How does Schedule R work for CPEO payroll?

Schedule R is an allocation schedule for aggregate employment tax returns. When a CPEO files an aggregate Form 941 using the CPEO's EIN, Schedule R allocates the reported amounts among the CPEO's customers.

For return preparation, Schedule R explains why payroll amounts may be reported through the third-party payer's filing system rather than through a separate client-EIN Form 941. The EA still needs payroll reports and workpapers that tie the client's wages and payroll costs to the business return.