Form AR3MAR: Arkansas Annual Withholding Reconciliation for Bookkeepers

Form AR3MAR is the Arkansas annual reconciliation of income tax withheld, filed by employers who deposit state withholding monthly. It is the state-level counterpart to the federal W-2 reconciliation, and it is one of those filings that is easy in itself but exposes every payroll posting error made during the year. In this article we walk through what the form does, what your ledger needs to support it, and how to review it before filing.

What does Form AR3MAR actually reconcile?

The form compares two numbers that should already agree: total Arkansas income tax withheld per the W-2s you issued, and total state withholding you reported and remitted across the year's monthly filings. When those two figures match, the reconciliation is a formality. When they do not, the difference is either a posting error, a late or missed remittance, or a W-2 that was printed with figures the ledger does not support.

Your job as the bookkeeper is to make sure the second case never survives to filing day. The form is due February 28 following the tax year, filed with the ARW-3 transmittal and copies of the W-2 and 1099 statements. Employers reporting 250 or more employees or payees must file those statements electronically.

How do you prepare the ledger for the reconciliation?

Start from the state withholding liability account, not from the payroll reports. Run the general ledger detail for the year and confirm three things.

First, every withholding accrual posted through payroll has a matching remittance against it. Second, the account's opening balance for January equals its closing balance from December of the prior year, with no unexplained adjusting entries in between. Third, the year-end balance is zero if all deposits have cleared, or equals a known timing difference such as a December remittance paid in January.

A clean example: the account accrues 1,900 in January, you remit 1,900 in February, and the pattern repeats monthly. At year end the balance is zero and the W-2 total ties to the sum of the twelve monthly filings. That is the position you want before you touch the form.

How do you tie the form to the W-2s?

The withholding figure on Form AR3MAR must equal the Arkansas state income tax withheld shown on the W-2s, in total. Reconcile the payroll register to the W-2 summary report, employee by employee if the totals differ. Common causes of a mismatch include a W-2 run after a late-December correction entry, a duplicate paycheck, or a local tax coded to the state withholding item by mistake.

If your software prefills the form, treat that as a draft, not a filing. Review every field it did not populate, and verify the prefilled totals against the ledger detail rather than accepting them. Prefill reads from the payroll data; it cannot know that a manual journal corrected a mispost in March.

When is it not an ordinary posting mistake?

A small difference you can trace to a specific paycheck or journal entry is bookkeeping, and you fix it with evidence: the corrected entry, the adjusted W-2 if needed, and a note in the working papers. A difference you cannot trace at all is a different problem. If the payroll liability account will not reconcile despite clean source documents, or the payroll data itself shows signs of corruption such as paychecks with impossible figures or histories that change between reports, stop posting corrections. Preserve a backup, document what you observed, and take it to a specialist before the file is altered further. Our QuickBooks data repair team handles that class of fault, and the earlier it is caught the more of the audit trail survives.

What should you keep in the working papers?

File the year's monthly withholding filings, the W-2 summary, the ledger detail for the liability account, and the reconciliation itself showing how the two totals tie. If there was a difference, keep the explanation and the correcting entry alongside it. When the state queries a reconciliation months later, the person answering the query is often not the person who filed it, and these papers are what makes that answer possible.

One last check: confirm the client is genuinely a monthly filer. Annual filers do not use Form AR3MAR at all; they file Form AR941A instead, and filing the wrong form is a delay no one needs in February.