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Home > FMS Policies and Procedures MN > Pay and File Taxes on Behalf of Consumers > IRS Form 941: Employer's Quarterly Federal Tax Return and Payments

IRS Form 941: Employer's Quarterly Federal Tax Return and Payments

Policy: 

In accordance with Section 3504 of the Internal Revenue Code, Revenue Procedure 70-6 and Proposed Regulations REG-137036-08 (January 13, 2010) and Revenue Procedure 2013-39, F/EA files Form 941 quarterly in aggregate, on behalf of all participants in the Program. F/EA uses its separate agent Employer Identification Number (EIN) to file Form 941 and to deposit workers Federal Withholding Tax, workers FICA and employer FICA. Federal Withholding Tax and employee and employer FICA are deposited by the F/EA with the IRS on within 24 business hours of each payroll. 

As applicable, F/EA submits Schedule B for Form 941 with Form 941.  Schedule B shows F/EA liability if F/EA deposits more often than monthly per deposit requirements.  Deposit requirements are determined based on F/EA aggregate liability, not on individual employer liability.  Most F/EAs must deposit more often than monthly and therefore must submit Schedule B for Form 941 with Form 941.
 
F/EA must submit Schedule R for Form 941 with Form 941 .
 
F/EA utilizes reconciliation processes to ensure 941 taxes are paid accurately, timely and in accordance with existing regulation. On a monthly basis, F/EA reconciles 941 payments to debits for 941 payments from Program Operating Account (See Reconciliation of General Ledger Liability Account for FICA and Reconciliation of General Ledger Liability Account for Federal Withholding Tax). Quarterly, F/EA Accountant ensures sum of quarterly debits from Program Operating Account for 941 payments matches payments reported on Form 941.
 
Documentation showing payments of FICA and Federal Withholding Tax made on behalf of consumers is made available to Program Administrator and consumers upon request.
Procedure: 
  1. F/EA makes 941 deposit on each day payroll checks are cut with a check date for that day
  2. 941 deposit includes FICA (Social Security and Medicare tax) withheld from workers pay, FICA (Social Security and Medicare tax)  paid by the employer on workers pay and Federal Income Tax withheld from workers pay
  3. F/EA makes all deposits using IRS online payment system, EFTPS.gov.
  4. On a weekly basis, <<Staff Title>> produces and prints a report called the EFTPS Batch Provider Payment Inquiry.  This report shows all deposits made for the F/EA's separate FEIN for the prior week.
  • The EFTPS Batch Provider Payment Inquiry shows each 941 deposit made on behalf of F/EA, the date the deposit was made and the settlement date
 5.  <<Staff Title>> reviews EFTPS Batch Provider Payment Inquiry and compares it to the week's Payroll Registers to ensure that the report accurately reflects 941 liabilities for the week.
 6.  Any discrepancies are researched and resolved.
 7.  After resolving any discrepancies, EFTPS Batch Provider Payment Inquiry is provided to F/EA Accountant.
 8.  Upon receiving EFTPS Batch Provider Payment Inquiry, F/EA Accountant logs into Bank website
 9.  Verify that a payment for the amount listed on the EFTPS Batch Provider Payment Inquiry was made from the bank account
10. Ensure the payment date shown by Bank matches Settlement Date on EFTPS Batch Provider Payment Inquiry
11. F/EA Accountant writes on EFTPS Batch Provider Payment Inquiry: “verified with bank on <<date>>” and initials
12. These weekly breakdowns are stored in F/EA Accountant’s applicable file until quarter end
13. At quarter end, <<Staff Title> produces a quarterly payroll summary of 941 payment from the EFTPS website.  This report is called EFTPS Batch Provider Payment Inquiry Report
14. Form 941 is completed per attached example.
15. F/EA Accountant verifies Form 941 to ensure that Payroll Department accurately reported wages paid, federal withholding tax and employer and workers FICA
16. Reconcile payments
17. Sum all payments made for FICA from Worker F/EA Payroll Account found here: <<File Path>> Payroll download
18. Locate spreadsheet for each of the three months in the quarter
19. Sort by transaction and description
20. Sub total ‘Amount’ by transaction
  • This provides subtotals of payments for each tax type

21. Subtotals with description “IRS USATAXPYMT” are weekly Federal Income Tax, and Employer and Employee FICA payments

22. Add the subtotals with description “IRS USATAXPYMT” for each month in the quarter

23. This creates monthly totals of payments

24. Compare this to the liability amounts on Schedule B to ensure that payments for each month are equal to or greater than liabilities

  • Voids may cause payments to be greater than liabilities in a month
  • If a payment in a previous month is greater than a liability, the liability in a later month can be greater than the payments for that month by the exact amount that was overpaid in a previous month

25. Complete lines 17, 18 and 19 on Quarterly Reconciliation Document

26. Compare the liability on each date on Form 941 Schedule B to the amount for each “Settlement Date” on the EFTPS Batch Provider Inquiry

27. Ensure that the amount on Form 941 Schedule B is less than or equal to the amount on the EFTPS Batch Provider Inquiry for the settlement date

28. Ensure that the settlement date and the date on Schedule B match in each case

  • Report any discrepancies to reporting agent
  • Reporting agent will file form 941-X as necessary

29. Compare the sum of payments for all three months from bank account to “Total liability for the quarter” on schedule B

30. Ensure sum of payments is greater than or equal to “Total liability for the quarter” on Schedule B
31. Compare the sum of payments for the quarter as debited from the bank account to Line 11 on Form 941

32. If a discrepancy exists, review prior quarter’s 941 Box 13 to see if an overpayment was made

33. Ensure that the discrepancy equals the difference between Line 11 941 and sum of debits from bank account


34. Compare Schedule B 941 Deposits to debits from bank account

35. Ensure all values on dates match

36. Ensure monthly totals match

37. <<Staff Title>> reviews Form 941, Schedules B and R and all supporting documents.
 
38. After <<Staff Title>> signs off on Form 941, mail Form 941 to applicable IRS office via UPS
 
39. Obtain UPS Tracking number
 
40. Enter date shipped on Quarterly Tax Reconciliation document
  • Quarter 1 is due by April 30
  • Quarter 2 is due by July 31
  • Quarter 3 is due by October 31
  • Quarter 4 is due by January 31

41. <<Staff Title>> scans all documents and stores them at <<File Path>>

42. Signed reconciliation sheets are stored for a minimum of 7 years.


 
Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

  1. On a monthly basis, F/EA independently reconciles 941 payments to debits for 941 payments from Program Operating Account.
    • This ensures that payments are reconciled monthly prior to being reconciled again when the quarterly return is filed with the IRS
  2. The F/EA Accountant performs the quarterly 941 and payment reconciliation
    • The F/EA Accountant verifies the supporting documents, the bank statement and 941 return for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is pre-numbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  3. The <<Staff Title>> reviews the reconciliation statement and the supporting documents for accuracy
    • The <<Staff Title>> verifies not only completeness, but also validity.
    • The <<Staff Title>> reviews all documents for mathematical accuracy.
    • After reviewing, the <<Staff Title>> Signs and dates the reconciliation sheet.
  4. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
  5. The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.

Producing F/EA Schedule B for Form 941

Policy: 

<<Insert policy for completing Schedule B of Form 941>>

Procedure: 

<<Insert procedure for completing Schedule B of Form 941>>

Internal Controls: 

<<Insert internal controls for completing Schedule B of Form 941>>

Producing F/EA Schedule R for Form 941

Policy: 

F/EAs must file Schedule R with their Forms 941. Vendor Fiscal/Employer Agents that operate in Self-Directed (also known as Participant-Directed and Consumer-Directed) programs operate under Section 3504 of the Internal Revenue Code and must file a Schedule R with their aggregate Form 941.

Schedule R (Form 941) is used to allocate the aggregate information reported on Form 941 to each participant employer.  For purposes of Schedule R (Form 941), the Internal Revenue Service refers to employers represented by agents as their 'clients'.  

When the F/EA serves 15 or more employer clients, complete as many Continuation Sheets for Schedule R as necessary.  Attached Schedule R (Form 941) and any Continuation Sheets to the aggregate Form 941.  F/EA should file Schedule R and Form 941 together with the Internal Revenue Service.

Schedule R is due with Form 941 for each quarter that an agent files an aggregate Form 941, beginning with Quarter 1, 2010.

Procedure: 

<<Insert procedure to produce Schedule R for Form 941>>

Internal Controls: 

<<Insert internal controls to produce Schedule R for Form 941>>