File 941c form or just make adustment in W2

I meant 2010 not 2011.My prob is that W3 will not match with W2 if I issue correct W2 with cash refund to him, as 941 has still showing higher Social security tax held. How to fix this?

Since you haven't mailed in the W-2 to SSA:

1) Fix the W-2 and W-3 to the corrected numbers before you submit them to SSA. Give the employee a W-2 with the correct numbers on it. Get the erroneous W-2 back and void it (you may or may not want to keep it in your records). 2) File 941X, possibly 940X and any state withholding or unemployment forms to match the correct numbers - even if there is not resulting change in taxes. The feds and states will eventually match up your reported numbers to the SSA reported numbers, and it's easier to fix them all to match the correct numbers now than in two or three years (we're just now dealing with 2008 W-2 mismatch issues)

3) Keep good notes in your records of what you did so anyone can read it and explain it if the need arises.

In step (2), will the IRS refund money to the employer? If yes, then half of this money must be given back the employee tax free.

What if W-2 was filed? Is there a form W-2x?

It's called a corrected W-2, a Form W-2C