IRS Updates Rules for Substitutes of Revised Form 941

Superseded by Rev. Proc. 2021-22

Supersedes Rev. Proc. 2018-24

Part III

NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 4436, General Rules and Specifications for Substitute Form 941, Schedule B (Form 941), Schedule D (Form 941), Schedule R (Form 941), and Form 8974.

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TABLE OF CONTENTS

Part 1 —

Section 1.1 — Purpose

Section 1.2 — What's New

Section 1.3 — Reminders

Section 1.4 — General Requirements for Reproducing IRS Official Form 941, Schedule B, Schedule D, Schedule R, and Form 8974

Section 1.5 — Reproducing Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 for Software-Generated Paper Forms

Section 1.6 — Specific Instructions for Schedule D

Section 1.7 — Specific Instructions for Schedule R

Section 1.8 — Specific Instructions for Form 8974

Section 1.9 — Office of Management and Budget (OMB) Requirements for Substitute Forms

Section 1.10 — Order Forms and Instructions

Section 1.11 — Effect on Other Documents.

Section 1.12 — Helpful Information

Section 1.13 — Exhibits

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 Part 1

Section 1.1 — Purpose

.01 The purpose of this Revenue Procedure 2020-31, IRB 2020-27, at IRS.gov/irb/2020-27_IRB#RP-2020-31, is to provide general rules and specifications from the IRS for paper and computer-generated substitutes for Form 941, Employer's QUARTERLY Federal Tax Return; Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors (referred to in this revenue procedure as “Schedule B”); Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations (referred to in this revenue procedure as “Schedule D”); Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers (referred to in this revenue procedure as “Schedule R”); and Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities.

Caution. Before creating a substitute Form 941, see Pub. 1167, General Rules and Specifications for Substitute Forms and Schedules, for additional rules and specifications for payment vouchers (Vouchers), printing in margins (Marginal Printing), and additional instructions (Additional Instructions for All Forms).

Note. Substitute territorial forms (941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono; 941-SS, Employer's QUARTERLY Federal Tax Return (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands); and Anexo B (Formulario 941-PR), Registro de la Obligación Contributiva para los Despositantes de Itinerario Bisemanal), should also conform to the specifications outlined in this revenue procedure.

.02 This revenue procedure provides information for substitute Form 941, Schedule B, Schedule D, Schedule R, and Form 8974. If you need more in-depth information on who must complete these forms and how to complete them, see the Instructions for Form 941, the Instructions for Schedule B, the Instructions for Schedule D, the instructions included with Schedule R, the Instructions for Form 8974, and Pub. 15, Employer's Tax Guide, or visit IRS.gov.

Note. Failure to produce acceptable substitutes of the forms and schedules listed in this revenue procedure may result in delays in processing and penalties.

.03 Forms that completely follow the guidelines in this revenue procedure and are exact replicas of the official IRS forms do not need to be submitted to the IRS for specific approval. Substitute forms and schedules need to be scanned using IRS scanning equipment.

If you are uncertain of any specification and want clarification, do the following.

Note. Allow at least 30 days for the IRS to respond.

.04 However, software developers and form producers should send a blank copy of their substitute Form 941 and Schedule B in Portable Document Format (PDF) to SCRIPS@IRS.gov. The purpose is not specifically for approval but to assist the IRS in preparing to scan these forms. Submitters will only receive comments if a significant problem is discovered through this process.

Submitters are not expected to delay marketing their forms in order to receive feedback. Submitters must not include any “live” taxpayer data on any substitute form submitted for review.

.05 The following six-digit form ID codes are used on Form 941, the schedules for Form 941, and Form 8974.

• Official paper forms: 950120 (Form 941, page 1); 950220 (Form 941, page 2); 950920 (Form 941, page 3); 951020 (Form 941, page 4); 960311 (Schedule B); 950420 (Schedule R, page 1); 950520 (Schedule R, page 2); and 950817 (Form 8974).

• Substitute 6x10 grids: 970120 (Form 941, page 1); 970220 (Form 941, page 2); 970920 (Form 941, page 3); 971020 (Form 941, page 4); 970311 (Schedule B); 970420 (Schedule R, page 1); 970520 (Schedule R, page 2); and 970817 (Form 8974).

Generally, the last two digits of the form ID code represent the last year in which the IRS made major formatting changes to the layout of the form.

Note. Page 4 of Form 941 (page intentionally left blank) is not required to be filed with the IRS as part of a substitute Form 941. However, if page 4 of the substitute Form 941 is filed, it must include the form ID code.

.06 This revenue procedure will be updated only if there are major formatting changes to the layout of the forms or there are other changes that impact the processing of substitute forms. This revenue procedure won't be updated solely because a line is changed to “Reserved for future use.”

Section 1.2 — What's New

Due to the enactment of P.L. 116-127, Families First Coronavirus Response Act (FCCRA), and P.L. 116-136, The Coronavirus Aid, Relief, and Economic Security (CARES) Act, we have made significant changes to Form 941 and Schedule R (Form 941). See the Instructions for Form 941 at IRS.gov/Form941 and the Instructions for Schedule R (Form 941) at IRS.gov/Form941 for information on the changes made to these forms.

Due to the COVID-19 pandemic, CPEOs are permitted to file a paper Form 941 and its accompanying schedules in lieu of electronic submissions for the second, third, and fourth quarters of calendar year 2020. For more information about the waiver, see Notice 2020-35, available at IRS.gov/pub/irs-drop/n-20-35.

Caution. Don't use the April 2020 revision of Form 941 to report employment taxes for the first quarter of 2020. Use the January 2020 revision of Form 941 to report employment taxes for the first quarter of 2020.

Section 1.3 — Reminders

.01 Qualified small business payroll tax credit for increasing research activities. For tax years beginning after December 31, 2015, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit against the employer's share of social security tax. The portion of the credit used against the employer's share of social security tax is allowed in the first calendar quarter beginning after the date that the qualified small business filed its income tax return electing to take the payroll tax credit. The election and determination of the credit amount that will be used against the employer's share of social security tax is made on Form 6765, Credit for Increasing Research Activities. The amount from Form 6765, line 44, must then be reported on Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. Form 8974 is used to determine the amount of the credit that can be used in the current quarter. The amount from Form 8974, line 12, is reported on Form 941, line 11a. If you are claiming the research payroll tax credit on your Form 941, you must attach Form 8974 to that Form 941.

.02 Draft forms. Draft forms can be found at IRS.gov/DraftForms.

.03 Certification program for professional employer organizations. The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 required the IRS to establish a voluntary certification program for professional employer organizations (PEOs). PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the certification program, certified professional employer organizations (CPEOs) must meet tax status, background, experience, business location, financial reporting, bonding, and other requirements described in sections 3511 and 7705 and related published guidance. The IRS began accepting applications for PEO certification in July 2016. Certification as a CPEO affects the employment tax liabilities of both the CPEO and its customers. A CPEO is generally treated as the employer of any individual performing services for a customer of the CPEO and covered by a contract described in section 7705(e)(2) between the CPEO and the customer (CPEO contract), but only for wages and other compensation paid to the individual by the CPEO. For more information, visit the IRS website at IRS.gov/CPEO.

CPEOs must generally file Form 941 and Schedule R electronically. However, CPEOs are permitted to file a paper Form 941 and its accompanying schedules in lieu of electronic submission for the second, third, and fourth quarters of calendar year 2020. For more information about a CPEO's requirement to file electronically, and the waiver for 2020, see Revenue Procedure 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/2017-03_IRB#RP-2017-14, and Notice 2020-35, available at IRS.gov/pub/irs-drop/n-20-35, respectively.

Section 1.4 — General Requirements for Reproducing IRS Official Form 941, Schedule B, Schedule D, Schedule R, and Form 8974

.01 Submit substitute Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 to the IRS for specifications review. Substitute Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 that completely conform to the specifications contained in this revenue procedure do not require prior approval from the IRS, but should be submitted to SCRIPS@IRS.gov to ensure that they conform to IRS format and scanning specifications.

.02 Print the form on standard 8.5-inch wide by 11-inch paper.

.03 Use white paper that meets generally accepted weight, color, and quality standards (minimum 20 lb. white bond paper).

Note. Reclaimed fiber in any percentage is permitted provided that the requirements of this standard are met.

.04 The IRS prefers printing Form 941 on both sides of a single sheet of paper, but it is acceptable to print on one side of each of two separate sheets of paper.

.05 Make the substitute paper form as identical to the official form as possible.

.06 Print the substitute form using nonreflective black (not blue or other-colored) ink. Printing in an ink color other than black may reduce readability in the scanning process. This may result in figures being too faint to be recognizable.

.07 Use typefaces that are substantially identical in size and shape to the official form and use rules and shading (if used) that are substantially identical to those on the official form. Use font size as large as possible within the fields.

.08 In the same location as shown on the official IRS forms, print the six-digit form ID code (if one exists on the official form) on each form using nonreflective black, carbon-based, 12-point font. The use of non-OCR-A font may reduce readability for scanning. Use the official form to develop your substitute form.

Note. Maintain as much white space as possible around the form ID code. Do not allow character strings to print adjacent to the code.

The year digits represent the last year in which the IRS made major formatting changes to the layout of the form. Therefore, the last two digits may not be the same as the current tax year. For the tax period starting April 2020 and until this revenue procedure is superseded, print “950120” on Form 941, page 1; “950220” on Form 941, page 2; “950920” on Form 941, page 3; “951020” on Form 941, page 4; “960311” on Schedule B; “950420” on Schedule R, page 1; “950520” on Schedule R, page 2; and “950817” on Form 8974. See Section 1.5 for information on form ID codes for software-generated forms.

Note. Page 4 of Form 941 (page intentionally left blank) is not required to be filed with the IRS as part of a substitute Form 941. However, if page 4 of the substitute Form 941 is filed, it must include the form ID code.

.09 Print the OMB number in the same location as on the official form. Be sure to include the OMB number on Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

.10 Print all entry boxes and checkboxes exactly as shown (location and size) on the official forms.

Note. Instead of a four-sided checkbox for the entry, just the bottom line of the box can be used as long as the location and size remain the same.

.11 Print “For Privacy Act and Paperwork Reduction Act Notice, see the back of the Payment Voucher.” at the bottom of page 1 of Form 941.

.12 Print “For Paperwork Reduction Act Notice, see separate instructions.” at the bottom of Schedule B and Schedule D.

.13 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of Schedule R.

.14 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of Form 8974.

.15 Do not print the form catalog number (“Cat. No.”) at the bottom of the forms or instructions. Instead, print your IRS-issued three-letter substitute form source code in place of the catalog number on the left at the bottom of page 1 of Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

Note. You can obtain a three-letter substitute form source code by requesting it by email at SubstituteForms@IRS.gov. Please enter “Substitute Forms” on the subject line.

.16 Do not print the Government Printing Office (GPO) symbol at the bottom of the forms or instructions.

Section 1.5 — Reproducing Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 for Software-Generated Paper Forms

.01 You may use the PDF files to develop the layout for your forms. Draft forms found at IRS.gov/DraftForms can be used to develop interim formats until the forms are finalized. When forms become finalized, they are posted and can be found at IRS.gov/Forms. You may use 6x10 grid formats to develop software versions of Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

Please follow the specifications exactly to develop the fields.

.02 If you are developing software using the 6x10 grid, you may make the following modifications.

• “970120” for Form 941, page 1; “970220” for Form 941, page 2; “970920” for Form 941, page 3; “971020” for Form 941, page 4; “970311” for Schedule B; “970420” for Schedule R, page 1; “970520” for Schedule R, page 2; and “970817” for Form 8974, as the form ID codes.

  Note. Maintain as much white space as possible around the form ID code. Do not allow character strings to print adjacent to the code.

• Place all 6x10 grid boxes and entry spaces in the same field locations as indicated on the official forms.

• Use single lines for “Employer Identification Number (EIN)” and other entry areas in the entity section of Form 941, pages 1, 2, and 3; Schedule B; Schedule R, pages 1 and 2; and Form 8974.

• Reverse type is not needed as shown on the official form.

• Do not pre-print decimal points in the data boxes. However, where the amounts are required, the amounts should be printed with decimal points and place holders for cents.

• Delete the pre-printed formatting in any “date” boxes.

• Use a single box for “Personal Identification Number (PIN)” on Form 941.

• You may delete all shading when using the 6x10 grid format.

.03 If producing both the form and the data or the form only, print your three-letter source code at the bottom of Form 941, page 1; Schedule B; Schedule D; Schedule R, page 1; or Form 8974. See Section 1.4.15.

.04 If producing only the data on the form, print your four-digit software industry vendor code on Form 941. The four-digit vendor code preceded by four zeros and a slash (0000/9876) must be pre-printed. If you have a valid vendor code issued to you through the National Association of Computerized Tax Processors (NACTP), you should use that code. If you do not have a valid vendor code, contact the NACTP via email at president@nactp.org for information on these codes.

.05 Print “For Privacy Act and Paperwork Reduction Act Notice, see the back of the Payment Voucher.” at the bottom of Form 941, page 1.

.06 Print “For Paperwork Reduction Act Notice, see separate instructions.” at the bottom of Schedule B and Schedule D.

.07 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of Schedule R, page 1.

.08 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of Form 8974.

.09 Be sure to print the OMB number in the same location as on the official forms on substitute Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

.10 Do not print the form catalog number (“Cat. No.”) at the bottom of the forms or instructions.

.11 Do not print the Government Printing Office (GPO) symbol at the bottom of the forms or instructions.

.12 To ensure accurate scanning and processing, enter data on Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 as follows.

• Display/print the name and EIN on all pages and attachments in the proper associated fields.

• Use 12-point (minimum 10-point) Courier font (where possible).

• Omit dollar signs, but use commas when showing amounts.

• Except for Form 941, lines 1 and 2, leave blank any data field with a value of zero.

• Enter negative amounts with a minus sign. For example, report “-10.59” instead of “(10.59).”

  Note. The IRS prefers that you use a minus sign for negative amounts instead of parentheses or some other means. However, if your software only allows for parentheses in reporting negative amounts, you may use them.

Section 1.6 — Specific Instructions for Schedule D

.01 To properly file and to reduce delays and contact from the IRS, Schedule D must be produced as close as possible to the official form.

.02 Use Schedule D to explain why you have certain discrepancies. See the Instructions for Schedule D for more information. In many cases, the information on Schedule D helps the IRS resolve discrepancies without contacting you.

.03 If a substitute Schedule D is not submitted in similar format to the official IRS schedule, the substitutes may be returned, you may be contacted by the IRS, delays in processing may occur, and you may be subject to penalties.

Section 1.7 — Specific Instructions for Schedule R

Schedule R has been redesigned to allow the new lines from the April 2020 revision of Form 941 to be reported on Schedule R.

Caution. Columns x and y, if applicable, are used only on a Schedule R filed with the second quarter 2020 Form 941. Don't enter any amounts in columns x and y for the third or fourth quarter of 2020.

.01 To properly file and to reduce delays and contact from the IRS, Schedule R and Continuation Sheets for Schedule R must be produced as close as possible to the official form.

Note. Do not present the information in spreadsheet or similar format. We may not be able to properly process nonconforming documents with an excessive number of entries. Complete as many Continuation Sheets for Schedule R (Schedule R, page 2) as necessary. If Continuation Sheets are not used or they vary in form from the official form, processing may be delayed and you may be subject to penalties.

.02 Use Schedule R to allocate the aggregate information reported on Form 941 to each client. If you have more than 5 clients, complete as many Continuation Sheets for Schedule R as necessary. Attach Schedule R, including any Continuation Sheets, to your aggregate Form 941 and file it with your return. Enter your business information carefully.

Make sure all information exactly matches the information shown on the aggregate Form 941. Compare the total of each column on Schedule R, line 9 (including your information on line 8), to the amounts reported on the aggregate Form 941. For each column total of Schedule R, the relevant line from Form 941 is noted in the column heading. If the totals on Schedule R, line 9, do not match the totals on Form 941, there is an error that must be corrected before submitting Form 941 and Schedule R.

.03 Do:

• Develop and submit only conforming Schedules R,

• Follow the format and fields exactly as on the official Schedule R, and

• Maintain the same number of entry lines on the substitute Schedule R as on the official form.

.04 Do not:

• Add or delete entry lines;

• Submit spreadsheets, database printouts, or similar formatted documents instead of using the Schedule R format to report data; and

• Reduce or expand font size to add or delete extra data or lines.

.05 If substitute Schedules R and Continuation Sheets for Schedule R are not submitted in similar format to the official schedule, the substitutes may be returned, you may be contacted by the IRS, delays in processing may occur, and you may be subject to penalties.

Section 1.8 — Specific Instructions for Form 8974

.01 To properly file and to reduce delays and contact from the IRS, Form 8974 must be produced as close as possible to the official form.

.02 Use Form 8974 only if you are claiming the qualified small business payroll tax credit for increasing research activities.

.03 If a substitute Form 8974 is not submitted in similar format to the official IRS form, the substitutes may be returned, you may be contacted by the IRS, delays in processing may occur, and you may be subject to penalties.

Section 1.9 — Office of Management and Budget (OMB) Requirements for Substitute Forms

.01 The Paperwork Reduction Act (the Act) of 1995 (P.L. 104-13) requires the following.

• OMB approves all IRS tax forms that are subject to the Act.

• Each IRS form contains the OMB approval number, if assigned. The official OMB numbers may be found on the official IRS-printed forms.

• Each IRS form (or its instructions) states:

  1. Why the IRS needs the information,

  2. How it will be used, and

  3. Whether or not the information is required to be furnished to the IRS.

.02 This information must be provided to any users of official or substitute IRS forms or instructions.

.03 The OMB requirements for substitute IRS forms are the following.

• Any substitute form or substitute statement to a recipient must show the OMB number as it appears on the official form.

• For Form 941, Schedule B, Schedule D, Schedule R, and Form 8974, the OMB number (1545-0029) must appear exactly as shown on the official form.

• For Form 941, Schedule B, Schedule D, Schedule R, and Form 8974, the OMB number must use one of the following formats.

  1. OMB No. 1545-0029 (preferred).

  2. OMB # 1545-0029 (acceptable).

.04 If no instructions are provided to users of your forms, you must furnish to them the exact text of the Privacy Act and Paperwork Reduction Act Notice.

Section 1.10 — Order Forms and Instructions

.01 You can order forms and instructions at IRS.gov/OrderForms.

Section 1.11 — Effect on Other Documents

.01 Revenue Procedure 2018-24, 2018-18 I.R.B. 525, dated April 30, 2018, is superseded.

Section 1.12 — Helpful Information

.01 Please follow the specifications and guidelines to produce substitute Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

.02 These forms are subject to review and possible changes, as required. Therefore, employers are cautioned against overstocking supplies of privately printed substitutes.

.03 Here is a review of references that were listed throughout this document.

• Form 941, Employer's QUARTERLY Federal Tax Return.

• Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors (referred to in this revenue procedure as “Schedule B”).

• Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations (referred to in this revenue procedure as “Schedule D”).

• Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers (referred to in this revenue procedure as “Schedule R”).

• Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities.

• Substitute territorial forms (941-PR, 941-SS, and Anexo B (Formulario 941-PR)).

• Instructions for Form 941.

• Instructions for Schedule B (Form 941).

• Instructions for Schedule D (Form 941).

• Instructions for Schedule R (Form 941).

• Instructions for Form 8974.

• Pub. 15, Employer's Tax Guide.

• SCRIPS@IRS.gov for submissions.

• SubstituteForms@IRS.gov for questions.

• For questions:

  Internal Revenue Service
  Attn: Substitute Forms Program SE:W:CAR:MP:P:TP
  1111 Constitution Ave. NW, Room 6554
  Washington, DC 20224

• IRS.gov/DraftForms for draft forms.

• IRS.gov/Forms for final forms.

Section 1.13 — Exhibits