How to Complete and File Form 941 Schedule R

Form 941 Schedule R, known as the Allocation Schedule for Aggregate Form 941 Filers, is a supplemental form attached to Form 941, the Employer’s QUARTERLY Federal Tax Return. When certain third-party payers file a single Form 941 for multiple employers, this schedule provides the Internal Revenue Service (IRS) with a detailed breakdown. It disaggregates the total figures, attributing specific amounts of wages, withheld taxes, and tax credits back to each client company to ensure proper accounting.

Who Must File Schedule R

Filing Schedule R is required for specific third-party payers. The primary filers are agents approved by the IRS under Internal Revenue Code Section 3504. These agents are formally authorized through Form 2678, Employer/Payer Appointment of Agent, which allows the agent to perform these duties for a client employer. Once approved, the agent files one aggregate Form 941 covering all its clients and must attach Schedule R to allocate the reported figures.

The other category of required filers is the Certified Professional Employer Organization (CPEO). A CPEO is an organization that has met IRS background, financial, and reporting requirements to become certified. These organizations manage their clients’ human resources and payroll tax functions and file a single aggregate Form 941, which requires them to also file Schedule R.

Information Required for Schedule R Completion

Before filling out Schedule R, an aggregate filer must collect precise payroll data for each client for the quarter. The filer needs each client’s legal name and Employer Identification Number (EIN). The filer must also have the specific payroll figures allocated to each client, including the total wages, tips, and other compensation, which corresponds to the amount reported on Form 941, Line 2.

Filers must also have the exact amount of federal income tax withheld from those wages and the taxable Social Security and Medicare wages for each client. If any tax credits are being claimed, the portion attributable to each client must be determined.

Completing Form 941 Schedule R

When filling out Schedule R, each client is listed on a separate line. The process begins by entering the filer’s own name and EIN at the top of the schedule, ensuring it matches the information on the aggregate Form 941. The filer must also check the box for the correct calendar quarter and indicate whether they are a Section 3504 agent or a CPEO.

The main body of the form consists of several columns for entering the client-specific data gathered previously. This includes the client’s EIN, name, and their allocated share of the figures from the aggregate Form 941. If the number of clients exceeds the space on the main form, the filer must use Schedule R Continuation Sheets.

Filing and Reconciliation with Form 941

The totals on Schedule R must be reconciled with the aggregate Form 941. The sum of the amounts in each column on Schedule R, including any continuation sheets, must exactly match the corresponding line items on the main Form 941. For instance, the total of the wages column on Schedule R must equal the total wages reported on Line 2 of the aggregate Form 941.

Once reconciled, Schedule R is attached to the aggregate Form 941 and filed together. For entities that file electronically, the schedule is submitted as part of the electronic file package. CPEOs are required to file electronically.