What is Form 944?
Form 944 or officially the Employer’s Annual Federal Tax Return is for employers whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less. The Internal Revenue Service (IRS), the U.S. federal tax agency, allows the smallest employers to file and pay taxes once a year. The IRS will notify you in writing if you are qualified to use Form 944.
If you are an employer and your annual liability for the above-mentioned taxes is or below $1,000, you must use Form 944 to file annually instead of using Form 941 or Employer’s Quarterly Federal Tax Return that requires employers to report quarterly federal tax return to the IRS. The IRS introduced Form 944 to give qualified employers a break in filing and paying federal tax income withheld and social security ad Medicare payments from employees.
According to the IRS, when using Form 994, you will need to report the following amounts:
- Wages you have paid.
- Tips your employees reported to you.
- Federal income tax you withheld.
- Both the employer's and the employee's share of social security and Medicare taxes.
- Additional Medicare Tax withheld from employees.
- Current year's adjustments to social security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance.
- Qualified small business payroll tax credit for increasing research activities.
Only employers who received a notification from the IRS can use and file Form 994. Aside from employers who are not notified, household and agricultural employers cannot file the form.
File Form 994 only once a calendar year. In general, the last day of filing is on January 31st of each year. If you made deposits on time in full payment of the taxes due for the year, you may file the return by February 10. According to the IRS, when it receives Form 944 after the due date, the filing will only be treated as on time if the envelope containing the form is properly addressed, contains sufficient postage, and is postmarked by the U.S. Postal Service on or before the due date, or sent by an IRS-designated private delivery service (PDS) on or before the due date.
Failure to file and inaccuracy in the reported amounts result in penalties and interests.
How to Fill Out Form 944?
Form 944 is a two-page document that contains five parts. Follow the guide below to answer the form accurately. For complete instructions and the latest information on Form 944, you may visit the official IRS website.
To start, provide the following:
- Your Employee Identification Number (EIN)
- Your legal name, and not your trade name
- Your trade name, if applicable
- Your address
Answer the following questions for the year. If you are an employer in American Samoa, Guan, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, and Puerto Rio, you can skip lines 1 and 2, unless you have employees who are subject to U.S. income tax withholding.
Line 1: Provide total wages, tips, and other compensation paid to all employees.
Line 2: Provide total federal income tax withheld from wages, tips, and other compensation.
Line 3: Mark the checkbox and proceed to Line 5 if there are no wages, tips, and other compensation are subject to social security or Medicare tax.
Line 4a—4d: Calculate taxable wages and tips according to classifications.
Line 4e: Add Column 2 from Lines 4a to 4d.
Line 5: Compute for total taxes before adjustments by adding Line 2 and Line 4e.
Line 6: Provide the current year’s adjustments.
Line 7: Compute for total taxes after adjustments by adding Line and Line 6.
Line 8: Provide qualified small business payroll tax credit for increasing research activities and attach Form 8974.
Line 9: Compute for total taxes after adjustment and credits by subtracting Line 8 from Line 7.
Line 10: Provide total deposits this year, including overpayment applied from a prior year and
overpayments applied from Form 944-X, 944-X (SP), 941-X, or 941-X (PR).
Line 11: Compute for the balance due. If Line 9 is more than Line 10, enter the difference and see instructions.
Line 12: Provide the overpayment amount and mark the appropriate box on what to do with it — apply to the next return or send a refund.
This section asks you to report your deposit schedule and tax liability for the year.
Line 13: This line asks for information on Line 9. Mark the appropriate checkbox and proceed with the next applicable step.
Line 13a—13l: If Line 9 is $2,500 or more, enter tax liability for each month.
Line 13m: Compute for total liability for the year by adding Lines 13a to 13l. The total must be equal to Line 9.
Inform the IRS about the status of your business.
Line 14: Mark the checkbox if your business has closed or stopped paying wages and enter the final date you paid wages.
Use this section to allow an employee, a paid tax preparer, or another person to discuss this return with the IRS. If you are allowing a third-party designee, provide name and phone number and select a five-digit Personal Identification Number (PIN) to use.
Sign and date the form to validate all the provided information. Also provide your name, title, and daytime phone number.
If you are a paid preparer, mark the checkbox if you are self-employed, then provide the following:
- Firm’s name, or yours if self-employed
- Phone number