Part 4: Explain — Instruction 941-X

41. Corrections of Both Underreported and Overreported Amounts Check the box on line 41 if any corrections you entered on line(s) 7–17, 18b–22, 25, 26b, 26c, 28, 29, or 35–40, column 3, reflect both underreported and overreported amounts.

Example. If you had an increase to social security wages of $15,000 for Xavier Black and a decrease to social security wages of $5,000 for Sophie Rose, you would enter $10,000 on line 8, column 3. That $10,000 represents the net change from corrections.

On line 43, you must explain the reasons for both the $15,000 increase and the $5,000 decrease.

42. Did You Reclassify Any Workers? Check the box on line 42 if you reclassified any workers to be independent contractors or nonemployees. Also, check this box if the IRS (or you) determined that workers you treated as independent contractors or nonemployees should be classified as employees. On line 43, give us a detailed reason why any worker was reclassified and, if you used section 3509 rates on lines 19–22 for any worker reclassified as an employee, explain why section 3509 rates apply and what rates you used.

Return not filed because you didn’t treat any workers as employees. If you didn’t previously file Form 941 because you mistakenly treated all workers as independent contractors or nonemployees, file a Form 941 for each delinquent quarter. On each Form 941 for which you’re entitled to use section 3509 rates, complete the following steps.

Write “ Misclassified Employees ” in bold letters across the top margin of page 1.
Enter a zero on line 12.
Complete the signature area.
Attach a completed Form 941-X (see instructions next). On each Form 941-X, complete the following steps.
Complete the top of Form 941-X, including the date you discovered the error.
Enter the wage amounts on lines 19–22, column 1.
Enter zeros on lines 19–22, column 2.
Complete columns 3 and 4 as instructed in Part 3.
Provide a detailed statement on line 43.
Complete the signature area.

Caution: If you can’t use section 3509 rates (for example, because the workers you treated as nonemployees were certain statutory employees), file a Form 941 for each delinquent quarter. Write “ Misclassified Employees ” in bold letters across the top margin of page 1 of each Form 941. Complete Form 941 using the Instructions for Form 941. Attach a Form 941-X to each Form 941. Complete the top of Form 941-X, including the date you discovered the error, and provide a detailed explanation on line 43.

Instructions for Form 941-X (Rev. 4-2026) 23

43. Explain Your Corrections Treasury regulations require you to explain in detail the grounds and facts relied upon to support each correction. On line 43, describe in detail each correction you entered in column 4 on lines 7–17, 18b–22, 25, 26b, and 26c. Also, use line 43 to describe corrections made on lines 6, 28– 29, and 35–40. If you need more space, attach additional sheets, but be sure to write your name, EIN, “Form 941-X,” the quarter you’re correcting (for example, “Quarter 2”), and the calendar year of the quarter you’re correcting on the top of each sheet.

You must describe the events that caused the underreported or overreported amounts. Explanations such as “social security and Medicare wages were overstated” or “administrative/payroll errors were discovered” or “taxes were not withheld” are insufficient and may delay processing your Form 941-X because the IRS may need to ask for a more complete explanation.

Provide the following information in your explanation for each correction.

Form 941-X line number(s) affected.
Date you discovered the error.
Difference (amount of the error).
Cause of the error. You may report the information in paragraph form. The following paragraph is an example.

“The $1,000 difference shown in column 3 on lines 6, 8, and 12 was discovered on May 11, 2026, during an internal payroll audit. We discovered that we included $1,000 of wages for one of our employees twice. This correction removes the reported wages that were never paid.”

For corrections shown on lines 19–22, explain why the correction was necessary and attach any notice you received from the IRS.