Schedule B (Form 941): Report of Tax Liability for Semiweekly Schedule Depositors – 2021 Guide

If you're an employer who withholds taxes from your employees' paychecks, you're probably familiar with Form 941, the quarterly federal tax return. But if your business crosses a certain threshold—reporting more than $50,000 in employment taxes during a specific lookback period—you'll need to file an additional form called Schedule B. This guide breaks down everything you need to know about Schedule B for the 2021 tax year in plain English.

What Schedule B (Form 941) Is For

Schedule B (Form 941) is a detailed report that tracks exactly when you incurred employment tax liability throughout a quarter. Think of it as a daily diary of your tax obligations. While Form 941 itself reports your total quarterly tax liability, Schedule B drills down to show the IRS which specific dates you paid wages to employees and how much tax you owed on each of those days.

The form captures three types of taxes: federal income tax withheld from employee paychecks, the employee share of Social Security and Medicare taxes (which you withhold), and the employer share of Social Security and Medicare taxes (which you pay). Your tax liability is tied to the date you paid wages, not when you made deposits or when the payroll period ended.

The IRS uses Schedule B primarily to verify that you deposited your employment taxes on time and in the correct amounts. If you're classified as a "semiweekly schedule depositor," this form becomes mandatory because you're required to make more frequent tax deposits—typically within three banking days of paying wages—rather than monthly deposits. IRS.gov

When You’d Use Schedule B (Including Late and Amended Filings)

Regular Filing

Schedule B is filed as an attachment to your quarterly Form 941 and has the same due date—the last day of the month following the end of each quarter (April 30, July 31, October 31, and January 31). You must file Schedule B if you're a semiweekly schedule depositor for any part of the quarter, even if you only became one partway through.

However, you don't need to file Schedule B if your total tax liability on Form 941, line 12, is less than $2,500 for the quarter, regardless of your depositor status.

Amended Schedule B

If the IRS assesses you a failure-to-deposit (FTD) penalty and you made an error on your original Schedule B that doesn't change your total quarterly liability, you can file an amended Schedule B to potentially reduce the penalty. For example, if you reported $3,000 of liability on day 1 of month 1 when it actually belonged on day 1 of month 3, you'd write "Amended" at the top of a corrected Schedule B and file it at the address shown in your penalty notice.

With Form 941-X

If you're filing Form 941-X (the adjusted employer's quarterly return) and you have a tax decrease while also having been assessed an FTD penalty, you can submit an amended Schedule B with Form 941-X. If you're filing a late Form 941-X showing a tax increase, you must include an amended Schedule B to avoid an "averaged" FTD penalty. IRS.gov

Key Rules for 2021

Who Must File

You're required to file Schedule B if you're a semiweekly schedule depositor. You become a semiweekly depositor in one of two ways:

• The Lookback Period Test: If you reported more than $50,000 in employment taxes during the four-quarter lookback period (July 1, 2019, through June 30, 2020, for calendar year 2021), you're automatically a semiweekly depositor for all of 2021.
• The $100,000 Rule: If you accumulate $100,000 or more in tax liability on any single day during the current or prior calendar year, you immediately become a semiweekly depositor—even if you were previously a monthly depositor—and you must begin making next-day deposits. IRS.gov

2021 Special Credits

The 2021 version of Schedule B includes specific provisions for adjusting your tax liability for nonrefundable credits related to COVID-19 relief, including:

• Qualified small business payroll tax credit for increasing research activities (limited to employer share of Social Security tax)
• Nonrefundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021
• Nonrefundable portion of employee retention credit for wages paid between April 1 and June 30, 2021 (limited to employer share of Social Security tax)
• Nonrefundable portion of employee retention credit for wages paid between July 1 and September 30, 2021 (limited to employer share of Medicare tax)
• Nonrefundable portion of COBRA premium assistance credit

Important 2021 Change

The Infrastructure Investment and Jobs Act limited the employee retention credit in the fourth quarter of 2021 to only "recovery startup businesses." For most employers, the credit ended on September 30, 2021. IRS.gov

Step-by-Step (High Level)

Step 1: Enter Your Business Information

At the top of Schedule B, carefully enter your Employer Identification Number (EIN) and business name exactly as they appear on your Form 941. Check the box for the correct quarter and enter the calendar year (2021).

Step 2: Enter Tax Liability by Date

Schedule B is divided into three months corresponding to the quarter. Each month has 31 numbered lines representing each day of the month. Enter your tax liability only on the lines that correspond to dates when you paid wages. Remember: use the wage payment date, not the date you made deposits or the payroll period end date.

For example, if you paid employees on April 2, April 16, and April 30, you'd enter amounts only on lines 2, 16, and 30 of Month 1 (April).

Step 3: Apply Nonrefundable Credits (If Applicable)

If you claimed nonrefundable credits on Form 941 (lines 11a through 11e), you must reduce your liability on Schedule B accordingly. Apply the entire quarter's credit amount starting with your first payroll payment of the quarter, reducing that day's liability but not below zero. Then carry any remaining credit forward to successive payroll dates until fully used. This ensures your total Schedule B liability matches Form 941, line 12.

Step 4: Calculate Monthly and Quarterly Totals

Add up all entries for each month, then add the three monthly totals together. Your "Total Liability for the Quarter" must exactly match the amount on Form 941, line 12. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Using Deposit Dates Instead of Wage Payment Dates

Many employers mistakenly enter amounts on Schedule B based on when they made deposits to the IRS. Schedule B tracks when you paid wages and incurred the tax liability, not when you made deposits. The IRS already has your deposit information from electronic funds transfer records.
Solution: Review your payroll records and identify the exact dates you paid employees each quarter. Those are the dates that should have entries on Schedule B.

Mistake #2: Not Matching Form 941, Line 12

Your Schedule B total must equal Form 941, line 12, exactly. Don't reduce your Schedule B total by refundable portions of credits (like the refundable employee retention credit), as these don't affect your tax liability—only deposits.
Solution: Before filing, double-check that the quarterly total on Schedule B matches line 12 of Form 941 precisely.

Mistake #3: Failing to File Schedule B When Required

Some semiweekly depositors forget to attach Schedule B to Form 941 or mistakenly file the monthly deposit schedule instead. If you're a semiweekly depositor and don't file Schedule B, the IRS may assess an "averaged" FTD penalty, which can be substantial.
Solution: Verify your depositor status. If you reported more than $50,000 in taxes during the lookback period or ever hit the $100,000 threshold, check the semiweekly box on Form 941, Part 2, and attach Schedule B.

Mistake #4: Incorrectly Applying Nonrefundable Credits

The 2021 credits have specific ordering rules and limitations. For example, the employee retention credit for Q2 2021 reduces only the employer share of Social Security tax, while the Q3 credit reduces only the employer share of Medicare tax.
Solution: Carefully review the credit application instructions. Start with the first payroll of the quarter and systematically reduce liabilities in sequence. Don't reduce any day's liability below zero. IRS.gov

What Happens After You File

After you file Schedule B with Form 941, the IRS uses it to verify your deposit compliance. The agency compares the tax liabilities you reported on Schedule B against your actual deposit dates and amounts (which they receive from your electronic deposits) to determine whether you made timely deposits.

If Everything Is Correct: You'll receive no further correspondence about Schedule B. The IRS will process your Form 941 normally.

If There Are Discrepancies: The IRS may assess a failure-to-deposit penalty. FTD penalties range from 2% to 15% of the underpaid amount, depending on how late the deposit was:

• 2% if you deposit 1-5 days late
• 5% if you deposit 6-15 days late
• 10% if you deposit 16 or more days late or within 10 days of receiving the first IRS notice
• 15% for amounts still unpaid more than 10 days after the IRS notice or the day the IRS demands immediate payment

If you receive an FTD penalty notice and believe there was an error on your Schedule B (not a late deposit, but incorrect reporting), you can file an amended Schedule B to potentially reduce or eliminate the penalty.

Record Retention: Keep copies of Schedule B and all supporting payroll records for at least four years from the due date of the return or the date you filed it, whichever is later. IRS.gov

FAQs

Q1: What's the difference between a monthly and semiweekly schedule depositor?

Monthly depositors have tax liability of $50,000 or less during the lookback period and must deposit employment taxes by the 15th day of the following month. Semiweekly depositors reported more than $50,000 in the lookback period and must deposit within three banking days after the payroll date. Semiweekly depositors must file Schedule B; monthly depositors don't.

Q2: I became a semiweekly depositor in the middle of the quarter. Do I still need to file Schedule B?

Yes. If you become a semiweekly depositor at any point during the quarter (typically by hitting the $100,000 threshold on a single day), you must complete Schedule B for the entire quarter, including dates when you were still a monthly depositor.

Q3: Can I skip Schedule B if my tax liability is small?

If your total tax liability on Form 941, line 12, is less than $2,500 for the quarter, you don't need to file Schedule B regardless of your depositor status. However, if you meet the semiweekly criteria and your liability is $2,500 or more, Schedule B is required.

Q4: What if I paid wages on a date that doesn't exist in a particular month (like the 31st in a month with 30 days)?

Only use the numbered lines that correspond to actual dates. If you paid wages on April 30, use line 30 of Month 1, even though there are 31 lines available. Leave unused lines blank.

Q5: How do I handle the employee retention credit on Schedule B if I paid qualified wages in the middle of the quarter?

Apply the entire quarter's nonrefundable portion of the credit starting with the first payroll date of the quarter, regardless of when you actually paid the qualified wages. Reduce the first day's liability (but not below zero), then carry forward any remaining credit to successive payroll dates until exhausted.

Q6: I made a mistake on my Schedule B. How do I fix it?

If you haven't been assessed a penalty, you typically don't need to file an amended Schedule B unless you're also filing Form 941-X for other corrections. If you received an FTD penalty notice and the error affected penalty calculation, write "Amended" at the top of a corrected Schedule B and mail it to the address in the penalty notice.

Q7: Where can I get Schedule B for 2021?

Schedule B uses the January 2017 revision for all years, including 2021. You can download it from IRS.gov or request it by calling 800-TAX-FORM (800-829-3676). The 2021 instructions (December 2021 revision) are available at IRS.gov.

Additional Resources:

• Form 941 Instructions: IRS.gov/Form941
• Publication 15 (Circular E), Employer's Tax Guide: IRS.gov/publications/p15
• Federal Tax Deposit Information: IRS.gov/ETD
• IRS Business and Specialty Tax Line: 800-829-4933

Understanding Schedule B doesn't have to be overwhelming. By tracking your wage payment dates carefully, applying credits correctly, and double-checking that your totals match Form 941, you'll satisfy this important reporting requirement and avoid costly penalties.