CenterPoint Payroll - Reconciling a 941 Form & 941 Schedule B

 

Document #:	3044	Product:	CenterPoint® Payroll

 

Form 941 works as the employer's quarterly payroll tax returns. Employers are required to withhold tax from each paycheck. The 941 form reports these payroll taxes, current quarter's adjustments to Social Security and Medicare taxes, the number of employees, as well as adjustments in prior quarters. An annual reconciliation should be completed before the last tax deposits is made at year end. This reconciliation ensures that Form 941 agrees with the W-2 form, as the IRS will compare W-3 totals with the totals on your 941 quarterly reports and your 940 annual report. Your 940 annual report will also be compared with a report that your state submits to the IRS summarizing your quarterly unemployment tax reports. Refer to the table below to reconcile each line of the 941 form. The table explains which report to use, which numbers should match and what can cause numbers to not match. Unless noted specifically, the reports should be printed for same date/quarter range as your 941 form.

---

Form 941

941 Line Number	Report Name & Location	Reconciliation Process
Line 2	Reports > Employer Tax Reports > 941/943 Detail AND  Reports > Pay Data Reports > Payroll Register (print only the last page of this long report)	The Company Totals line of the Federal Txbl Wages column should match Line 2. AND The Total Earnings - any Non Taxable Wages - any Pre Tax Deductions for Federal Withholding = Line 2 on the 941.
Line 3	Reports > Employer Tax Reports > 941/943 Detail	The Company Totals line of the Federal Tax Withheld column should match Line 3.
Line 5a, Column 1	Reports > Employer Tax Reports > 941/943 Detail	The Company Totals line of the FICA Txbl Wages column should match Line 5a, Column 1.
Line 5a, Column 2	Reports > Payroll Tax Data Reports > Tax Liability > Tax Liability	The Social Security Tax Totals line of the Total Tax column should match Line 5a, Column 2.
Line 5b, Column 1	Reports > Pay Data Reports > Payroll Register	The Earnings columns in the Report Totals section will show total tips.
Line 5c, Column 1	Reports > Employer Tax Reports > 941/943 Detail	The Company Totals line of the Medicare Txbl Wages column should match Line 5c, Column 1
Line 5c, Column 2	Reports > Employer Tax Reports > 941/943 Detail	The Company Totals line of the Medicare Tax Withheld column, multiplied x 2, should equal line 5c, Column 2.
Line 10	Reports > Employer Tax Reports > Tax Liability Select a range of all Federal Taxes* in the Tax Type field.	The Report Total line of the Tax Amount column should match Line 10.
Line 11	Reports > Employer Tax Reports > Tax Liability	The Report Total line of the Payment Amount column should match line 11.

Form 941

941 Line Number	Report Name & Location	Reconciliation Process
Line 2	Reports > Payroll Tax Data Reports > Federal Tax Reports > Federal Tax Withheld by Employee AND  Reports > Payroll Data Reports > Payroll Register > Payroll Register Totals	The Report Totals line of the Federal Wages column should match Line 2. AND The Total Earnings - any Non Taxable Wages - any Pre Tax Deductions for Federal Withholding = Line 2 on the 941.
Line 3	Reports > Payroll Tax Data Reports > Federal Tax Reports > Federal Tax Withheld by Employee	The Report Totals line of the Federal Tax column should match Line 3.
Line 5a, Column 1	Reports > Payroll Tax Data Reports > Federal Tax Reports > Federal Tax Withheld by Employee	The Report Totals line of the Soc. Sec. Wages column should match Line 5a, Column 1.
Line 5a, Column 2	Reports > Payroll Tax Data Reports > Federal Tax Reports > Federal Tax Withheld by Employee	The Report Totals line of the Soc. Sec. Tax column, multiplied x 2 should equal Line 5a, Column 2.
Line 5b, Column 1	Reports > Payroll Data Reports > Payroll Register > Payroll Register Totals	The Earnings columns in the Totals section will show total tips.
Line 5c, Column 1	Reports > Payroll Tax Data Reports > Federal Tax Reports > Federal Tax Withheld by Employee	The Report Totals line of the Medicare Wages column should match Line 5c, Column 1
Line 5c, Column 2	Reports > Payroll Tax Data Reports > Federal Tax Reports > Federal Tax Withheld by Employee	The Report Totals line of the Medicare Tax column, multiplied x 2, should equal line 5c, Column 2.
Line 9	Reports > Payroll Tax Data Reports > Tax Liability > Tax Register Select a Tax of Earned Income Credit	The Employee Tax should match line 9.
Line 10	Reports > Payroll Tax Data Reports > Tax Liability > Tax Liability Select all Federal Taxes* in the Tax Name field.	The Report Totals line of the Total Tax Amount column should match Line 10.
Line 11	Reports > Payroll Tax Data Reports > Tax Liability > Tax Liability	The Report Totals line of the Amount Paid column should match line 11.

 

Troubleshooting Line 2

The most common reconciliation problem is found when Line 2 on the 941 Form or the 941/943 Detail ReportFederal Tax Withheld by Employee report doesn't equal the Payroll Register Totals report. Below we have listed the most common reasons for that.

• The taxable wages manually calculated from the Payroll Register Totals report (Total Earnings - Non Taxable Wages - Pre Tax Deductions) was done incorrectly.

• Review your list of earnings. For this calculation any non taxable earnings (mileage reimbursement for example) must be deducted from the Total Earnings
• Review your list of deductions. All deductions that should be deducted pretax (most 401k & cafeteria plans for example) must be deducted from the Total Earnings.

• The 941/943 Detail ReportFederal Tax Withheld by Employee report is missing an employee entirely.

• If an employee is setup without Federal Withholding Tax (Payroll > Setup > Payroll Details > Employees > Taxes tab), none of their wages will be reported on the 941 Form or the 941/943 Detail ReportFederal Tax Withheld by Employee report, but will be on the Payroll Register Totals report.
• If the employee is subject to Federal Withholding but you do not want it withheld, then you should add the Federal Withholding tax to the employee Payroll > Setup > Payroll Details > Employees > Taxes tab) and on the tax choose the "Extra" tax tableExempt Filing Status, which is designed to withhold zero taxes.

• Review the Earnings (Setup > Payroll Details > Earnings).
  • Was an earning inadvertently set up as Non Taxable Pay (or Taxable Pay and it should have been Non Taxable Pay)to have taxes excluded?
  • An earning was setup using the No Tax button to force the system to Exclude Earnings from Federal Tax instead of having it Subject to But Not Withheld.Should the earning be setup to have taxes "Subject to but not withheld" instead of taxes excluded?
• Review all Deductions (Setup > Payroll Details > Deductions & Benefits).
  • If a pre-tax deduction (401k contribution, for example) wasn't setup to reduce taxable wages then the wages reported on the 941 Form will be too large. When setting up a pre-tax deduction such as 401k contributions, the Reduce Tax button should be used to Reduce Before Calculating any federal taxes.verify the Type is Non-Taxable and the correct taxes are excluded on the Taxes tab.
• All employees are on both the 941/943 Detail ReportFederal Tax Withheld by Employee report and the Payroll Register Totals report, but the manually calculated wages from the Payroll Register (Total Earnings - Non Taxable Wages - Pre Tax Deductions) for one employee does not match the amount for that employee on the 941/943 Detail ReportEmployee Tax Withheld by Employee report.
  • The Federal Withholding tax may have been temporarily deactivated. This is sometimes done when a "special check" was issued and they didn't want Federal Tax withheld. This has the exact same affect as having no Federal Withholding Tax setup on the employee - none of their wages will be reported on the 941 Form or the 9431/943 Detail ReportFederal Tax Withheld by Employee report, but will be on the Payroll Register Totals report.
  • A manual adjustment to a deduction may have been made during the payroll process (Check Writing > Enter Pay) and forgot to use the Recalculate button to force the system to recalculate all taxes. For example if you made changes to the 401k contribution for an employee while in Enter Pay and did not use the Recalculate button, the wages subject to Federal Tax will be incorrect for that employee.

Troubleshooting Line 5

• If Line 5a column 2 does not match the 941/943 detail reportFederal Tax Withheld by Employee report, you will need to follow many of the same suggestions from above to find the problem. The first thing to do though is take the total FICA TxblSoc. Sec. Wages and multiple it by 6.2%. Does that match the Soc. Sec.FICA Tax Withheld on the same report? If not, do the same calculation for each employee on the report to find which employee is incorrect.

• If Line 5c column 2 does not match the 941/943 detail reportFederal Tax Withheld by Employee report , you will need to follow many of the same suggestions from above to find the problem. The first thing to do though is take the total Medicare Txbl Wages and multiple it by 1.45%. Does that match the Medicare Tax Withheld on the same report? If not, do the same calculation for each employee on the report to find which employee(s) is incorrect.

• How to determine which specific payrolls were done incorrectly. 
1. After determining which employee(s) contain the problems, determine the specific payroll that was done incorrectly. This is necessary so that you can void the employee(s) pay check and re-enter it so the taxable wages are correct.
2. Select Reports > Pay Data Reports > Payroll Data Reports > Payroll Register > Employee Pay Register (Detail). Run the report for a single employee (the one that you have identified as being incorrect), select all Pay RunsDates for the quarter in question and select a Report Type of Detail.
3. Determine the taxable wages for the pay period (taxable wages less pre-tax deductions) then multiply by the Social SecurityFICA tax rate (6.2%) and verify if proper Social SecurityFICA tax was withheld. Then multiple the taxable wage by the Medicare rate (1.45%) and verify if proper Medicare tax was withheld.
4. Once you have determined which checks have the incorrect Social SecurityFICA and Medicare Tax Withheld, follow the instructions below on how to correct.

Troubleshooting Line 7

• If the Tax Liability amounts for the quarter differ between Schedule B and Line 6 of the 941 Form, the dollar amount will be displayed in Line 7. The most common reason for this difference is rounding. Otherwise , it's likely a liability is incorrect or missing on the Schedule B. For example, the employer portion of Social SecurityFICA and Medicare taxes.

How to correct problems found:

Once all setup issues have been corrected, the pay runs will need to be corrected. The proper way to correct any of these problems is:

1. Determine which payroll(s) are incorrect and print a payroll register for each incorrect check.
2. Void the payroll check(s) in question.
3. Re-enter the payrolls which will now correctly calculate the taxable wages.

 

An alternative way to correct any of these problems is to:

1. Determine which payroll(s) are incorrect.
2. Manually adjust the amounts on the 941 Form and individual W-2 Forms so they are correct.

Schedule B (Form 941)

Box	Report Name & Location	Reconciliation Process	Troubleshooting Tips
Tax Liability for the quarter	Reports > Employer Tax Reports > Tax Liability Select a range of all Federal Taxes* in the Tax Type field.	The Report Total line of the Tax Amount column should match the Tax Liability for quarter box on the Schedule B.	If the number for the quarter doesn't match, then follow the steps in the next line to check each month
Tax Liability for Month 1, 2 3	Reports > Employer Tax Reports > Tax Liability. Select a range of all Federal Taxes* in the Tax Type field. Select a check date range of just one month.	The Report Total line of the Tax Amount column should match the Tax Liability for Month 1 (2 or 3) box on the Schedule B.	If the number for the month doesn't match, then follow the steps in the next line to check the report day by day to find the payroll that caused the problem.
Month 1 (2 or 3), boxes 1 - 31	Reports > Employer Tax Reports > Tax Liability Select a range of all Federal Taxes* in the Tax Type field. Select a date range of the first payroll of the month	The Report Total line of the Tax Amount column should match the corresponding day box on the Schedule B.	If the first payroll matches, continue to do the same for each payroll until the suspect payroll is found.

Schedule B (Form 941)

box	Report Name & Location	Reconciliation Process	Troubleshooting Tips
Tax Liability for the quarter	Reports > Payroll Tax Data Reports > Tax Liability > Tax Liability >Select all Federal Taxes* in the Tax Name field.	The Reports Total line of the Amountcolumn should match the Tax Liability for quarter >box on the Schedule B.	If the number for the quarter doesn't match, then follow the steps in the next line to check each month
Tax Liability for Month 1, 2 3	Reports > Payroll Tax Data Reports > Tax Liability > Tax Liability Select all Federal Taxes* in the Tax Name field. Select a check date range of just one month.	The Report Total line of the Total Tax Amount column should match the Tax Liability for Month 1 (2 or 3) box on the Schedule B.	If the number for the month doesn't match, then follow the steps in the next line to check the report day by day to find the payroll that caused the problem.
Month 1 (2 or 3), boxes 1 - 31	Reports > Payroll Tax Data Reports > Tax Liability > Tax Liability Select a range of all Federal Taxes* in the Tax Type field. Select a date range of the first payroll of the month	The Report Total line of the Total Tax Amount column should match the corresponding day box on the Schedule B.	If the first payroll matches, continue to do the same for each payroll until the suspect payroll is found.

* Federal taxes would include: FICA (company & employee share), Medicare  (company & employee share), Federal Unemployment, Federal Withholding, Earned Income Credit.

See Also