What to do when data in Form 941, Line 12 does not match data in Line 16 or Schedule B

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In Accounting CS, data in Form 941, Line 12 (Total taxes after adjustments) may be different from the data in Line 16 (Deposits) or in the Schedule B. This is almost always caused by a difference in FICA Social Security or FICA Medicare taxes, and not Federal Withholding. Accounting CS will display a Critical diagnostic when Line 12 does not match Line 16 and/or the Schedule B.

The difference usually occurs when the FICA calculation on page 1 does not match the amount actually withheld on the payroll checks reported on page 2 or Schedule B.

Use the following solutions to troubleshoot and correct the diagnostic on Form 941 in Accounting CS.

Clear Form overrides

Overrides made to payroll tax forms remain as they are until cleared manually. Overrides may affect calculations on other forms or other lines on the same form. Use the following steps to remove any override edits that were made to the 941 in prior periods that may affect the current period 941 calculations.

  1. Choose Actions > Edit Payroll Tax Forms.
  2. If not already selected, choose the appropriate client from the client drop-down list at the top right.
  3. Select Reconciliation from the Form type: field; mark the Quarterly checkbox; and then choose the quarter and year you are processing.
  4. Click Refresh.
  5. Choose Edit > Clear Form Overrides. This will remove any amounts that were manually input (these amounts appear in red text).
  6. Verify the amounts on the 941 and continue processing as usual.

Use the Analyze Client Activity - Payroll Forms view to verify amounts on Form 941

Use the Analyze Client Activity - Payroll Forms view to quickly verify the amounts on federal Form 941. You can drill down within this view to see detailed information about each payroll tax, each employee amount, and each payroll check.

  1. From the Actions > Edit Payroll Tax Forms screen (with the Form 941 selected), click the Analyze Client Activity analyze account activity button in the toolbar or choose Actions > Analyze Client Activity > Payroll Tax Form.
  2. The FICA-SS, FICA-MED, FICA-MED2, and FIT amounts should agree with line 12 on the 941 form. But if they do not, click the tax links (in blue text) to drill down to and view the names of the employees for whom those taxes apply.
  3. Click each employee name link (in blue text) to view the list of both the handwritten and printed checks with tax amounts that are included in the form totals.
  4. You can then click on individual checks and other transactions to view the details within the Actions > Enter Transactions screen

Review adjustments and overrides made to employee checks

Payroll check overrides can lead to differences between employee and employer taxes along with creating differences between the calculated taxable wages and the overridden amounts.

If you override payroll check amounts in the Transaction Detail section, the application displays those amounts in red text and automatically recalculates all payroll check values.

  1. Choose Actions > Enter Transactions.
  2. Clear the Journal/Bank account and the Posting Period filters.
  3. Click the Date column heading to sort the grid by date.
  4. Locate the first payroll check of the quarter. Scroll through the checks, looking at the Employee and Employer Taxes section for any override (red) amounts for the FICA - SS, FICA - MED, FICA-MED2, and FIT.
  5. The check(s) you locate with overrides are potentially the issue.
  6. Verify the amount that should have been calculated for the tax on the check. Use the Payroll Journal with Taxable Wages to narrow down these differences.
  7. Identify overrides that were made in the taxes section on the payroll check.  Do these overrides equal the taxable wages x the tax rate?  

The taxable wages for the check can be quickly identified by going to Edit > Adjust Taxable Wages.  Once identified, you can adjust the taxable wages for the check, delete and re-enter the checks without overrides, or modify the 941 form.

If there are a number of overwritten checks, it may be easier to review the Payroll Journal with Taxable Wages report for the quarter.

  1. Choose File > Print Reports.
  2. Select and generate the Payroll Journal with Taxable Wages report for the current processing quarter.
  3. Verify that the tax rates and taxable wages for the employees are accurate on the report

The Payroll Journal with Taxable Wages Report contains 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 contains the individual checks for that period.

Example: Entering overrides on a payroll check

A medical insurance pay item is setup as a regular deduction instead of a Café Plan in Setup Payroll items. Instead of correcting the deduction to be the Special Type of Cafeteria plan, the deduction was left as is and calculations for the payroll check were overwritten in the Enter Transactions Screen.

Note:

  • The taxable wages in this example will remain at $650 unless Taxable wages are adjusted while in the Enter Transactions Screen, see Enter > 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.

This table compares how the form 941 will calculate with the payroll check overrides noted above vs. how the 941 will calculate when the deductions are setup correctly as a café plan. In this example, gross wages are $650 and the deduction is $50.

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 .124 = 80.60 600.00 x .124 = 74.50
5c, Taxable Medicare wages & tips 650.00 x .029 = 18.85 600.00 x .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    
Line 16, Total liability 166.30 166.30

Review changes in the taxability of payroll items

When the taxability a payroll item is changed, it may have an effect on the taxable wages in a payroll check. If you remember changing the payroll item tax treatment, use the change to narrow down the amount by which the form is off.

If you do not know if a payroll item has been changed, there are several places to review that something may have been updated:

  1. Verify in the Events tab of the Setup > Employees screen to see if payroll items may have been added or edited for the employee.
  2. Verify in the Events tab of the Setup > Firm Information > Firm screen if payroll items have been added or changed for the client that may affect the employee’s wages.
  3. Verify the taxability of all payroll items. In the Exemptions tab of the Setup > Paycheck Items screen verify whether any pretax deduction items are in use and check that they are set up correctly.

After you locate the cause of the difference(s), adjust the taxable wages for the check, delete and re-enter the checks without overrides, or modify the 941 form.

Example: Changing the tax exempt status of payroll items with an effective date that is prior to 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 pretax deduction. 

Changing the Tax Exempt status for specific taxes for payroll items enables you to update taxable wages for all payroll checks entered after the change and to update existing payroll checks as well. Note that this may affect previously filed payroll tax forms.

  1. Choose Setup > Payroll Items and click the Tax Exemptions tab.
  2. Select the appropriate client record from the Client field in the top right-hand corner of the screen.
  3. Highlight the payroll item in the Payroll Items list and click the Edit button.
  4. Mark the checkbox for the appropriate federal and FICA taxes to make the payroll item exempt.
  5. Click the Enter button to save the changes to the payroll item.
  6. Enter an effective date that applicable to what you are correcting. Remember this change may effect prior period payroll tax forms. We used the first of the year in this example.

This table compares how the form 941 will calculate with the original $50 deduction setup of after tax vs. how the 941 will calculate when deduction taxability is changed to pretax. In this example, gross wages are $650 and the deduction is $50.

Notice the differences between line 12 and line 16 when the deduction is changed to pretax.

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 .124 = 80.60 600.00 x .124 = 74.50
5c, Taxable Medicare wages & tips 650.00 x .029 = 18.85 600.00 x .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   7.66
Line 16, Total liability 181.46 181.46

Related topics

Adjusting taxable wages for employees

Diagnostic 941: Line 12 does not equal Line D of Schedule B

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