All approved IRC section 3504 agents and certified professional employer organizations (CPEOs) must file an aggregate Form 941, with Schedule R (Form 941) attached, if they are reporting wages on behalf of their clients. The Schedule R (Form 941) allocates those aggregate wages reported on Form 941 to each of the clients. Section 3504 agents who elect to file an aggregate Form 940 on behalf of home health care service recipients and all CPEOs must attach a Schedule R (Form 940) to their aggregate Form 940.
Schedule R (Form 941)
All section 3504 agents and CPEOs are required to attach Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers (PDF), to the aggregate Form 941, Employer’s QUARTERLY Federal Tax Return.
The IRS developed the Schedule R (Form 941) to simplify the aggregate reporting process for employers, aggregate filers and the IRS.
A summary of section 3504 agent and CPEO authorities is on the Third Party Arrangement Chart page of IRS.gov.
Using its own Employer Identification Number (EIN), the section 3504 agent or CPEO files a single Form 941 that aggregately reports the information from all of its clients, as well as information for wages paid to its own employees. The section 3504 agent or CPEO 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 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 needed with respect to each client reported on an aggregate Form 941.
An aggregate filer who has more than 10 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. . Generally, a CPEO must electronically file the Schedule R (Form 941), but certain exceptions apply (see Requirements for Maintaining a Certification as a CPEO for more information). 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.
Schedule R (Form 940)
The IRS also developed Schedule R (Form 940) (PDF) to allocate 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 for IRC section 3504 agents of home care service recipients and is required for CPEOs.
See Section 3504 Agent Employment Tax Liability, 26 CFR 31.3504-1, for more information.
The Schedule R (Form 940) may be filed electronically or by paper submission. Generally, a CPEO must electronically file the Schedule R (Form 940), but certain exceptions apply (see Requirements for Maintaining a Certification as a CPEO for more information).
The Schedules R (Form 940 and Form 941) are not interchangeable.