Preparing and Filing Form 944 for Small Business Payroll Taxes
Employer's Annual Federal Tax Return
IRS Form 944 - Employer's Annual Federal Tax Return was initiated by the IRS several years ago to give smaller employers a break in filing and paying federal payroll taxes (federal income tax withheld from employees, and Social Security and Medicare payments owed by employers and employees).
The IRS says the purpose of form 944 is to allow employers whose annual payroll tax liability (as described below) is $1,000 or less to file only once a year instead of quarterly. Form 944 is used for these smaller employers instead of IRS Form 941 - the Employer's Quarterly Employment Tax Return.
You can only file Form 944 if the IRS notifies you in writing or if you make a request to the IRS to file this form instead of Form 941.
Form 944 cannot be used for household employers or for agricultural employers.
What is Form 944?
Form 944 is called "Employer's ANNUAL Federal Tax Return," and it's used to report payroll tax liability and payments. It records all the payroll taxes due for the year and the amounts the employer has already paid.
All employers are required to withhold federal income taxes, state income taxes (where applicable), and FICA taxes (for Social Security and Medicare) from employee pay, and to report and pay these taxes to the IRS, along with an amount equal to the amounts withheld from employees for FICA taxes. Form 944 is the reporting mechanism for providing this information to the IRS.
Form 944 also includes information on the Additional Medicare Tax that is withheld from high-income employees, that must be paid along with the other employment taxes. This additional tax isn't required to be paid by you as the employer.
What Information is Included on Form 944?
The information on the form includes the total for all employees for the year for:
The result is the total taxes due.
This amount is compared to the total deposits the employer has already made for the year to get either a balance due or an overpayment amount, depending on whether the total deposits are less than or more than the total taxes due.
Who Is Eligible or Required to File Form 944?
You may receive one of two types of letters from the IRS regarding filing Form 944. One says you are eligible to file this form and the other one says you are required to file this form.
Eligible to File Form 944
The IRS notifies smaller employers that they are eligible to file Form 944 instead of Form 941. You are eligible to file this form if your liability for social security, Medicare, and withheld federal income taxes is $1,000 or less for the entire year. Your payroll tax liability is the total amount you must pay to the IRS for these taxes, and it includes:
- The amounts you have withheld from employee pay for federal income taxes
- The amounts you have withheld from employee pay for social security taxes and Medicare taxes, and
- The amounts your business must pay to match the social security and Medicare taxes.
If the total for all three of these for the year is $1,000 or less you may be eligible to file using Form 944.
How Does Form 944 Work for New Employers?
If you are a new employer, on your application for an Employer ID Number (EIN), you must include information about the highest number of expected employees in the first year. This information may be used to generate an "eligible to file Form 944" letter.
Based on current tax rates, if you pay $5,000 or less in wages subject to social security and Medicare taxes and federal income tax withholding during the calendar year, you’re generally likely to pay $1,000 or less in employment taxes.
How Do I Change Between Form 944 and Form 941?
If you have been notified by the IRS that you are required to file Form 944, you may not file Form 941. But if you want to file Form 941 instead for Form 944, you must request this in writing or you can call the IRS. You can also request to file Form 944 instead of Form 941.
Your request must be made in writing between January 1 and March 15 of the current year, or by phone at 800-829-4933 between January 1 and April 1 of the current year.
For example, if you want to File Form 944 for 2020, you must make your request to the IRS between January 1 and April 1 of 2020, if you are filing your request by phone, or between January 1 and March 15 (postmarked) of 2020, if you are mailing in your request.
When Should I File Form 944?
Form 944 must be filed by January 31 of the year after the year being reported. If you made deposits on time and in full payment, you have until February 10 of the following year to file this form.
For example, you must file Form 944 for 2020 by January 31, 2021.
When These Payroll Taxes Must Be Paid
When these payroll taxes must be paid depends on the amount of your liability for employment taxes. The liability is equal to the total of all withholdings (for income taxes and FICA taxes) and including the total amount owed by the company for its contribution to FICA taxes.
- If your total tax liability is less than $2,500 for the year, employment taxes for your business included on Form 944 may be paid when you file Form 944.
- If your total tax liability is $2,500 or more for the year, but less than $2,500 for the quarter, you can deposit by the last day of the month after the end of a quarter. However, if your fourth quarter tax liability is less than $2,500, you may pay the fourth quarter's tax liability with Form 944.
- If your total tax liability of over $2,500 for a quarter, you must deposit monthly or semi-weekly, depending upon your schedule.
You must make payroll tax deposits using the IRS EFTPS system, no matter what the amount of your payroll tax liability.
This information is a general overview, and not detailed tax advice. Payroll taxes are complicated, and there are fines and penalties for mistakes in Form 944 that change the amount you must pay or that result in a delay in filing or paying payroll taxes. If you aren't sure how to complete this form, get help from your tax professional or consider outsourcing your payroll tasks.
IRS. Form 944 Employer's Annual Federal Tax Return. Accessed Oct. 19, 2019.
IRS. Instructions for Form 944. "Who Must File Form 944?" Page 3. Accessed April 22, 2020.
IRS. Instructions for Form 944. "New Employers." Page 3. Accessed Oct. 19, 2019.
IRS. Instructions for Form 944. "When Must You Deposit Your Taxes?" Pages 6-7. Accessed Oct. 19, 2019.