What is IRS Form 944?

Managing payroll taxes is a key responsibility for any business with employees. For many small businesses, IRS Form 944 offers a simpler way to handle these obligations. But what is IRS Form 944, who needs to file it, and how does it work? This article answers these questions and more, making the process clear and straightforward for benefits brokers, HR leaders, and business executives across the United States.

Understanding IRS Form 944

IRS Form 944, officially called the “Employer’s Annual Federal Tax Return,” is a tax form that certain small employers use to report federal income tax withheld from employees’ paychecks, as well as Social Security and Medicare taxes (collectively known as FICA taxes). Unlike the more common Form 941, which is filed quarterly, Form 944 is filed just once a year. This annual filing schedule can save time and reduce paperwork for eligible small businesses.

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Form 944 is designed specifically for employers with a low annual payroll tax liability—generally, those whose total liability for Social Security, Medicare, and federal income tax withholding is $1,000 or less for the entire year. The IRS must notify you in writing if you are eligible to use Form 944 instead of Form 941.

Who Needs to File Form 944?

Not every small business can use Form 944. The IRS determines eligibility and sends a written notice to qualifying employers. Here’s who should file:

• Employers who have received an official IRS notice instructing them to file Form 944 instead of Form 941.
• Businesses whose total annual liability for federal income tax withheld, Social Security, and Medicare taxes is $1,000 or less.
• Employers who pay $5,000 or less in annual W-2 wages are typically under this threshold, but the actual liability depends on specific payroll calculations.

Exceptions:
You cannot file Form 944 if:

• You only employ household employees (see IRS Publication 926 and Schedule H).
• You only employ agricultural workers (see IRS Publication 51 and Form 943).
• The IRS has not notified you to use Form 944, or has instructed you to use Form 941.

If you believe your business qualifies but have not received an IRS notice, you can request to file Form 944 by contacting the IRS early in the year.

What Does Form 944 Report?

Form 944 covers all the key payroll tax details for eligible small employers, including:

• Total employee wages and tips paid during the year
• Federal income tax withheld from employees’ paychecks
• Both employer and employee shares of Social Security and Medicare taxes
• Adjustments for sick pay, tips, and group-term life insurance
• Qualified small business payroll tax credits (e.g., for increasing research activities)
• Credits for sick and family leave wages, employee retention credit, and COBRA premium assistance

How Is Form 944 Different from Form 941?

Filing Form 944 reduces the administrative burden for eligible small businesses, since you only need to file and pay once a year instead of every quarter.

Step-by-Step: How to Fill Out Form 944

Filling out Form 944 is straightforward if you have your payroll records in order. Here’s what you need to do:

1. Gather Essential Information

• Employer Identification Number (EIN)
• Legal business name and address
• Total wages, tips, and other compensation paid to employees
• Amounts withheld for federal income tax, Social Security, and Medicare
• Any payroll tax credits claimed during the year

2. Complete the Five Parts of the Form

Part 1: Annual Tax Information

Report total wages, tips, and compensation, along with the total federal income tax withheld. Calculate the employer and employee portions of Social Security and Medicare taxes. Make any necessary adjustments for sick pay or group-term life insurance.

Part 2: Tax Liability for the Year

If your total tax liability is under $2,500, you can skip this section. If it’s $2,500 or more, break down your tax liability by month.

Part 3: Business Status

Indicate if your business has closed or stopped paying wages. If so, provide the final date you paid employees and attach a statement.

Part 4: Third-Party Designee

If you want the IRS to speak with a third party (like your tax preparer or CPA), provide their details here.

Part 5: Signature

Sign and date the form, affirming that the information is accurate. If a paid preparer helped, they must complete their section.

3. Filing and Payment

• File Form 944 electronically or by mail, following IRS instructions.
• If you owe taxes, you can pay electronically or by mailing a check with the payment voucher (Form 944-V).

4. Deadlines

Form 944 is due by January 31 of the following year. For example, your 2024 return is due January 31, 2025. If you have made all deposits on time and in full, you may have until February 10 to file.

Why the IRS Uses Form 944

The IRS created Form 944 to make payroll tax compliance easier for the smallest employers. By allowing annual filing, the IRS reduces paperwork and administrative costs for businesses with minimal payroll tax liability. This helps small businesses focus more on their operations and less on tax forms.

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Tips for Staying Compliant

• Keep accurate payroll records throughout the year.
• Watch for IRS notices regarding your filing requirements.
• File Form 944 by the deadline to avoid penalties.
• Consult a tax professional if you’re unsure about your eligibility or how to complete the form.

Final Thoughts

IRS Form 944 is a helpful tool for small businesses with limited payroll tax liability. By streamlining the reporting and payment process, it allows business owners and benefits professionals to focus on what matters most: supporting employees and growing the business. Always check your IRS notifications and keep your payroll records up to date to ensure smooth, compliant filing each year.

For more resources on benefits administration and compliance, Venteur’s expert team is here to help you navigate the world of employee benefits with confidence.