3e. Verify reports
Now that you have printed the reports, you’re ready to compare the reports to make sure the transactions are in agreement.
You’ll need to...
Download the reconciliation worksheet [XLXS]
You can use this worksheet to reconcile quarterly reports, annual 941 report, employee tax summary, and payroll history. After you print the reports (as part of the year end checklist), enter the values or totals from the reports into the worksheet. The worksheet will help you find out if Payroll is out of balance. Follow the instructions, included in the worksheet, to reconcile your payroll reports.
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Compare the Annual 941 Report total with the total of all Quarterly 941 reports for the year.
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Compare the Year-to-Date totals from the 941 Report with the totals found on the Payroll History Report.
Compare the Annual 941 Report totals to the Quarterly 941 Report totals
Take the Annual 941 Report and compare the totals on the Annual 941 Report against the totals on the Quarterly 941 Reports. You want to add the Line 2s on Quarter 1, 2, 3, and 4 to see if the total matches the total on the Annual 941. You will also need to compare the totals on line 3, 5a-5 column 1 and 2.
Do the totals match?
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Yes, the totals match. You’re in good shape. Keep going!
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No, the totals do not match. You’ll need to find the incorrect transaction and correct it before you continue. You can troubleshoot this issue by reprinting the 941 report for Quarter 1, Quarter 2, Quarter 3, and Quarter 4 and then compare it to the original 941 report that you mailed. Doing this will help you track the problem to a specific quarter.
Why don’t the totals match? This usually means there’s something wrong with the pay codes on an employee. For example, the pay codes on an employee could be marked as Do Not Calculate or another setting may be changed. A good way to troubleshoot this problem is to reprint the 941 Report for each quarter. And then compare it to the original 941 Report that you mailed to the IRS. This will help you find error.
Compare the Annual 941 Report to the Payroll History Report
Take the Annual 941 Report and compare the totals on the Annual 941 Report against the totals on the Payroll History Report.
What if I can’t find the 941 amount on the Payroll History report? You may need to add taxable pay codes and subtract pretax deductions to calculate the 941 amount and reconcile the Annual 941 Report.
Do the Total Gross Wages match?
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Yes, the totals match. You’re done.
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No, the totals do not match. Look for any pretax deductions for example, fringe benefits and 401k. You may need to add the gross wages + taxable fringe benefit - federal pretax deductions = Federal Taxable Wages.
Do the Taxable Social Security Wages match?
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Yes, the totals match. You’re done.
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No, the totals do not match. Remember, gross wages + taxable fringe benefit - wages for EE exempt from SS tax - SS pretax deductions = SS Taxable Wages. Use the Employee Tax Summary report to verify taxable Social Security for each employee. Look for employees who are exempt from Social Security.
Why don’t the Social Security totals match? Try looking for employees who are exempt from Social Security and employees who are missing the Social Security pay code.
Do the Taxable Medicare Wages match?
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Yes, the totals match. You’re done.
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No, the totals do not match. Remember, gross wages + taxable fringe benefit - Medicare pretax deductions = Medicare Taxable Wages. Use the Employee Tax Summary report to verify taxable Social Security for each employee. Look for employees who are exempt from Social Security.
Why don’t the Medicare totals match? Try looking for employees who are exempt from Medicare and employees who are missing the Medicare pay code. Remember, to adjust the total for taxable fringe benefits.
When you’re done with this section, the year-to-date information for total gross wages, Social Security, and Medicare are correct.
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