IRS Revises Form 941 Schedule Used To Report Post-Reorganization Employment Tax Discrepancies

IRS recently released a June 2011 version of Form 941, Schedule D, Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, and its instructions. The form was last revised in April 2010.

Background. Every employer (except household employers) must file with IRS a quarterly return reporting withheld income taxes on Form 941. (Reg. §31.6011(a)-1, Reg. §31.6011(a)-4)

After certain types of reorganizations, if the wages paid and the taxes withheld by the acquired corporation are included on the Forms W-2 (Copy A) filed by the surviving corporation, there will be a difference between the amounts shown on the surviving corporation's Forms W-2 (Copy A) and its Forms 941.

Employers file Schedule D to explain discrepancies caused by acquisitions, statutory mergers, and consolidations in the amounts reported on Forms W-2 and 941 for Social Security wages, Medicare wages and tips, Social Security tips, federal income tax withheld, and advance earned income credit (AEIC) payments for tax years ending before Jan. 1, 2011. Each party to the transaction must file its own Schedule D. The schedule does not need to be filed, even if there is an acquisition, statutory merger, or consolidation, if there aren't any of the discrepancies noted above between Forms W-2 and 941.

The new version of the form notes that the AEIC may not be claimed after the 2010 tax year. The form also has a new mailing address. The mailing address for Schedule D is now: IRS Philadelphia Campus, Mail Stop 4-G08 151, 2970 Market Street, Philadelphia, PA 19104. IRS cautions filers that there is a different mailing address for Form 941. Schedule D may also be filed electronically with Form 941.

Deadline for filing Schedule D. The deadline for filing Schedule D depends on whether the business continues to operate after the statutory merger, acquisition, or consolidation. If the business continues to operate, the form should be filed no later than by the due date for the first quarter Form 941 after the calendar year of the transaction. If the business does not continue to operate, the form should be filed with the final Form 941.

Illustration: If the statutory merger, acquisition, or consolidation occurred in the third quarter of 2010, and the business is continuing to operate, an employer would have had to file Schedule D no later than the deadline for filing Form 941 for the first quarter of 2011 (i.e., May 2, 2011). However, if the business did not continue to operate, an employer would have been required to file Schedule D no later than the deadline for filing Form 941 for the third quarter of 2010 (i.e., Nov. 1, 2010).

References: For Form 941 and filing requirements after statutory merger or consolidation, see FTC 2d/FIN ¶S-3195.1; United States Tax Reporter ¶60,114.011; TaxDesk ¶812,032 et seq.; TG ¶9120.