SECTION 5. BACKGROUND

.01 In general, employers may choose to correct FICA tax overpayment errors

either by making an interest-free adjustment or filing a claim for refund. Section 31.6402(a)–2 provides rules under which a refund claim for an overpayment of FICA tax may be made. The claim must be filed on the form prescribed by the IRS and must designate the return period to which the claim relates, explain in detail the grounds and facts relied upon to support the claim, and set forth such other information as may be required by § 31.6402(a)–2 and by the instructions relating to the form used to make the claim. Employers use the employment tax “X” form ( e.g ., Form 941–X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund) corresponding to the employment tax return filed ( e.g ., Form 941, Employer’s QUARTERLY Federal Tax Return) to claim refunds. For examples showing how an employer corrects employment tax reporting errors using the claim process, see Rev. Rul. 2009–39, 2009–52 I.R.B. 951.

.02 An employer may not receive a refund of the employer share of overpaid FICA tax without making reasonable efforts to protect its employees’ interests. See § 31.6402(a)–2; Rev. Rul. 81–310, 1981–2 C.B. 241; Atlantic Department Stores, Inc. v. United States, 557 F.2d 957 (2d Cir. 1977). If taxes were withheld from an employee, the employer has a duty to make reasonable efforts to protect the employee’s interests in any employee share of the refund. Section 31.6402(a)– 2(a)(1)(ii) specifically provides that no refund for the employer share of the overpaid FICA taxes will be allowed unless the employer has first repaid or reimbursed its 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 share. However, this requirement does not apply to the extent that the taxes were not withheld from the employee or, after the employer makes reasonable efforts to repay or reimburse the employee or secure the employee’s consent, the employer cannot locate the employee or the employee will not provide consent.

.03 Under § 31.6402(a)–2(a)(2), every employer that files a claim for refund of the employee share of overpaid FICA tax is required to certify, as part of the claim process, that the employer has repaid or

reimbursed the employee share of the overpayment of FICA tax to the employee or has secured the written consent of the employee to allowance of the filing of the claim for refund, except to the extent taxes were not withheld from the employee. For refund claims for employee tax overcollected in prior years, the employer must also certify that it has obtained the employee’s written statement confirming that the employee has not made any previous claims (or the claims were rejected) and will not make any future claims for refund of the amount of the overcollection.

.04 If after reasonable efforts the employer cannot locate the employee or the employee will not provide the requested consent, the employer may file a claim for refund for only the employer share of the FICA taxes. See § 31.6402(a)–2(a)(1)(ii) and Rev. Rul. 81–310.

.05 Under Chicago Milwaukee Corp. v. United States, 40 F.3d 373 (Fed. Cir. 1994), an employer need not repay or reimburse its employees or obtain the employees’ consents for the filing of a refund claim prior to filing the claim in order for the claim to be valid. However, the employer must repay or reimburse its employees or obtain the employees’ consents (subject to the exceptions under § 31.6402(a)– 2(a)(1)(ii)) before the IRS may grant the claim.

.06 If an employer files a claim for refund based on a certification that consents were secured from the employees, and the IRS grants the refund, the IRS will refund the taxes (including any applicable interest paid pursuant to § 6611) to the employer, which must then give each employee his or her share of the refund.

.07 Under § 31.6402(a)–2(a)(2)(i), the employer must retain each employee’s consent (including any required written statement) as part of the employer’s records.

.08 Section 6061 provides that any return, statement, or other document required to be made under any provision of the Code or regulations be signed in accordance with forms or regulations prescribed by the Secretary. Section 6065 requires that, except as otherwise provided by the Secretary, any such document must contain or be verified by a written declaration that it is made under

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the penalties of perjury. To facilitate taxpayers’ compliance with the verification requirement of § 6065, the IRS has long provided that an acceptable “penalties of perjury statement” should be located immediately above the required signature and include substantially the following language: “I declare, under penalties of perjury, that I have examined the above statements and information and to the best of my knowledge and belief they are true, correct, and complete.”

.09 Under § 31.6001–1 and § 31.6001–2, an employer that claims a refund must retain a complete and detailed record with respect to the tax to which the claim relates, including a copy of any statement or other documents, for as long as the contents of the statement or document may become material in the administration of any internal revenue law, but in no event for less than four years after the date the claim is filed.