Schedule R (Form 941) Allocation Schedule for Aggregate Form 941 Filers: A Complete Guide (2013)
If you're a payroll agent or third-party payer filing taxes for multiple clients, Schedule R is the form that breaks down where all those numbers on your aggregate Form 941 actually came from. Think of it as the behind-the-scenes spreadsheet that shows the IRS how much payroll tax belongs to each of your individual clients. Here's everything you need to know about Schedule R for 2013 in plain English.
What the Form Is For
Schedule R (Form 941) is an allocation schedule that accompanies an aggregate Form 941. When you file a combined payroll tax return for multiple employer clients (called an “aggregate” return), Schedule R is mandatory—it breaks down the total figures into individual client-by-client amounts.
Who uses this form? Primarily IRS-approved agents under section 3504. These are professionals who have received advance written approval from the IRS to file payroll tax returns on behalf of multiple employers. To get this approval, you must have filed Form 2678 (Employer/Payer Appointment of Agent) and received IRS authorization before you can file Schedule R.
The form allocates seven key tax components for each client: total wages paid, federal income tax withheld, Social Security and Medicare taxes, any taxes due on unreported tips, total taxes after adjustments, and deposits made. You'll also report the same information for your own employees (if you have any) separately on line 18. The grand total on line 19 must match the amounts shown on your aggregate Form 941—if they don't, you have an error that needs correction before filing.
When You’d Use It (Late/Amended Filing)
Regular Filing
Schedule R must be filed every quarter whenever you file an aggregate Form 941. There's no getting around it—if you're an approved agent filing aggregate returns, Schedule R is required each quarter, even if you have just one client.
Late Filing
If you miss a deadline, you still need to file Schedule R along with your late Form 941. The same penalties that apply to late Form 941 filing apply here—5% of unpaid taxes per month (up to 25% maximum). The clock starts ticking from the due date:
- April 30 for Q1
- July 31 for Q2
- October 31 for Q3
- January 31 for Q4
If you made timely deposits covering your full tax liability, you get an extra 10 days.
Amended Returns
When you need to correct a previously filed aggregate Form 941, you'll use Form 941-X (the adjusted/amended version), and you must also complete and attach Schedule R to show the corrected client allocations. You generally have three years from the date you filed Form 941, or two years from the date you paid the tax (whichever is later), to file Form 941-X for refunds or corrections.
Key Rules for 2013
The 15-Client Threshold
The main Schedule R form accommodates up to 15 clients on lines 1–15. If you have more than 15 clients, you must use additional “Continuation Sheets for Schedule R” to report client 16 and beyond. Each continuation sheet holds 25 more clients. You then carry the subtotals from all continuation sheets to line 17 of the main Schedule R form.
Social Security Wage Base
For 2013, the Social Security wage base limit was $113,700. You stop collecting and reporting Social Security tax once an employee reaches this threshold, but Medicare tax continues on all wages with no limit. The employee Social Security tax rate was 6.2% (it had been temporarily reduced to 4.2% in prior years).
Electronic Filing Threshold
If you're filing for 1,000 or more clients, you must file electronically through an IRS-approved transmitter using the Modernized e-File (MeF) system. Below 1,000 clients, you could choose paper or electronic filing.
No Commas in Large Numbers
When entering amounts over $999.99, do not use commas. Enter 125000.00, not 125,000.00. This helps the IRS’s scanning equipment read your forms correctly.
Matching Requirement
The totals on line 19 of Schedule R must exactly match the corresponding lines on your aggregate Form 941. Column (b) total must match Form 941 line 2, column (c) must match line 3, column (d) must match line 5e, and so forth. Any mismatch is an error that must be fixed before submission.
Step-by-Step: How to Complete Schedule R (High Level)
Step 1: Gather Client Records
Collect payroll records for each client for the quarter, including total wages paid, federal income tax withheld, Social Security and Medicare taxes, and deposits made. You'll need this data broken down client-by-client.
Step 2: Complete the Header
Enter your EIN (as the agent) and your business name exactly as shown on the attached Form 941. Check the appropriate quarter box and enter the calendar year.
Step 3: Allocate Client Information (Lines 1–15)
For each client, enter their EIN in column (a), then complete columns (b) through (g) with their allocated amounts. Each column corresponds to a specific line from Form 941. Work methodically—one client per line, one column at a time.
Step 4: Use Continuation Sheets if Needed
If you have more than 15 clients, continue on as many continuation sheets as necessary (each holds 25 clients). Total each continuation sheet on line 26 and carry that subtotal to line 17 of the main Schedule R.
Step 5: Add Your Own Employees (Line 18)
If you paid wages to your own employees (separate from client employees), report those amounts on line 18 using the same column structure.
Step 6: Calculate Totals (Line 19)
Add lines 16, 17, and 18 for each column. These line 19 totals must match your aggregate Form 941.
Step 7: Cross-Check Everything
Verify that each column total on line 19 matches the corresponding line on Form 941. If they don't match, find and correct the error before filing. Double-check all EINs—a single wrong digit can cause processing problems.
Common Mistakes and How to Avoid Them
Mistake #1: Mismatched Totals
The most common error is when Schedule R line 19 totals don't match Form 941 amounts.
Prevention: Use a calculator or spreadsheet for all calculations, and always verify line 17 includes all continuation sheet amounts before computing line 19.
Mistake #2: Wrong EINs
Entering an incorrect EIN—either your own at the top or a client's EIN in column (a)—causes the IRS's systems to reject or delay your return.
Prevention: Copy EINs directly from official documents (client Form 2678, prior Forms 941).
Mistake #3: Forgetting Continuation Sheets
Agents with many clients sometimes attach continuation sheets but forget to carry the subtotals to line 17 of the main form.
Prevention: Create a filing checklist and confirm line 17 before submission.
Mistake #4: Mismatched Quarter
Checking a different quarter box on Schedule R than on Form 941 causes confusion and processing delays.
Prevention: Fill out both forms side by side and verify quarter consistency.
Mistake #5: Including Commas or Dollar Signs
Commas and dollar signs confuse the IRS's scanning equipment.
Prevention: Enter numbers without punctuation except decimals (50000.00 not $50,000.00).
Mistake #6: Omitting Line 18 Employee Information
Agents who have their own employees sometimes forget to report their own payroll information.
Prevention: Treat your business as an additional “client” for recordkeeping.
What Happens After You File
Processing Timeline
Once received, the IRS processes Schedule R alongside your Form 941. Processing typically takes 2–6 weeks for paper returns, faster for electronic submissions.
Client Account Updates
The IRS uses Schedule R data to credit each client’s payroll tax account, ensuring each client’s Social Security and Medicare wages are properly recorded.
IRS Matching Program
The IRS compares your quarterly Schedule R submissions against year-end Forms W-2 data (reported on Form W-3). Discrepancies may result in correspondence audits or notices.
No Separate Confirmation
You won't receive a separate acknowledgment for Schedule R—it's considered part of your Form 941 package. If your Form 941 is accepted, your Schedule R was accepted too.
Audit Risk
Schedule R forms receive extra scrutiny because they involve multiple taxpayers. Maintain detailed client-by-client payroll records for at least four years.
FAQs
Q1: Do I need Schedule R if I'm only filing for one client?
Yes. If you're an IRS-approved section 3504 agent filing an aggregate Form 941, Schedule R is mandatory—even for one client.
Q2: What if my client's information changes mid-quarter?
Report totals for the entire quarter as paid. If a client leaves mid-quarter, report their wages up to your last payroll date with them.
Q3: Can I file Schedule R electronically?
Yes. In 2013, e-filing was available through IRS-approved providers, mandatory for 1,000+ clients.
Q4: What happens if I discover an error after filing?
File Form 941-X and attach a corrected Schedule R showing the proper allocations.
Q5: Do I send deposits separately for each client?
No. You make one combined deposit for all clients; Schedule R tells the IRS how to allocate it.
Q6: How long should I keep Schedule R records?
Keep employment tax records for at least four years from the due date or payment date.
Q7: What if my continuation sheets don't fit in the envelope?
Use a larger envelope. Never separate Schedule R from Form 941. For large filings, e-file instead.
For official forms and instructions: Visit IRS.gov or call the IRS Business and Specialty Tax Line at 1-800-829-4933 for assistance with Schedule R questions.
