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E-filing 941 and 940 Returns

ProPay creates electronic files for quarterly Form 941 and annual Form 940 returns that you can transmit to the IRS. This saves time, reduces errors, and provides immediate confirmation of filing.

What Is a 941/940 E-file?

An e-file is an XML file containing all the information normally included on paper Form 941 or 940. The IRS e-file system is explained in detail in IRS Publication 3823.

ProPay handles the technical complexities of creating properly formatted e-files. You only need to understand a few key terms and complete the setup process.

Before You Begin

Apply to become an IRS e-filer

Before you can e-file, you must apply to the IRS and receive approval. You'll receive various Filer IDs and PIN numbers needed to prepare and submit e-files.

Reference: IRS Publication 3823 - https://www.irs.gov/pub/irs-pdf/p3823.pdf

Understand key terms

Reporting Agent: An accounting service, franchiser, bank, or other person authorized to prepare and electronically file Forms 940 and 941 for a taxpayer. Reporting agents sign all electronic returns they file with a single PIN signature.

ETIN (Electronic Transmitter Identification Number): A five-digit number assigned by the IRS to each applicant who transmits returns directly to the IRS data communications subsystems.

EFIN (Electronic Filer Identification Number): A six-digit number assigned by the IRS to identify the filer by IRS district.

PIN (Personal Identification Number): A five or ten-digit unique confidential number used by each authorized agent or taxpayer approved to participate in IRS e-file for business programs.

DPIN (Third Party Designee Personal Identification Number): A self-assigned five-character identification number used by third-party authorized agents. This number also prints on the paper Form 941 for third-party designees.

SSN/PTIN (Preparer Tax Identification Number): A nine-character identification number that prints on paper Form 941. A PTIN starts with "P" and is followed by 8 digits. It's assigned by the IRS to identify a responsible individual within an organization who transmits e-files. Register at www.irs.gov/ptin to obtain a PTIN. If you don't have a PTIN, you may use the preparer's Social Security number.

Set up ProPay for E-filing

Enter preparer information

  1. Click Client Functions > Set-Up > System Setup > Electronic.
  2. Locate the 941 E-File Parameters section.
  3. Enter all the necessary IDs and PINs you received from the IRS:
    • ETIN
    • EFIN
    • PIN
    • PTIN (or SSN if no PTIN)
    1. Click Save.

    Enter client information

    For each client you want to e-file for:

    1. Click Client Functions > Edit/Change Client.
    2. Select the client.
    3. Click Tax Filing and Other Info.
    4. If your client has signed Form 8655 (authorizing you to e-file):
      • Check the appropriate box indicating you have received approval.
      1. Enter the 941 Business Name Control assigned by the IRS for this client.
      2. Click Save.

      Review Signatory and Designee Setup

      Before e-filing, ensure you have properly configured signatory and designee information.

      See: Signatory and designee setup for detailed explanations of these terms.

      Create E-file Returns

      After completing the setup, you can create e-file returns each quarter or year:

      1. Click Client Functions > Electronic Processing > Magnetic Media > Federal Quarterly 941 Returns.
      2. Select the tax period (quarter for 941, year for 940).
      3. Select the clients to include.
      4. Click Create E-File.
      5. ProPay creates an XML file that can be transmitted to the IRS.

      Transmit to the IRS

      After creating your e-file:

      1. Follow the IRS instructions for uploading the file through the IRS e-file website.
      2. Wait for the IRS to issue an acknowledgement number.
      3. Record the acknowledgement number as proof of filing.

      ProPay retains a separate file as the "official" IRS-filed copy. You can open this file from another menu option in ProPay to:

      • Review prior tax returns that have been filed.
      • Provide proof of filing.
      • Generate copies for each client.

      For detailed transmission instructions, see: How to transmit e-file

      After Filing

      1. Check for the IRS acknowledgement (usually within 24-48 hours).
      2. If accepted, retain the acknowledgement number for your records.
      3. If rejected, review the error report, make corrections in ProPay, and resubmit.
      4. Provide copies of filed returns to clients as needed.

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