As an employer, you must withhold certain taxes from your employees’ paychecks, including federal income tax, social security tax, and Medicare tax. You’re also responsible for paying the employer’s share of social security and Medicare taxes. The IRS allows the smallest businesses to file and pay these employment taxes annually, instead of quarterly, through Form 944, Employer’s Annual Federal Tax Return.
You may be able to file Form 944, instead of Form 941, if your annual social security and Medicare taxes and federal income tax withholding liability is $1,000 or less. The IRS will notify you, in writing, if you’re expected to file Form 944.
You can also file Form 944 if you’re a new employer who meets the eligibility requirements. Generally, if you pay $4,000 or less in wages subject to employment taxes, you’ll probably pay $1,000 or less in employment taxes. When you receive your Employer Identification Number (EIN), you’ll be notified whether you should file Form 944 or 941.
Form 944 reports:
wages you’ve paid,
tips your employees have reported to you,
federal income tax withheld,
employer and employee portions of social security and Medicare taxes,
Additional Medicare Tax withheld, and
adjustments to social security and Medicare taxes.
How to Fill Out Form 944
Before you begin filling out Form 944, enter your EIN, your business’s legal name, trade name (if applicable), and address. Go to page 2 and enter your business’s legal name and EIN.
Enter any wages, tips, and other compensation that would also be included in box 1 of Form W-2. This includes sick pay paid by a third party, if you were given timely notice of the payments and the third party transferred employment tax liability to you.
Enter any federal income tax you withheld on wages, tips, taxable fringe benefits, and supplemental unemployment compensation benefits.
If you didn’t pay any wages, sick pay, or fringe benefits that were subject to social security tax, check the box on line 3, then move on to line 5.
In column 1, enter the total wages, sick pay, and fringe benefits subject to social security tax. Don’t include tips.
The rate for social security tax is 12.4% — 6.2% for the employer portion and 6.2% for the employee portion. Multiply column 1 by 0.124, and enter the total in column 2.
In column 1, enter any tips your employees reported to you. These tips include cash tips, charged tips that you paid to your employees, and tips received from other employees under a tip-sharing arrangement.
Your employees must report any cash tips to you by the 10th day of the month following the month they received the tips. They can report tips by using Form 4070 or by written statement or electronic tip record.
Multiply the tip amount in column 1 by 0.124, and enter the total in column 2.
Enter all wages, tips, sick pay, and fringe benefits subject to Medicare tax, in column 1.
The rate for Medicare tax is 2.9% — 1.45% for the employer portion and 1.45% for the employee portion.
Multiply the amount in column 1 by 0.029, and enter the total in column 2.
If you paid any employee more than $200,000 during the year, you have to withhold Additional Medicare tax on the amount over $200,000. This tax is only imposed on the employee, at a rate of 0.9%.
Enter any amount paid over $200,000 in column 1, and multiply it by 0.009 – enter the total in column 2.
Add the second column from lines 4a through 4d and enter the total on line 4e.
Add lines 2 and 4e, and enter the total on line 5.
Enter employee shares of social security and Medicare tax amounts that resulted from current period adjustments.
You’ll enter any adjustments for fractions of cents, due to rounding.
You may also have to enter adjustments if a third-party sick pay payer withheld and deposited the taxes.
Enter adjustments for taxes that you did not collect on tips or on group-term life insurance premiums paid for a former employee.
If the amount is $2,500 or more, you’ll have to deposit the funds through Electronic Funds Transfer (EFT).
Enter any employment tax payments you made during the year.
If the amount on line 7 is greater than the amount on line 8, enter the difference on line 11. Usually, you’ll only have a balance due if line 7 is less than $2,500.
If the amount on line 8 is greater than the amount on line 7, enter the difference on line 12.
Choose whether you want a refund or the overpayment amount should be applied to your next return. If you check both boxes or neither box, the IRS will usually apply the amount to your account.
If the amount on line 7 is less than $2,500, check the first box on line 13 and go to line 14.
If the amount on line 7 is $2,500 or greater, check the second box. If you’re a monthly depositor, enter your tax liability for each month on lines 13a through 13l. Enter your total tax liability for the year on line 13m. The total on line 13m should equal the amount on line 7.
You’ll only check the box on line 14 if your business closed during the year or if you stopped paying wages. Enter the last date you paid wages. This notifies the IRS that this will be your last return.
If you would like an employee, paid tax preparer, or anyone other than yourself to discuss Form 944 with the IRS, check box “yes” in part 4. Enter the name, phone number, and a five-digit personal identification number (PIN) of the person the IRS may speak to. The person you select can choose any five numbers for their PIN.
By checking “yes,” you authorize
the IRS to talk to the person about any questions they may have while processing the return;
the person to give the IRS any information missing from the form;
the person to call the IRS for information about processing; and
the person to respond to any IRS notices you’ve shared about math errors or tax preparation.
Who can sign Form 944?
If you’re a sole proprietor, only you can sign Form 944.
If your business is a corporation or an LLC treated as a corporation, the president, vice president, or other principal officer duly authorized may sign.
If your business is a partnership or an LLC treated as a partnership, a responsible and duly authorized partner, member, or officer may sign.
If your company is a single-member LLC treated as a disregarded entity, the owner or a principal officer duly authorized may sign.
If you paid someone to prepare Form 944 for you, they must sign the form and provide information, including their preparer tax identification number (PTIN). If they were not paid or are an employee of your company, they do not sign the form.
When to File
For tax year 2017, Form 944 is due by January 31, 2018. If you’ve made all your payments throughout the year on time and in full, you may file by February 10, 2018.
Choosing to File Form 944
If the IRS requires you to file Form 941 each quarter, but if you believe that your employment tax liability for the year will be $1,000 or less, you may request to file Form 944 instead. You can call the IRS at 1-800-829-4933 by April 3, 2017, or you can submit a written request by March 15, 2017. You cannot file Form 944 until you have written notice from the IRS.
How to Make a Deposit
If your tax liability is $2,500 or less for the year, you don’t have make regular deposits. Instead, you can submit your payment with Form 944, using Form 944-V.
If your business grows during the year, and your tax liability becomes more than $2,500 for the year, you’ll have to make your deposits by EFT, usually using the Electronic Federal Tax Payment System (EFTPS). To ensure your deposit is processed on time, make the deposit by 8pm Eastern time the day before your deposit’s due date.
If your tax liability is greater than $2,500 for the year, but less than $2,500 for the quarter, deposit your taxes by the last day of the month after the end of each quarter.
Monthly and Semi-Weekly Depositors
If your tax liability is $2,500 or greater for the quarter, you’ll either make your deposits monthly or semi-weekly, depending on your lookback period.
The lookback period for tax year 2017 is calendar year 2015. If you reported a tax liability of $50,000 or less during the lookback period, you’re a monthly depositor. You must deposit your payments for the month by the 15th day of the following month.
If you reported a tax liability of over $50,000 for the lookback period, you’re a semi-weekly depositor. If your payday is Wednesday, Thursday, and/or Friday, you’ll deposit by the following Wednesday. If your payday is Saturday, Sunday, Monday, and/or Tuesday, you’ll deposit by the following Friday.