File IRS Form 944 Annually Instead of Form 941 Quarterly
You take some of every employee’s paycheck for federal income tax, social security taxes, and Medicare. Plus, you subtract the additional Medicare Tax from anyone’s wages who makes over $200,000 a year. These amounts are then credited to your employees’ IRS accounts as payment towards their taxes. Fair enough. But how do you tell the IRS how much you took from your employees? And how do you send the funds to the IRS so they can credit your employees’ tax accounts?
Let’s look at what you need to know about IRS Form 944 for your small business and how to file Form 944 with the IRS.
Highlights:
- What can you do with this form?
- Is your small business eligible to benefit from IRS Form 944?
- Filing Instructions
- Deadline & Submission Methods
- Avoid the 3 Most Common Errors
What can you do with this form?
This Employer’s Annual Tax Return reports your employees’ employment taxes to the IRS. You complete the form detailing your employees’ wages, income tax, tax withheld amounts, and your share of FICA.
Is your small business eligible to benefit from IRS Form 944?
But not every employer can file this form!
Total your annual liability for withheld federal income taxes, social security, and Medicare. If the amount is $1,000 or less, you can file Form 944 annually instead of Form 941 quarterly.
But check to see which form is right if –
- You hire household employees.
- You hire employees only to do agricultural work.
- The IRS told you to file quarterly.
- The IRS has not (yet) told you that you can file Form 944.
Filing Instructions
Your payroll software will keep track of all the information you need to complete Form 944. Like all IRS forms, you’ll start with information about your company, like the name, address, and EIN.
The latest version of Form 944 from the IRS website.
You’ll notice there are four parts.
- Part 1 – Questions for this year.
- Part 2 – Deposit schedule and tax liability.
- Part 3 – About your business.
- Part 4 – Third-party designee.
- Part 5 – Signature.
Part 1: Questions for this year
Part 1 has 12 lines, some with several parts.
Most of the information is pretty straightforward, but here are a few important notes.
- Line 1 Does not include qualified family or sick leave wages.
- Line 2 Does not include taxes withheld by third-party payers for sick time.
- Line 3 Leave the box blank if all compensation is subject to Social Security or Medicare tax.
- Lines 4a-4e Wages over the SS maximum are not included. The 2023 base was $160,200. Withhold the additional Medicare tax of 0.9% on wages over $200,000.
- Line 6 Check for positive or negative adjustments needed to round off fractions of cents from the percentages of Social Security and Medicare taxes, third-party sick payer amounts, tips, or term life insurance.
- Lines 8c, 8e, and 8f are all “Reserved for future use,” so leave them blank.
- Line 9 can’t be negative, but if it is between $0 and $2,500, pay using Form 944-V or deposit the amount. If over $2,500, use an electronic funds transfer (EFT).
- Lines 10b, c, e, g, and i are all “Reserved for future use,” so leave them blank.
- Line 11 If line 9 is more than line 10h, enter the balance due. If not, leave this blank.
- Line 12 If line 10h is more than line 9, enter the overpayment here. You can have your overpayment applied to your next return or ask the IRS to send you a refund.
Part 2: Deposit schedule and tax liability
- If line 9 was under $2,500, check the first box and go to Part 3.
- If line 9 is $2,500+, check the second box and note your deposit schedule as monthly or semiweekly.
Part 3: About your business
Again, add your name and EIN at the top of Page 3.
The lines that don’t apply to you or say “Reserved for future use” should be left blank. Complete the rest as described.
Part 4: Third-party designee
If you want someone else to talk to the IRS for you, this is where you make that designation. You can appoint an employee, a paid tax preparer, or another person. If you don’t want anyone to discuss your Form 944 with the IRS, just check “No.”
Part 5: Signature
The signature on your business’ Form 944 can’t be from just anyone. In a sole proprietorship, the owner must sign. The president, vice president, or other principal officer can sign in a corporation. A responsible and duly authorized officer, partner, or member can sign for a partnership. The signature must be from an owner or principal officer for a disregarded entity, and only a fiduciary can sign for an estate or trust.
Deadline & Submission Methods
Like many other IRS forms, the deadline is January 31st, but you could have until February 12th if your deposits were made on time. When January 31st falls on a holiday or weekend, the next business day is the due date.
Most businesses file Form 944 (and most others) electronically, but mailing a paper form is allowed. Check the mailing instructions on the IRS website.
Avoid The 3 Most Common Errors
- The most common error is a simple miscalculation of the tax liability amounts when small businesses manually try to complete Form 944. Incorrect calculations may cost you interest or penalties.
- Submit Form 944 before the January 31st deadline.
- Add your name and EIN at the top of all three pages.
Conclusion
The IRS needs a breakdown of the funds you’ve withheld from your employees for federal income tax, social security, and Medicare. As a small business deducting less than $1,000 a year from your employees, you can use IRS Form 944 to report these amounts annually instead of quarterly, as larger companies must do. Completing this form only once a year saves time as you let the IRS know how much you withheld from your employees.
