A reader has written in to ask why Line 1 of their Federal Form 941 does not appear to be reporting the correct number of employees.
First let's look at the IRS instructions for Form 941, line 1: "Enter the number of employees you paid for the pay period that includes March 12, June 12, September 12, or December 12 for the quarter indicated on the return. Do not include household employees, persons who received no pay during the pay period, pensioners, or active members of the armed forces."
QuickBooks calculates the number of employees from data in your company file and paycheck records. This is true for both Do-It-Yourself (Standard and Enhanced) and the Intuit Online Payroll (IOP).
Federal Form 941 Line 1 doesn't necessarily show the total number of employees who were paid during the quarter. Instead, it shows the number who were paid wage items for the specific pay period that includes the 12th day of the 3rd month of the quarter. These dates are March 12, June 12, September 12, and December 12.
You can follow these steps to verify the number of employees who should be reported on Line 1:
- From the Reports menu, select Employees & Payroll.
- Select the Payroll Summary report.
- Customize the dates, by selecting Custom in the Dates drop-down option of the Date field.
- Enter the date you paid employees for the pay period that included the day 12 of the last month of the quarter within the To and From (custom) Date fields (March 12, June 12, September 12 or December 12).
- Click Refresh to run the report for the selected day. Then count the employees shown on the payroll summary report to obtain the number of employees paid for line 1.
While it is possible that the number derived using the above procedures is different from that reported on Line 1 because of an error, usually the number is different for the following reasons:
- An employee may not have actually received a paycheck for wage items for the pay period containing March 12, June 12, September 12, or December 12.
- The paycheck pay periods of any of the employees you expect to be counted in Line 1 may not include March 12, June 12, September 12, or December 12.
- The paycheck of the employees you expect to be counted in Line 1 may be missing.
- You have not yet created the paycheck for an employee that should be counted in Line 1.
- The employee is inactive when the 941 is being created.
- The employee's record shows them terminated on the 'count date' (March 12, June 12, September 12, or December 12).
Not all of these may apply, and some may be specific to your specific version of QuickBooks and Payroll option. Clearly there maybe reasons why either QuickBooks is correct, or it is wrong; however, what you need to know is, how, if it is wrong, do you fix your Federal Form 941 (Line 1).
To manually correct Federal Form 941, Line 1 in QuickBooks 2014, 2015 or 2016:
1) From the Employees menu, select Payroll Tax Forms & W-2s. The File Forms tab in the Payroll Center will open.
2) When File Forms opens select Quarterly Form 941 and Schedule B. If the form is there proceed to step 3 below, if the form is not there:
- Click the Forms drop-down menu.
- Choose Make a New Form Active.
- Next to State select Federal.
- Choose form Quarterly Form 941 and Schedule B from the list and then select Add Form.
3) Click File Form. The Select Payroll Form window will open.
4) Enter the appropriate quarter-ending date.
5) Click OK.
6) In the Form 941/Schedule B window, click Next until you reach the lines 1 to 4 window.
7) Enter the correct number of employees in the field.