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Employers Could Obtain Consent for Employment Tax Refunds Electronically

The IRS issued a proposal to change a revenue procedure that would permit employers who file refund claims for overpaid Federal Insurance Contributions Act (FICA) and Railroad Retirement Tax Act (RRTA) taxes to obtain their consent to the refund claims electronically.

The employers are required to use reasonable efforts to obtain employee consent before filing for the refund, but many times the employee cannot be found or may fail to respond to the employer. Employers may correct overpaid employment taxes by either making an interest-free adjustment or by filing a claim for refund on Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return, or Claims for Refund.

An employer cannot obtain a refund of its overpaid taxed without protecting its employees’ interest in their share of the overpaid taxes. The employer is not allowed a refund unless they have already reimbursed the employee or has secured the employee’s consent to the allowance of the claim for refund and includes a claim for the refund of the employee tax.

Employers must certify that the employer has overpaid or reimbursed the employee share to the employee or has the written consent to allow the refund or credit. For prior-year refund, the employer must certify in a written statement that he employee has not made any previous claims and will not make any future claims for refund or credit of the amount.

If the employer has made reasonable effort to obtain the employee’s consent, which includes and required written statements, and cannot locate the employee or the employee does not furnish the consent, then the employer can claim a refund of the overpaid employer share of the tax, but not obtain he refund of the employee’s share. This is also true in cases where the employee does not authorize the employer to claim a refund of the FICA taxes on his or her behalf.

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