment taxes are adjusted, Form 4668 is used to correct FICA wage records maintained by the Social Security Administration (SSA) or to notify the Railroad Retirement Board (RRB) that Railroad Retirement tax adjustments were closed for assessment (or overassessment).

  2. Form 4668 must not be forwarded to the SSA. For employment tax examinations conducted after 1–86, employers are required to report the wage adjustment to SSA via Forms W–2 (Wage and Tax Statement) and Form W–2c (Statement of Corrected Income and Tax Amounts). Employers must file Forms W–2/W–2c by the last day of February following the quarter in which they agree to the employment tax deficiency i.e., examination conducted in September 1986, Form W–2/W–2c is to be filed by the last day of February, 1987. Except in instances where the examining officer has secured Form W–2/W–2c after the examination, employers will forward these forms to the area Case Processing Support function. Forms W2/W–2c secured from employers will be reconciled by the examining officer and ESP will be instructed to forward the forms to the Social Security Administration. Employers who do not file these forms will be subject to penalties.

  3. A tickler file containing a copy of Form 4668 for each year examined is to be maintained awaiting receipt of Forms W–2/W–2c. (for those cases in which Forms W–2/W–2c were not secured by the examining officer). Examination will identify on Form 3198 those cases that involve only conversion issues. The retained copy of Form 4668 involving conversion issues must be identified as such (refer to (8) for SSA mailing address for forms involving conversion issues).

  4. Employers will send Forms W–2 under cover of Form W–3 (Transmittal of Income and Tax Statements) and Form W–2c under cover of Form W–3c (Transmittal of Corrected Income and Tax Statements). After receipt of these forms in the Case Processing Support function, the amounts from the transmittal form(s) will be reconciled against the retained copy of Form 4668. After reconciling these forms, the transmittal form(s) along with Form(s) W–2/W–2c will be sent to the SSA under cover of Form 3210. If there is any difficulty in reconciling the amounts from the forms, the assistance of the examiner who conducted the examination may be requested. Only those forms that do not agree with the dollar amount as shown on Form 4668 will be returned to the employer. Maintain in the tickler file a copy of the letter outlining the reason for returning Forms W–2/W–2c. This Letter may help establish whether reasonable cause should be considered if a penalty referral is made. Late filed forms (see criteria in Text 4.4.10.2.1) with such error(s), will be sent to the Examination group as a penalty referral.

4.4.10.2.1  (02-08-1999)
Barred Periods

  1. If any barred periods are involved, this also must be indicated. The left side portion of Form 4668 applicable to FICA wages, will be photocopied and forwarded to the campus Receipt and Control Branch. The copy must be legible for transcription and microfilming.

4.4.10.2.2  (02-08-1999)
Adjustments to RRTA

  1. If the adjustment is to RRTA, a copy of Form 4668 must be mailed to the RRB, addressed as follows:

    Director of Data Processing and Accounts
    Railroad Retirement Board
    844 Rush Street
    Chicago, Illinois 60611

4.4.10.2.3  (02-08-1999)
Reconciling Transmittal Forms

  1. Reconcile Form W–3 by ensuring:

    1. The Social Security FICA Wages on Form W–3 equal Lines 1 and 2, columns b through e of Form 4668.

    2. The Social Security (FICA) Tips on Form W–3 equals Line 3, Columns b through of Form 4668.

  2. Reconcile Form W–3c by ensuring:

    1. Social Security Wages, column (c) of Form W–3c equal Lines 1 and 2, columns b through e of Form 4668;

    2. Social Security Tips, column (c) of Form W–3c equals Line 3, columns b through e of Form 4668.

4.4.10.2.3.1  (02-08-1999)
Combined W–2/W–3 and W–2c/W–3c

  1. If one employer forwards Form W–2/W–3 and Form W–2c/W–3c, the combined total of the amounts shown for Social Security Wages/Tips on transmittals W–3 and W–3c must be equal to the applicable line entries on Form 4668 as stated above.

4.4.10.2.3.2  (05-01-2003)
SSA Addresses

  1. Forms W–2/W–3 and or Forms W–2c/W–3c involving conversion issues (as identified on retained Form 4668) will be forwarded under cover of Form 3210 annotated "Conversion Issue " . This will ensure appropriate processing and crediting of the taxpayer's benefit data.

  2. Forms W-2/W-3 and or Forms W-2c/W-3c that DO NOT involve conversion issues, will be annotated "4668 Cases" and sent under cover of Form 3210.

    If you use the U.S. Postal Service to send paper documents: If you use a carrier other than the U.S.Postal Service to send paper documents:
    Social Security Administration
    Data Operations Center
    P.O. Box 3333
    Wilkes Barre, PA 18767-3333     		Social Security Administration
    Data Operations Center
    Attn: W-2c Process
    1150 E. Mountain Drive
    Wilkes Barre, PA 18702-7997
    If you use the U.S. Postal Service to send magnetic media: If you use a carrier other than the U.S. Postal Service to send magnetic media:
    Tape/Cartridge
    Social Security Administration
    AWR Magnetic Media Processing
    5-F-17, NB, Metro West
    PO Box 33009
    Baltimore, MD 21290-3009     		Tape/Cartridge/Diskette
    Social Security Administration
    AWR Magnetic Media Processing
    5-F-17, NB, Metro West
    300 N. Greene Street
    Baltimore, MD 21290-0300
    Diskette
    Social Security Administration
    AWR Magnetic Media Processing
    5-F-17, NB, Metro West
    PO Box 33014
    Baltimore, MD 21290-3014     		 

  3. Do not include Form 4668 in the package being sent to SSA.

4.4.10.2.3.3  (02-08-1999)
Penalty Referral for Not Filing of Form W–2/W–2c

  1. If an employer fails to file Form W–2/W–2c by April 1 following the February in which the forms are due Case Processing Support will make a penalty case referral (using the retained copy of Form 4668) to the Examination group which conducted the employment tax examination. Form 4668 will be annotated "Penalty Case Referral" . The group will consider assessing appropriate penalties for failure to file information returns. Forms W–2/W–2c received in Case Processing Support after the penalty referral is made, will just be forwarded to the Social Security Administration (appropriately addressed).

4.4.10.2.3.4  (02-08-1999)
Doc. Code 54 Carryback Penalty Adjustments

  1. When processing an adjustment through Document code 54, special action is necessary when adjusting a TC 180, Deposit Penalty along with carryback transaction codes 294, 295, 298, or 299 (which are used to post the tax adjustment and begin interest from the designated interest computation date). Since the TC 180 adjustment requires input of a reason code and the carryback transactions prohibit input of reason codes, the TC 180 must be input separately. One document should contain all transactions other than the TC 180. The second document should contain only the TC 180 Deposit Penalty.

4.4.10.3  (02-08-1999)
Processing Employee Share of FICA

  1. When an income tax case is being processed that contains adjustments for an EMPLOYEE share of FICA tax, process the FICA tax adjustment as a partial assessment using Disposal Code 08 without an agreement date entry, Disposal Code 08 is used since the 30 day interest free waiver period is not applicable to FICA tax and interest is computed to the payment date or 23C Date, whichever is earlier. Interest on these cases that contain employee share of FICA tax adjustments are NOT INTEREST FREE.

  2. As with all FICA tax adjustments, the examining officer must secure taxpayer agreements with Form 2504, Agreement to Assessment or Collection of Additional Tax and Acceptance of Overassessment. While a different agreement form is secured, it is not necessary to process the employee share of FICA tax as a NMF adjustment. Since FICA tax is not an income tax, it is not subject to deficiency procedures and cannot be included on a statutory notice of deficiency. When a statutory notice is to be issued, any adjustments made to the employee share of FICA is to be processed as a partial assessment.

4.4.10.4  (02-08-1999)
Form 940, Federal Unemployment Tax Adjustments

  1. In order to correctly process Form 940 cases, examining officers must provide the closing function with the following information:

    1. Total tax adjustment and the state code the change is made for;

    2. Wage adjustment and the state code the change is made for;

    3. Total Corrected 940 wages; and,

    4. Credit reduction wages, credit reduction amount and the state code(s) for the state(s) subject to credit reduction (if applicable).

  2. THIS INFORMATION IS NOT NECESSARY ON NO CHANGE CASES.

4.4.10.4.1  (02-08-1999)
Processing Form 940 Federal Unemployment Tax Adjustments

  1. For all increases or decreases in FUTA tax or wages, in which Disposal Codes 03, 04, 08, 09 or 10 are used unique reference codes must be entered with the tax adjustment. If the adjustment is for penalties only, use Disposal Code 12 to bypass the reference code requirement.

4.4.10.4.2  (02-08-1999)
Reference Codes

  1. The reference code(s) reflect which state for which the tax/wages are being adjustment. The three digit reference code for the tax portion of the adjustment is comprised of a "T" FOLLOWED by the two character state code (e.g., California is CA; New Jersey is NJ) . The total of the tax (T) reference code amount must equal the TC 300/301 tax adjustment. If the "T" reference code amount does not equal the tax amount or is not entered, a terminal reject will occur.

  2. If the adjustment is due to an increase or decrease in wages, a wage reference code(s) is also required. The three digit reference code for the wage adjustment is comprised of a "W" FOLLOWED by the two character state code. If adjustments were made to more than one state, the tax and or wage adjustment amount(s) attributed to each state will be entered.

  3. Input of these reference codes are not applicable for no change cases, cases closed TO Appeals, or second adjustment documents processed through AIMS after input of a quick assessment.

4.4.10.5  (05-01-2003)
Schedule H

  1. Form 4668, Form 4667 and Form 2504 are used to make adjustments to Schedule H.

4.4.10.5.1  (05-01-2003)
EIN

  1. If the EIN per the original Schedule H is incorrect or there was no Schedule H filed:

    1. Use IREF 993 to add or correct the primary taxpayer’s 9 digit EIN.

    2. Use IREF 994 to add or correct the secondary taxpayer’s 9 digit EIN.

4.4.10.5.2  (05-01-2003)
Form 4668, Adjustments to Social Security and Medicare Taxes

  1. Form 4668 is used to reflect adjustments to Social Security and Medicare Taxes. Following are the line numbers from the Form 4667 that will be used to complete the entries in Item 12 and 15 on the MFT 30 Form 5344. Line numbers that are not listed should be ignored in the preparation of the Form 5344.

  2. Line 1 = Social Security and Medicare wage adjustments. Item 15 on Form 5344.

    1. Use IREF 004 for SS wage adjustment for Primary taxpayer

    2. Use IREF 904 for SS wage adjustment for Secondary taxpayer

    3. Use IREF 073 for Medicare wage adjustment for Primary taxpayer

    4. Use IREF 973 for Medicare wage adjustment for Secondary taxpayer

    5. The above reference numbers can be + or - but not zero. If decreased below the amount posted at Master File, the transaction will unpost (UPC 189).

  3. Line 09 = Reflects income tax withholding adjustment. Item 15 on Form 5344.

    1. DO NOT USE REFERENCE NUMBER 184

    2. Use IREF 003 for Primary taxpayer

    3. Use IREF 903 for Secondary taxpayer

    4. The above reference numbers can be + or - but not zero. If decreased below the amount posted at Master File, the transaction will unpost (UPC 189).

  4. Line 10 = Reflects Total Social Security and Medicare tax adjustment. Item 15 on Form 5344.

    1. Use IREF 007 for Primary taxpayer

    2. Use IREF 907 for Secondary taxpayer

    3. The above reference numbers can be + or - but not zero. If decreased below the amount posted at Master File, the transaction will unpost (UPC 189).

  5. Line 13 = Delinquent tax or increase (decrease) in tax. Item 12 on the Form 5344. The interest free provisions for adjustments on BMF employment taxes are in effect for errors discovered on IMF, Schedule H. Adjustments will be made interest free if reported by the due date of the return for the period in which the error was discovered. TC 308 should be used to adjust employment taxes when an error is discovered on Schedule H.

4.4.10.5.3  (05-01-2003)
Form 4667

  1. Form 4667 is used to reflect adjustments to FUTA. Following are the line numbers from the Form 4667 that will be used to complete the entries in Item 12 and 15 on the MFT 30 Form 5344. Line numbers that are not listed should be ignored in the preparation of the Form 5344.

  2. Line 2 = Increase or decrease in taxable wages. See (4)c and d below.

  3. Line 8 = Reflects increase/decrease in tax. Item 12 on the Form 5344. The interest free provisions for adjustments on BMF employment taxes are in effect for errors discovered on IMF, Schedule H. Adjustments will be made interest free if reported by the due date of the return for the period in which the error was discovered. TC 308 should be used to adjust employment taxes when an error is discovered on Schedule H.

  4. Line 10 = Reflects State (* = State Code) Item 15 on the Form 5344. If FUTA state code is input, disposal code cannot be 01 or 02.

    1. Use IREF TXX* for tax adjustment for Primary taxpayer. Amount to enter is from Line 8. This will generate an IREF 995 at Master File.

    2. Use IREF ZXX* for tax adjustment for Secondary taxpayer. Amount to enter is from Line 8. This will generate an IREF 997 at Master File.

    3. Use IREF WXX* for wage adjustment for Primary taxpayer. Amount to enter is from Line 2. This will generate an IREF 996 at Master File.

    4. Use IREF YXX* for wage adjustment for Secondary taxpayer. Amount to enter is from Line 2. This will generate an IREF 998 at Master File.

    5. The above reference numbers can be + or - but not zero. If decreased below the amount posted at Master File, the transaction will unpost (UPC 189).

4.4.10.6  (02-08-1999)
Excise Tax Return Procedures

  1. Following are procedures for excise tax returns.

4.4.10.6.1  (02-08-1999)
Excise Fuel Online Network (ExFON) Penalty Assessments

  1. The ExFON computer application is designed to allow the DCO to enter inspection and penalty information into a laptop computer. The information is transmitted telephonically to a host computer in Cincinnati Service Center. The DCO manager accesses the host computer from a desktop system to approve recommended penalties. Once the penalty is approved, Cincinnati Campus Assessments Unit will print the assessment forms and make the needed assessments.

  2. The dyed fuel penalties (section 6715 and 4083(c) (3) are assessed as civil penalties through the Master File Civil Penalty Module via MFT codes 55 (IMF and 13 (BMF) with reference numbers 655, 656, and 657. No AIMS controls are established on Master File or Non-Master File. Case Processing Support function will not be involved in the process.


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