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Merge Companies

Purpose

Combine multiple child companies with the same Federal ID number into a single parent company for filing consolidated tax returns:

  • Single Form 941 (quarterly federal tax return)
  • Single Form 940 (annual federal unemployment return)
  • One set of W-2 forms

Key Concepts

Parent company

A new company created in ProPay specifically for combining files from multiple child companies. The parent company:

  • Has the same Federal ID as all child companies
  • Receives merged data from child companies
  • Is used only for filing consolidated tax returns
  • Should never have direct payroll entries

Child companies

Your existing companies that:

  • Share the same Federal ID number
  • Have payroll processed normally
  • Feed data to the parent company via the merge process

Creating a Parent Company

Step 1: Start the merge process

  1. Go to Utilities > Merging > Start Merging.
  2. Click New Parent.

Step 2: Assign a parent ID

Choose a Parent ID that's different from your existing client ID structure.

Example: If you use A01-Z99 for regular clients, reserve X01-X99 for parent companies.

Step 3: Enter parent company information

  1. Enter the company name
  2. Enter the address
  3. Enter the Tax ID (must match all child companies)
  4. Click Save Data

Adding Child Companies

Before adding child companies to a parent, verify these requirements:

Required matching information

All child companies must have:

  • Same Federal ID number as the parent company
  • Same federal tax deposit frequency (semi-weekly, monthly, or quarterly)

State-specific requirements

If filing state returns through the parent:

  • Same State ID number within each state
  • Same state tax deposit frequency for all child companies
  • Same SUI ID number within each state
  • Same SUI rate within each state

Setup requirements

All child companies must have identical:

  • Employer deductions setup
  • Employer other pay rates setup

Add the child companies

  1. Review the list of available child companies
  2. Double-click each child company you want to add to the parent

State and Form Limitations

Federal Form 941 filing

No limit on the number of child companies, as long as the total does not exceed 5 states.

State forms and Form 940

Maximum of 5 tax states for all child companies combined.

If you have more than 5 states:

  • File state tax returns from each child company individually
  • Form 940 is limited to 5 states
  • W-2 forms are limited to 5 states

Example 1: Within the 5-state limit

Scenario: Client operates in 5 states:

  • 10 companies in California
  • 5 companies in New York
  • 10 companies in Florida
  • 6 companies in Hawaii
  • 8 companies in Arizona

Solution: All companies have the same Federal ID and same State IDs within each state. You can merge all companies and file:

  • Single Form 941 (quarterly federal)
  • Single Form 940 (annual federal)
  • Single W-2 set
  • Single filing for each state

Example 2: Exceeding the 5-state limit

Scenario: Client operates in 7 states (exceeds the 5-state limit).

Solution:

  • Create one parent company for filing Form 941 (quarterly federal returns)
  • Create multiple parent companies, each with no more than 5 states, for:
  • Form 940 filings
  • W-2 filings
  • State tax filings

Merging Files

When to merge

Merge data before filing quarterly tax returns or annual W-2 forms.

How to merge

  1. Go to Utilities > Merging > Start Merging.
  2. Select the parent company.
  3. Click Merge.

Important: Each time you click Merge:

  • ProPay clears all existing data in the parent company
  • ProPay refills the parent with current data from all child companies

This ensures the parent always has the most current information.

Printing Tax Forms

Federal forms (941, 940, W-2)

Option 1: Through the merging menu

  1. Go to Utilities > Merging > Start Merging.
  2. Select Print 941, 940, W-2.

Option 2: Through the tax forms menu

  1. Go to Client Functions > Tax Returns.
  2. Select the desired form.
  3. Select the parent company.

State forms

  1. Go to Client Functions > Tax Returns.
  2. Select the desired state form.
  3. Choose either:
    • Individual child companies (if more than 5 states)
    • Parent company (if 5 or fewer states total)

    E-filing and Magnetic Media

    Form 941 e-file

    File the parent company's Form 941 electronically the same way as any other company.

    State magnetic media filings

    State magnetic media filing follows the same rules and limitations as printing state paper forms (5-state limit).

    Setting Up Filing Options

    For the parent company

    1. Go to Client Functions > Edit/Change Client.
    2. Select the parent company.
    3. Go to Tax Filing & Other Information.
    4. Check the appropriate boxes to define filing methods for the parent company

    For child companies

    To avoid filing duplicate returns:

    1. Go to Client Functions > Edit/Change Client.
    2. Select each child company.
    3. Go to Tax Filing & Other Information.
    4. Check "Do not file or print any tax returns for this client"

    This prevents double filing for both the parent and child companies.

    Important Warnings

    • Never add employees directly to a parent company
    • Never process payroll in a parent company
    • Never make manual entries in a parent company
    • All data in the parent is deleted each time you merge

    Related Topics

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