• Section: US Payroll
  • Last updated: May 21, 2019, 4:54 p.m.

Troubleshooting 941s

The 941 Report is a bucket report (based upon History). To see a detail of the amounts on the 941 Report, you can view the amounts on the Tax Detail Report (also a bucket/History report). The Wage Basis column will show amounts per employee and a total amount. Remember: Payroll History can be edited!

941 Report differs from the Tax Liabilities report

Because of the two different ways the figures are calculated, rounding can cause the amounts to be different.

The 941 Report shows what the tax amount SHOULD be. Wages for each employee on each check are totaled, and then this total is multiplied by a percent.

The Tax Liabilities report shows EXACTLY what tax was recorded. Wages for each employee are taxed on each check and then each of these tax amounts is totaled.

The Tax Liabilities report is a transaction report (based upon check transactions). To see a detail of the amounts on the Tax Liabilities report, you can view the Payroll Category report (based upon check transactions).

Did you:

  • Delete a check?
  • Why was check deleted?
  • If it's because a deduction was supposed to be exempt but was paid as non-exempt:
    • Did you make the deduction exempt before you deleted the check?
    • If you did, the non-exempt wage will stay in payroll history, causing the discrepancy.
    • Solution:
      • Delete the check as is
      • Un-exempt the deduction in Payroll Categories/Deductions
      • Record the check with the non-exempt deduction, and then delete it.
      • Exempt the deduction and Record the check.

Did you change Payroll History?

  • Why did you change it? Pay History drives the figures on the 941.
  • Recorded Transactions drive the figures on the tax liabilities report. Make sure the changes you made in history are correct and necessary

Fractions of Cents

Q: What are fractions of cents?

  1. Federal law requires you, as an employer, to withhold taxes from your employees’ paychecks. Each time you pay wages, you must withhold - or take out of your employees’ paychecks – certain amounts for federal income tax, social security tax, and Medicare tax (payroll taxes). Under the withholding system, taxes withheld from your employees are credited to you employees in payment of their tax liabilities.
  2. Your liability for employment taxes occurs when you actually pay the employees their wages, not when the pay period ends. For example, if your pay period ends September 24th, but you do not pay the employees until October 1st, their wages would be reported in the fourth quarter (October, November and December), when you actually paid the employees their wages and became liable for the tax, not the third quarter when the pay period ended.
  3. The total social security and Medicare taxes on Form 941 and Form 944 may differ by a small amount from the total on you payroll records due to the fractions of cents that you gained or lost when computing separate amounts for individual employees. You may add or subtract this difference on the line for tax adjustments for fractions of cents. Generally, this should not be more than a few cents. The employee share of amounts shown in column 2 of lines 5a, 5b, or 5c may differ slightly from amounts actually withheld from employees' paychecks due to the rounding of social security and Medicare taxes based on statutory rates

Q: Where are the fractions of cents located on the 941 form?

  1. Fractions of cents on the 941 form can be found under Part 1 at Line 7 (Current quarter’s adjustment for fractions of cents.)

Q: How are fractions of cents calculated?

  1. for Semiweekly depositors it is the total liability on schedule b minus line 6 equals line 7 (Current quarter’s adjustment for fractions of cents.)
  2. for Monthly depositors it is line 10 (this amount is also equal to the total liability for the quarter found under part two line 16) minus line 6 equals line 7 (Current quarter’s adjustment for fractions of cents.)

Q: How do I adjust my Fractions of Cents?

  1. For Semiweekly Depositors you can adjust this amount by adjusting your liabilities on your schedule B.
  2. For Monthly Depositors you can adjust this amount by adjusting your liabilities on page two under part two.

Q: What amount is acceptable for fractions of cents?

  1. Generally, this amount is no more than a few cents.

Reference: IRS Publication 15 (http://www.irs.gov/pub/irs-pdf/p15.pdf).

Exempt Payroll Categories

The totals reported on a 941 can be reduced by any payroll categories with exemptions. If totals on the 941 are lower than you expect it to be, review your payroll categories that have been marked Exempt. Go to your top menu bar and select Lists > Payroll Categories. Double click on a category to open it and then at the bottom of that window click the Exempt button to verify exemptions.