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Draft Instructions Issued for Revised Form 941 Schedule R

May 21, 2020, 5:39 PMUpdated: May 22, 2020, 3:39 PM

Draft instructions for a revised supplemental form that is to be used by aggregate filers of 2020 quarterly federal tax return data were released May 20 by the Internal Revenue Service.

The draft instructions are for Schedule R, Allocation Schedule for Aggregate Form 941 Filers, which was released May 5 as a draft.

Schedule R is to be adjusted to accommodate data reporting for payroll-related relief measures established by the Families First Coronavirus Response Act (FFCRA), enacted March 18, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted March 27.

The schedule’s redesign is to facilitate reporting of information pertaining to the employer’s credit for qualified sick and family leave wages, the employee retention credit, and the deferral of employer Social Security tax. Revisions to the two-page schedule included a new check box for other third-party filers. The form also has 25 columns, up from nine, for information reporting from Form 941, Employer’s Quarterly Federal Tax Return.

Third-party payroll processors and certified professional employer organizations (CPEOs) must complete Schedule R each time they file aggregate Form 941 data, the IRS said. Prospective reporting agents acting for an employer must file Form 2678, Employer/Payer Appointment of Agent, with the IRS. The form must be on file and approved before a reporting agency can file Schedule R.

Noncertified PEOs that file aggregate Forms 941 must file Schedule R if any clients claim the qualified small business payroll tax credit for increasing research activities, credit for qualified sick or family leave wages, or the employee retention credit; or the client is deferring the employer share of Social Security tax, the instructions said.

If an employer that is eligible for the qualified-sick and family-leave credits or the employee retention credit contracts with a noncertified PEOs to report and pay its federal employment taxes, the PEO would need to report the credits on an aggregate Form 941 and separately report the credits allocated to the employer on Schedule R, the Form 941 draft instructions said.

The requirement to separately report information on Schedule R also applies if an employer is deferring its share of Social Security tax on Line 13b of Form 941 or if an employer is eligible for the qualified small-business payroll tax credit for increasing research activities, the draft instruction said.

Reporting agents and noncertified PEOs are to file Form 941 and Schedule R electronically or by paper submission; certified PEOs are to file Form 941 and Schedule R electronically.

Draft forms and instructions are not final and may be updated.

(Corrected to indicate that revised Schedule R is to have 25 columns.)

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergindustry.com

To contact the editor responsible for this story: Howard Perlman in Washington at hperlman@bloombergindustry.com

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