Schedule R (Forms 941 and Form 940)

The IRS developed the Schedule R for Form 941 and Form 940 to simplify the aggregate reporting process for employers, third-party payor aggregate filers, and the IRS.

The Schedule R for Form 941 and Form 940 is used to identify the third-party aggregate filer and its clients’ related tax liabilities for which reporting and payment is being made on an aggregate form using the Employer Identification Number (EIN) of a third-party payor. 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 and/or Form 940.

An aggregate filer who has more than 5 clients must use the sufficient number of Continuation Sheets for Schedule R to report the correct allocation of wages, taxes, deposits, and payments for each client included on the aggregate form.

Caution: The Schedule R for Form 940 and the Schedule R for Form 941 are not interchangeable.

Schedule R (Form 941)

All approved Internal Revenue Code (IRC) section 3504 agents and certified professional employer organizations (CPEOs) that are reporting wages on behalf of their clients must file an aggregate Form 941, Employer’s Quarterly Federal Tax Return, using its own EIN listing all its clients, as well as the information for wages paid to its own employees with a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers PDF attached. The Schedule R (Form 941) allocates those aggregate wages reported on Form 941 to each of the clients. The section 3504 agent or CPEO must remit all federal employment tax deposits and payments related to these filings using its own EIN.

A summary of section 3504 agent and CPEO authorities is on the Third party arrangement chart page of IRS.gov.

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 (refer to Requirements for maintaining a certification as a CPEO for more information). Refer to Publication 4436, General Rules and Specifications for Substitute Form 941, Schedule B (Form 941), Schedule D (Form 941), Schedule R (Form 941), and Form 8974, for more information if filing electronically.

Schedule R (Form 940)

The IRS also developed Schedule R (Form 940) PDF PDF to allocate the aggregate wage, tax, credit, deposit, and payment amounts reported on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. Aggregate Form 940 filing is allowed for IRC section 3504 agents of home care service recipients and is required for CPEOs.

Refer to 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 (refer to Requirements for maintaining a certification as a CPEO for more information).