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

Alerts and notices

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. When this happens, you'll see one of the following e-File critical 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.

These messages display when the the Form 941 tax deposit was under-paid, and is almost always caused by a difference in FICA Social Security or FICA Medicare taxes, rather than in the federal withholding. The messages continue to display even after you process 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 does not have a line for previous payments, it will make all liabilities in the period equal to the tax due (or overpayment).

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

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 instances, there may be overrides on Schedule B from prior quarters. Overrides made to payroll tax forms remain as they are until cleared manually, and these 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 the Refresh button.
  5. Choose Edit > Clear Form Overrides. This will remove any amounts that were entered manually (these amounts appear in red text).
  6. Verify the amounts on the 941.

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.

Note: This tool was disabled with the 2020.2.0 release due to the complexities of Form 941 for 2020 and the related COVID-19 credits and tax deferrals.

  1. From the Actions > Edit Payroll Tax Forms screen (with Form 941 selected), choose Actions > Analyze Client Activity > Payroll Tax Form.
  2. The FICA-SS, FICA-MED, FICA-MED2, and FIT amounts should match up with the line 12 amount on the 941 form. 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 any handwritten and/or printed checks that have tax amounts that are included in the form totals.
  4. Click any individual checks and other transactions to view their details within the Actions > Enter Transactions screen.

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 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. Beginning with the first payroll check of the quarter, scroll through the checks, looking in the Employee and Employer Taxes sections for any override (red) amounts for the FICA - SS, FICA - MED, FICA-MED2, and FIT. (Any checks with overrides could potentially be the issue.)
  5. Verify the amount that should have been calculated for the tax on the check. (Run the Payroll Journal with Taxable Wages report to narrow down these differences.)
  6. 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 dialog. You can then 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 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 Taxable wages are adjusted in the Enter Transactions Screen (via 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 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 .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 (or Schedule B), Total liability 166.30 166.30

Review changes in the taxability of payroll items

When the taxability of a payroll item is changed, it may effect the taxable wages amount in a payroll check. 

If you do not know if a payroll item has been changed, there are several areas to look for changes.

  1. In the Events tab of the Setup > Employees screen, check to see if payroll items were added or modified for the employee.
  2. In the Events tab of the Setup > Firm Information > Firm screen, look for added or modified payroll items for the client that may affect the employee's wages.
  3. Verify the taxability of all payroll items. And, in the Exemptions tab of the Setup > Paycheck Items screen, check to see if any pre-tax deduction items are in use, and verify 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.

The following table shows how the form 941 will calculate with the original $50 deduction set up as after-tax vs. 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.

Notice 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 .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 (or Schedule B), Total liability 181.46 181.46

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