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Data in Form 941, Line 12 doesn't match data in Line 16 or Schedule B
Scenario
You may get the following e-file critical messages when data in Form 941, Line 12 may be different from the data in Line 16 or in the Schedule B.
Error messages
- Monthly or quarterly depositor. Line 12 does not equal Line 16.
- Semi-weekly depositor. Line 12 does not equal Line D of Schedule B.
Cause
These messages display when the Form 941 tax deposit was underpaid. A difference in FICA Social Security or FICA Medicare taxes, rather than in the federal withholding, can cause it. The messages continue to display even after you process the liability adjustments and print the created adjustment liability check.
The Process Liability Adjustments feature is not designed to update Form 941 or Schedule B. Its sole purpose is to make all liabilities equal to the tax due (or overpayment) plus previous payments on the form (for forms that have a line for previous payments). If the form doesn't have a line for previous payments, it makes all liabilities in the period equal to the tax due (or overpayment).
Solutions
Try the following solutions to troubleshoot and correct the diagnostic message on Form 941 in Accounting CS.
Solution 1: Clear form overrides
To clear the diagnostic, you may need to override the amounts on Form 941 or Schedule B. Unless the original checks are deleted and re-entered with the correct taxability setup.
In some examples, there may be overrides on Schedule B from earlier quarters. Overrides made to payroll tax forms remain the same until cleared manually, and these overrides may affect calculations on other forms or other lines on the same form.
Take the following steps to remove any override edits that were made to the 941 in earlier periods that may affect the current period 941 calculations.
- SelectActions, thenEdit Payroll Tax Forms.
- Select a client from the client dropdown list.
- SelectReconciliationfrom the Form type field.
- Select theQuarterlycheckbox, then select the quarter and year you're processing.
- SelectRefresh.
- SelectEdit, thenClear Form Overrides.noteThis removes any amounts that were entered manually.
- Verify the amounts on the 941.
Solution 2: Use the Analyze Client Activity - Payroll Forms view to verify amounts on Form 941
Analyze Client Activity - Payroll Forms
view to verify amounts on Form 941Use the
Analyze Client Activity - Payroll Forms
view to verify the amounts on the federal Form 941. You can also check detailed information about each payroll tax, each employee amount, and each payroll check.note
This tool was turned off with the 2020.2.0 release due to the complexities of Form 941 for 2020 and the related COVID-19 credits and tax deferrals.
- From theActions,Edit Payroll Tax Formsscreen (with Form 941 selected), selectActions,Analyze Client Activity, thenPayroll Tax Form.
- The FICA-SS, FICA-MED, FICA-MED2, and FIT amounts should match the line 12 amount on the Form 941.
- If they don't, select the tax links to review the names of the employees for whom those taxes apply.
- Select each employee name link to view the list of any handwritten and/or printed checks that have tax amounts that are included in the form totals.
- Select any individual checks and other transactions to review their details within theActions,Enter Transactionsscreen.
Solution 3: Review adjustments and overrides made to employee checks
Payroll check overrides can cause differences between employee and employer taxes and differences between the calculated taxable wages and the overridden amounts.
If you override payroll check amounts in the Transaction Detail section of the Enter Transactions screen, Accounting CS displays those amounts in red text, and automatically recalculates all payroll check amounts.
- SelectActions, thenEnter Transactions.
- Clear the Journal/Bank account and the Posting Period filters.
- Select theDatecolumn heading to sort the grid by date.
- Beginning with the 1st payroll check of the quarter, review the checks, checking the Employee and Employer Taxes sections for any override (red) amounts for the FICA - SS, FICA - MED, FICA-MED2, and FIT.noteAny checks with overrides could potentially be the issue.
- Verify the amount that should have been calculated for the tax on the check. Run thePayroll Journal with Taxable Wagesreport to narrow down these differences.
- Identify any overrides that were made in the Taxes section on the payroll check.
- Do these overrides equal the taxable wages x the tax rate?
You can quickly identify the taxable wages for the check in the
Edit
, Adjust Taxable Wages
window. You can then adjust the taxable wages for the check, delete and re-enter the checks without overrides, or change the 941 form.If there are a number of replaced checks, it may be easier to review the Payroll Journal with Taxable Wages report for the quarter.
- SelectFile, thenPrint Reports.
- Select and generate thePayroll Journal with Taxable Wagesreport for the current processing quarter.
- Verify that the tax rates and taxable wages for the employees are correct on the report
important
The Payroll Journal with Taxable Wages report includes detailed information for all or selected payroll checks for the specified date or range of dates. It includes itemized withholding taxes with the corresponding taxable wages. This report can be printed for any range you want and includes the individual checks for that period.
Example: Enter overrides on a payroll check
A medical insurance pay item is set up accidentally as a regular deduction rather than a special type Café Plan in the
Actions
, Setup Payroll Items
screen. Instead of correcting the deduction to be the Special Type of Cafeteria plan, someone left the deduction as it was, and overrode the calculations for the payroll check in the Actions
, Enter Transactions
screen.note
- The taxable wages in this example are $650.00, and will remain so, unless you go toEnter,Adjust Taxable Wages, thenEnter Transactionsscreen to adjust taxable wages.
- We recommend creating a new deduction before entering any payroll checks or changing the existing Health Insurance deduction to be tax exempt.
The following table compares how the form 941 will calculate with the payroll check overrides noted earlier versus how the 941 will calculate when the deductions are set up correctly as a Café Plan. In this example, the gross wages are $650.00 and the deduction is $50.00.
941 Line numbers | Overriding the tax withholdings | Using the correct deduction setup (no overrides) |
|---|---|---|
Line 2, Wages, tips and other compensation | 650.00 | 600.00 |
Line 3, Federal Income Tax withheld from wages, tips, and other compensation | 74.50 | 74.50 |
5a, Taxable social security wages | 650.00 x 0.124 = 80.60 | 600.00 x 0.124 = 74.50 |
5c, Taxable Medicare wages & tips | 650.00 x 0.029 = 18.85 | 600.00 x 0.029 = 17.40 |
Line 12, Total taxes after adjustments | 173.95 | 166.30 |
Line 13, Total deposits for this quarter | 166.30 | 166.30 |
Line 14, Balance due | 7.65 | 0 |
Line 15, Overpayment | N/A | N/A |
Line 16 (or Schedule B), Total liability | 166.30 | 166.30 |
Solution 4: Review changes in the taxability of payroll items
When the taxability of a payroll item is changed, it may affect the taxable wages amount in a payroll check.
If you don't know if a payroll item was changed, there are several areas to look for changes.
- Go toSetup,Employeesscreen, then select theEventstab.
- Check if payroll items were added or changed for the employee.
- Go toSetup,Firm Information,Firmscreen, then select theEventstab.
- Search for added or changed payroll items for the client that may affect the employee's wages.
- Verify the taxability of all payroll items.
- Go toSetup,Paycheck Itemsscreen, then select theExemptionstab.
- Check if any pre-tax deduction items are in use, and verify that they're set up correctly.
After you locate the cause of the differences, adjust the taxable wages for the check, delete and re-enter the checks without overrides, or change the 941 form.
Example: Change the tax exempt status of payroll items with an effective date that is before the current period
Adjusting taxable wages for employees without considering the effects on previously filed payroll tax forms can also create differences in the 941 form. This example displays the effects of changing a payroll deduction from an after-tax deduction to a pre-tax deduction.
The following table shows how the form 941 will calculate with the original $50 deduction set up as after-tax versus how it will calculate when the deduction taxability is changed to pre-tax. In this example, gross wages are $650 and the deduction is $50.
Note the differences between line 12 and line 16 (or Schedule B) when the deduction is changed to pre-tax.
941 Line numbers | Deduction setup as after Tax | Deduction changed to pre-tax retroactive to first of the year |
|---|---|---|
Line 2, Wages, tips and other compensation | 650.00 | 600.00 |
Line 3, Federal Income Tax withheld from wages, tips, and other compensation | 82.00 | 82.00 |
5a, Taxable social security wages | 650.00 x 0.124 = 80.60 | 600.00 x 0.124 = 74.50 |
5c, Taxable Medicare wages & tips | 650.00 x 0.029 = 18.85 | 600.00 x 0.029 = 17.40 |
Line 12, Total taxes after adjustments | 181.46 | 173.80 |
Line 13, Total deposits for this quarter | 181.46 | 181.46 |
Line 14, Balance due | 0 | 0 |
Line 15, Overpayment | N/A | 7.66 |
Line 16 (or Schedule B), Total liability | 181.46 | 181.46 |
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Enter data for Form 941
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