Help for item 3.

You cannot make an adjustment on Form 945 to correct federal income tax withholding or backup withholding reported in a prior calendar year unless it is to correct an administrative error. An administrative error occurs if the amount you entered on Form 945 is not the amount that you actually withheld. For example, if the total federal income tax actually withheld was incorrectly reported on Form 945 due to a math or transposition error, this is an administrative error. The administrative error adjustment corrects the amount reported on Form 945 to agree with the amount actually withheld from nonpayroll payments.

You must report an adjustment to correct an administrative error on Form 945 in the year in which you discover the error. If the net adjustment is negative (reducing your tax liability), enclose the amount reported on line 3 in parentheses (if possible).

You will not be allowed a refund or credit for any prior year's overpayment of federal income tax that you withheld from a payee. This is because the payees use the amount of withholding shown on the information return (for example, Form 1099-R) as a credit when filing their income tax returns.

If you are making an adjustment(s) to correct a prior year administrative error, report the net adjustment (including adjustments to federal income tax withholding and backup withholding) on line 3. Complete Form 941c, Supporting Statement To Correct Information, or an equivalent statement, and file it with Form 945 to provide the required information on the adjustment(s). Be sure to identify the adjustment(s) in the Explanation of Adjustments (Part V of Form 941c) as correcting an administrative error and provide a description of the error(s). Do not file Form 941c separately from corner of Form 945.

Reporting adjustments on line 8 or on Form 945-A. The amount of the adjustment(s) also must be taken into account in the Monthly Summary of Federal Tax Liability (line 8) or on Form 945-A, Annual Record of Federal Tax Liability. If the adjustment increases your tax liability, include the adjustment with any other amount on the entry space for the date that you discovered the error and increase any required deposit by the adjustment amount. If the adjustment decreases your tax liability, use the adjustment amount as a credit to offset subsequent liabilities on line 8 or Form 945-A until it is used up. For more information, see section 13 of Pub. 15 (Circular E). The Pub. 15 (Circular E) instructions for making adjustments refer to Form 941 but also apply to Form 945 adjustments.

TIP. If you are not required to complete line 8 or Form 945-A because your total taxes are less than $2,500, do not show adjustments on line 8 or on Form 945-A.

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