Form 941 Schedule R and Form 940 Schedule R
All approved IRC section 3504 agents must file an aggregate Form 941 if they are reporting wages on behalf of their clients. Form 941 Schedule R must be attached to allocate those aggregate wages per client. Section 3504 agents who elect to file an aggregate Form 940 on behalf of home health care service recipients must attach a Form 940 Schedule R with their aggregate Form 940.
Form 941 Schedule R
All agents authorized to file an aggregate Form 941, Employer’s QUARTERLY Federal Tax Return (PDF), are required to attach Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers (PDF), to the aggregate Form 941.
The requirement went into effect for the first quarter of 2010. The IRS developed the Schedule R (Form 941) to simplify the aggregate reporting process for employers, aggregate filers and the IRS.
An aggregate Form 941 is filed by agents who are approved by the IRS under section 3504 of the Internal Revenue Code. Agents must file Form 2678, Employer/Payer Appointment of Agent (PDF) on behalf of each employer to be approved to act as a section 3504 agent (See special rules for state agents under Notice 2003-70). The common law employer, called a “client” on Schedule R (Form 941), and the section 3504 agent are both liable for all taxes for which the agent is authorized to file.
Employers may also use the Form 2678 to revoke an existing agent appointment. A summary of agent authorities is on the Third Party Arrangement Chart page of IRS.gov.
Using its own Employer Identification Number (EIN), the section 3504 agent files a single Form 941 that aggregately reports the information from all clients the agent represents, as well as information for wages paid to its own employees. The section 3504 agent must remit all federal employment tax deposits and payments related to these filings using its EIN.
The Schedule R (Form 941) will provide the IRS with client-specific information to support the totals reported by an agent on an aggregate Form 941. It includes an allocation line for each client showing a breakdown of their wages and employment tax liability for the tax period. This allows the IRS to reconcile the information for each client with the aggregate totals on the face of the Form 941.
The Schedule R (Form 941) instructions explain all the information a section 3504 agent must provide with respect to each client reported on an aggregate Form 941.
An agent who has more than 15 clients must use a sufficient number of Continuation Sheets for Schedule R (Form 941) to report the correct allocation of wages, taxes, deposits and payments for each client.
The Schedule R (Form 941) may be filed electronically or by paper submission. However, agents filing for 1,000 or more clients must file a paper return. Effective for returns filed electronically after December 31, 2013, there is no limit on the number of clients on the Schedule R. See Publication 4436, General Rules and Specifications for Substitute Form 941, Schedule B (Form 941), and Schedule R (Form 941) for more information if filing electronically.
Form 940 Schedule R
The IRS has also developed Schedule R (Form 940) (PDF) that allocates the aggregate wage, tax, credit, deposit and payment amounts reported on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (PDF). Aggregate Form 940 filing is allowed only for agents of home care service recipients authorized under section 3504.
See Section 3504 Agent Employment Tax Liability, 75 Fed. Reg. 1735-01, 2010-6 I.R.B. 398 (proposed January 13, 2010), available on the IRS Web site (PDF), for more information.
Similar to Schedule R (Form 941), Schedule R (Form 940):
- Allows a section 3504 agent to file a single Form 940 under its EIN for certain clients
- Provides client-specific allocations of the totals reported on the aggregate Form 940
- Explains all of the required information in the form instructions
- Includes continuation sheets to be completed by agents with more than 15 clients
- May be electronically filed, (effective for returns filed electronically after December 31, 2013, there is no limit on the number of clients on the Schedule R).
Agents must use the Schedule R (Form 940) only with an aggregate Form 940, and the Schedule R (Form 941) only with an aggregate Form 941. The Schedules R are not interchangeable.