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Article: 317439

Title: Understanding and Auditing Form-941

Orientation

The 941 is a federal form that is reported every quarter by businesses. It is used to report Subject Earnings and Payroll Taxes for the organization for the quarter as well as a variety of other information related to payroll taxes.

There are several sections of the 941.

Part 1

Contains information to specific questions about how many employees were employed, their subject FIT, SS and MC earnings, any adjustments or exemptions as well as amounts of payments and how much is owed.

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Part 2

Accessed by going to the next page Part 2. This is where you indicate if you are a monthly depositor or a semi-weekly depositor. Most are semi-weekly. Indicating you are semi-weekly will automatically mean that you must complete schedule B.

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Part 3-5 is additional contact and official information.

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Schedule B

Schedule B is a day by day schedule of taxes paid (actual Tax, not subject earnings). The amounts in here should correspond to the total of all taxes paid on that date in payroll.

There are three months, each one being one month in the quarter. Then there are boxes for each day in that month. There are monthly and quarterly totals.

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Auditing

There are several tools to audit form 941. These are the 941 Worksheet and Tax History report. The basic strategy when auditing the 941 is to ask the following questions:

Does the 941 in Aatrix match the 941 Worksheet in Fund Accounting?

Does the 941 Worksheet match the tax history report?

941 vs. 941 Worksheet

If you go to Reports>Payroll Tax Worksheets>941 Worksheet. The only real option on this report is to choose the dates the report runs for. There are not other filters or adjustments. This report cannot be altered.

The report has two basic parts, the summary and the Schedule B. Each of the numbers on the 941 worksheet should match their corresponding values in Aatrix. Once this has been established the next step in auditing comes from looking at the tax history report to get the detail of the numbers. This is done by running a Tax History Report.

941 vs. Tax History

Matching the 941 Report to the Tax History Report involves running several different Tax History Reports to match the different sections.

Part 1

Part 1 is the basic form of the 941, it contains a summary of Federal taxes paid over the quarter. You will need to set up a different report to proof each number.

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NOTE: The values in this section are calculated values. It takes the subject earnings and multiplies it by the proper percentage. If for some reason the actual amounts withheld were different (rate changes/adjustments/modifications to calculated payroll) the value in the tax history report will not tie. At that point adjustments would have to be made to correct the values

1 – Number of Employees

To proof the employee count see KB 310368 for detailed instructions.

2- Total Wages Tips and Other Compensation

This should equal the total FIT Subject Earnings for the period.

The Report setup should look something like this

Setup Tab

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Content Tab

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Filter Tab

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Options Tab

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Report

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When you run the report you will get a listing of every check that had FIT subject wages and a total at the end that should match the 941 Worksheet.

3- Total Income Tax Withheld

This amount should equal the total FIT withholding.

Using the same report from line 2 we should see the total FIT tax withheld.

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4- Total Social Security Wages

This section should show your total subject social security wages and total social security withheld

NOTE: Reports run for 2011 will have a tax rate of 10.4%. Otherwise they will have a tax rate of 12.4%.

You can use the same basic report as above but change the filter to report on social security

Filter Tab

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Report

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If we look at the report the Employee and Employer Subject Earnings should equal the amount on the 941 worksheet. The amount of Tax should equal the sum of the Employee Plus Employer Tax amounts. We can multiply the Subject Earnings x Tax % to check this number.

5 – Total Medicare Wages

This report should show the total Medicare Subject Earnings and Medicare tax withheld.

You can use the same report as above but change the filter to MC.

Filter Tab

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Report

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If we look at the report the Employee and Employer Subject Earnings should equal the amount on the 941 worksheet. The amount of Tax should equal the sum of the Employee Plus Employer Tax amounts. We can multiply the Subject Earnings x Tax % to check this number.

6- Total social security and Medicare taxes.

This should be the sum of the tax amounts for social Security

7- Exempt Wages and tips paid this quarter (HIRE)

This only applies if you had employees subject to the HIRE act in 2010. It was discontinued as of 12/31/2010

8 – Advanced Earned Income Credit (EIC)

This only applied if you had employees subject to Advanced EIC payments. This was discontinued as of 12/31/2010.

If Amounts Don’t Match

If you run the audit reports and the amounts don’t match it is likely that there was a social security rate change or something has been done in review/modify calculated payroll before a check was printed. Also look for checks voided in that quarter, issued in a prior period. If the amounts don’t match it is very likely the amount that is off is going to show up at the bottom of the report in the “Fractions of Cents”. For detailed instructions on how to troubleshoot this scenario see KB 317401.

Schedule B

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Schedule B is a detailed report that gives a document date by document date breakdown of Tax Liability. The amounts should include the actual taxes collected for FIT, MC, SS and EIC.

You can proof these numbers in Summary by setting up the following Tax History Report. Go to Reports>History>Taxes and Create a new report

Setup

On the Setup Tab

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You should have the report dates equal to the document date you see on the Schedule B.

On the Content Tab

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On the Filter Tab you will filter to include FIT, MC, SS and EIC.

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Options Tab

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Report

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The total should be equal to the sum of the PTD Employee + PTD Employer Tax.

If you want to see more detail of what makes that total up you can add that detail to the content tab.

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This will give you a paycheck by paycheck breakdown of the amounts.

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Using these reports you should be able to get the detail of what makes up the values in the 941 Worksheet and 941 Report. If the values are incorrect they will most likely need to be adjusted through Setup/Adjust Employee balances.

Fractions of Cents

In the 941 the Fraction of cents is the difference between the calculated amounts in part 1 and the actual amounts in Schedule B. In most cases it should be less than $1. If it is a larger amount there could be several causes. Most likely because of over withholding. See KB 317401 for details.

If the Fractions of Cents is good on the 941 worksheet but is not ok in Aatrix it is likely that you have changed or added a value in Part 1 (some type of adjustment or credit) but not done the same in Schedule B. You should see KB 197686 and 313406 for instructions on dealing with that.

Keywords: 941, FICA, worksheet, quarterly, schedule, B, schedule B, tax, history, federal, SS, MC, EIC, FIT, Aatrix, form Schedule B, audit, auditing, fraction, cents, 317439

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