Tuesday, May 31, 2011

IRS Having Problems Processing Form 941, Schedule R

The IRS told participants during the May 12 payroll industry conference call that it is having some problems processing Form 941, Schedule R, Allocation Schedule for Aggregate Form 941 Filers.

Schedule R is used by “Form 2678 agents” to file an aggregate return on behalf of multiple taxpayers. An agent files Form 2678, Employer/Payer Appointment of Agent, to receive permission to file an aggregate return for all of his or her clients under the agent's EIN. A “Form 2678 agent” assumes joint liability with the employer for the employer's Social Security, Medicare, and federal income tax withholding responsibilities.

There are seven columns on Schedule R that agents must complete to allocate information on Form 941 to each of their clients. The IRS notes that some agents are submitting a spreadsheet with this information, rather than submitting the Schedule R itself. The spreadsheet has the same columns as Schedule R, but the agents are squeezing as much information onto a page as they can. In this situation, the IRS must re-type the information, which is not only time-consuming, but it can also lead to more errors. The IRS is advising agents to only submit information that conforms to the format of Schedule R (i.e., not to add lines, create spreadsheets, etc.).

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