Building a smooth year-end process begins now
The best year-end building block is a correct first-quarter Form 941. Here’s help.
• Before filing, reconcile quarterly data with the wage/tax data from the general ledger or service bureau reports; watch the totals back to gross wages.
• Check the box at the top of the form for the quarter and make sure the quarter checked is the same as shown on Schedule B, Report of Federal Tax Liability (ROFT).
• Check the Yes box and complete the third-party designation information in Part 4 if you want to discuss this form with the IRS.
• Check that numbers aren’t transposed; use a minus sign to enter negative amounts.
• Report employees’ earnings up to the Social Security taxable wage base ($132,900).
• Enter total wages and other compensation paid and taxable fringe benefits provided on Line 2, even if you didn’t withhold taxes from the payments.
• The amount monthly depositors report in Part 2, Line 16, must match the Line 12 amount.
• Semiweekly depositors verify that the ROFT and Line 12 balance. Reminder: Record tax liabilities, not deposits, to the ROFT.
• Ensure that the dates/tax liabilities match the ROFT and your EFTPS deposit records.
• Print a PDF copy of the 941 in actual size, not shrink-to-fit.
• Reconcile year-to-date data after filing, including imputed values for noncash compensation. What must balance: 941 amounts/W-2 summary/payroll reports. Run sample W-2s to confirm the reconciliation. Tip: Create a reconciliation spreadsheet. Advantages: Fourth-quarter totals won’t be a surprise and problems can be found and fixed easily.
• Balance gross-to-net and taxable wages quarterly. For later quarters, balance cumulative payrolls to quarterly totals and balance quarterly totals against each other; identify discrepancies and correct them.
• Make interest-free adjustments of underreporting errors by filing Form 941-X by the due date of Form 941 for the quarter during which the error is discovered and pay any tax due. Also, file W-2c/W-3c forms.
Review the payroll bank accounts for additional tax debits or credits made by your service bureau; book any corresponding journal entries.