Schedule R (Form 941) Allocation Schedule for
Aggregate Form 941 Filers – 2015 Checklist
Schedule R allocates wages, tips, withheld taxes, and credits among multiple clients when
Section 3504 agents or Certified Professional Employer Organizations file a single aggregate
Form 941 for 2015. This allocation schedule provides the IRS with client-specific information to support the totals reported on the aggregate return.
Eligibility Requirements for Aggregate Filing
Aggregate Form 941 filing is available exclusively to IRS-approved Section 3504 agents and
CPEOs. Section 3504 agents must file Form 2678, Employer/Payer Appointment of Agent, and receive IRS approval before acting as an agent for employers.
The agent files Form 941 on an aggregate basis using the agent’s employer identification number and attaches Schedule R to allocate wages and taxes to each client. CPEOs receive certification through a separate IRS application process that authorizes them to handle employment tax duties for client companies.
Preparing Required Information
Gather all payroll records for each client included in the aggregate filing before starting
Schedule R. Verify that each entity has a valid employer identification number matching IRS records.
You must confirm the principal business activity code for each location and identify any businesses that began or ceased operations during 2015. Exact name and employer identification number matching IRS records are required for all clients listed on Schedule R.
Step-by-Step Completion Process
Step 1: List Each Client Entity
Enter the legal name and employer identification number for each client in column (a) of
Schedule R. Include all entities with employees during the tax year, even if one location had zero wages for the quarter.
Step 2: Allocate Taxable Social Security Wages
Distribute total wages subject to Social Security tax across each client column. Wages include only amounts subject to the 6.2% Social Security tax rate, up to the wage base limit of $118,500 per employee.
Do not include amounts exceeding this wage cap for any individual employee. The sum of all client allocations must equal the Form 941 line total for taxable social security wages.
Step 3: Allocate Medicare Wages
Enter wages subject to Medicare tax in the appropriate column for each client. Medicare wages include all compensation subject to the 1.45% Medicare tax rate for both employer and employee.
Do not reduce Medicare wages by the social security wage cap, as Medicare tax applies to all wages without limitation. Employees earning over $200,000 are also subject to an Additional
Medicare Tax of 0.9%, which is an employee-only tax with no employer share.
Step 4: Report Tips by Client
List reported tips by client on the appropriate line of Schedule R. Tips are included in the taxable wage calculations on Form 941 and must be allocated to each client based on employee reports.
Tips allocated to each client must come from employee reports on Form 4070 or payroll records maintained for that specific client. Verify that the total allocated tips equals the total tips reported on the aggregate Form 941.
Step 5: Allocate Federal Income Tax Withheld
Allocate total federal income tax withheld to each client location based on actual withholding from payroll records. Each client column total should reflect actual withholding from that entity’s employees only, not estimated amounts.
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Step 6: Allocate Adjustments and Corrections
If Form 941 includes adjustments or corrections from prior quarters, allocate these amounts to the correct client. All adjustments must be tied to specific payroll months and locations where the error occurred.
Reconciliation and Filing Requirements
Sum all amounts in each line across all Schedule R client columns before filing. Each column total must exactly match the corresponding Form 941 line amount.
If totals do not match, verify that no client was omitted and that no wage category was double-counted across locations. Ensure each Schedule R client column references the same employer identification numbers listed on the aggregate Form 941.
Provide one completed Schedule R with the principal Form 941 filing for each quarter. Do not file separate Schedule R forms for each client location.
Section 3504 agents and CPEOs must file Schedule R each time they file Form 941 on an aggregate basis. The allocation schedule is required documentation for aggregate employment tax returns.
Key Tax Rates and Requirements for 2015
The Social Security tax rate in 2015 is 6.2% each for employee and employer, totaling 12.4%, applied to wages up to $118,500 per employee. In 2015, the Medicare tax rate was 1.45% for both employees and employers, resulting in a total of 2.9%. No wage cap applies to Medicare wages.
An additional Medicare tax of 0.9% applies only to employee wages exceeding $200,000 as an employee-only tax with no employer share. Employers must withhold the Additional Medicare
Tax from wages paid in excess of $200,000 to an employee and continue withholding each pay period until the calendar year ends.
Critical Compliance Requirements
Client employer identification numbers on Schedule R must match IRS entity records exactly.
Mismatched employer identification numbers may delay processing of the aggregate Form 941.
Adjustments and corrections must be traced to the specific calendar month and client location where the error occurred rather than allocated by year-end estimate. This requirement ensures accurate employment tax reporting and proper crediting to employee Social Security earnings records.
Do not abbreviate client names or modify employer identification numbers when entering information on Schedule R. The Section 3504 agent’s or CPEO’s primary employer identification number should appear on the aggregate Form 941 as the filer.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
