If your small company employs people, you must file business taxes and report the income and payroll taxes you deduct from their pay. Usually, the Employer’s Quarterly Federal Tax Return, also known as IRS Form 941, is used to submit this data. You might be able to submit IRS Form 944, however, if your company is smaller and has a lower tax liability.
Here is all the information you need to know about IRS Form 944 and who can use it, along with detailed instructions to assist you in submitting your business return.
What is IRS Form 944?
Using Form 944, you can report the taxes you’ve deducted from your workers’ paychecks, including federal income tax, social security tax, and Medicare tax. Your employer’s Social Security and Medicare payment obligation can be determined using the IRS 944 Form and reported. This form was developed especially for smaller companies with fewer workers and a lower tax burden.
Form 944 is a yearly tax return, in contrast to IRS Form 941, which provides a lot of the same information but must be submitted quarterly. Businesses that expect to owe an employment tax of $1,000 or less, or who anticipate paying $4,000 or less in total employee wages for the year, are qualified to submit IRS Form 944. Therefore, you only need to submit an employment federal tax return (and make any necessary payments) once a year if you qualify to use Form 944 in place of Form 941 to report your income.
Purpose of IRS Form 944
The purpose of Form 944 was to give private venture managers some leeway when it came to accounting for and covering government finance regulatory costs. By simplifying the process for all parties involved, Form 944 also serves the secondary purpose of saving IRS employees’ time and resources.
How Do IRS Forms 941 and 944 Differ From One Another?
- You must complete either the IRS Form 941 or Form 944, depending on the type of company you are claiming, in order to avoid IRS penalties.
- The difference between these two structures is whether you ensure charge conclusions and document your charges on a quarterly or annual basis.
- The vast majority of organizations will typically register Form 941. This arrangement is designed for businesses that cover their regulatory costs and report quarterly duty results.
- Because it makes accounting much simpler overall, it is wise that the vast majority of organizations are required to settle their government expenses and document charge justifications on a quarterly basis.
- The Form 944 is designed for organizations that prefer to track evaluations and deduct fees annually.
Who Needs to File IRS Form 944?
To satisfy IRS reporting and calculation requirements for employment taxes, the majority of companies are required to submit Form 941 on a quarterly basis. Nevertheless, some companies are qualified to submit a yearly IRS Form 944 in its place. Again, the general guideline for eligibility is that you must anticipate an annual employment tax liability of $1,000 or less.
However, the IRS must notify you in writing of your status before you can submit Form 944 rather than Form 941 to the IRS. The IRS may inform you if Form 944 is necessary for your company or if it is not. If Form 944 is needed, you must submit it; you cannot submit Form 941 in its place unless you have asked the IRS for permission to do so and got it. On the other hand, if you are only permitted to complete Form 944 and are not required to, you are still permitted to file Form 941 on a quarterly basis.
Furthermore, if you think your employment tax liability satisfies the aforementioned criteria but you haven’t received an IRS notification stating that you’re qualified to complete Form 944, you can request this change by contacting the IRS by phone or mail. However, it should be mentioned that this request must be submitted in the first few months of the calendar year. The IRS will once more give you written notification if they do alter the file requirements.
However, even if your company satisfies the criteria for a lower tax liability, there are two circumstances in which you would still be unable to submit IRS Form 944 in place of 941: first, if you exclusively hire domestic workers, and second, if you exclusively hire farm workers.
Additionally, if you’re a new boss, you can ask to be permitted to finish IRS Form 944. The employer identification number (EIN) application form, Form SS-4, allows you to indicate whether you believe you will be able to satisfy the Form 944 filing requirements. The IRS will notify you of your employment tax filing requirements (IRS 944 or 941) when you are given your EIN.
Where to Find IRS Form 944?
You’ll need to know where to find IRS Form 944, how to file it, and when you need to file it if you’ve received notice that you need to do so, particularly since the latter differs significantly from Form 941. You can locate Form 944 on the IRS website, just like you can with other business tax forms. You can complete and file the IRS 944 in a few different methods. Of course, you can literally file first. Either fill out Form 944 on your computer, print it, and send it, or print it, fill it out by hand, and mail it. According to your state and whether you’re filing with a payment or not, the Form 944 instructions indicate where you can file this return.
The IRS actually encourages you to submit IRS Form 944 online, which you can also do. You have two choices when using the IRS E-file system to submit this form electronically. The first option is to send the forms on your own using software that has been authorized by the IRS. Second, you can hire a tax expert who has been approved by the IRS for electronic filing to file on your account. Additionally, your provider may have the capability for you to finish the IRS 944 and file it through their system if you already use an accounting or payroll service.
IRS Form 944, which is an annual form rather than a quarterly one, has a different filing date than Form 941 does. In light of this, the report for the tax year ending in 2021 would be due on January 31, 2022. Form 944 must be submitted by this date for the prior tax year, which is January 31. However, you have a few additional weeks to file if you have made deposits on time and in full payment of the taxes due for the year. This increase may occur on a different day each year, but it usually takes place around February 11.
IRS Form 944: Step by Step Instructions
Now that you know the fundamentals of IRS Form 944, let’s get more specific and learn how to fill it out. You can follow these Form 944 directions to learn exactly how to fill out the five parts on the two pages of this IRS tax form.
Step 1: Gather Payroll Data and Fill in Your Basic Business Information
Prepare the data you’ll need in advance and make it readily available before beginning the Form 944 procedure, is what we’d advise. You’ll need access to this data, as well as the overall compensation you paid to your employees throughout the year, because this form relates to payroll taxes, including FICA taxes (Social Security and Medicare taxes) and the federal income taxes you’ve withheld from your employees’ wages.
Again, if you use accounting or payroll software, these programs are fantastic resources for fast and simple access to these numbers. Additionally, your individual system might be able to produce a report that contains all the data required for Form 944.
Now that you have the necessary information, you can begin. You’ll see it below, but the part asking for basic, identifying information about your company is on the first page of Form 944. Your EIN, name, trade name (if applicable), and location are required to be entered here.
Step 2: Fill in Form 944 Part 1
The first two boxes on Part 1 of Form 944 should be filled out to record the total wages paid to your employees for the year and the total federal income tax withheld from those wages. You’ll then be asked if the wages listed in box 1 are liable to Medicare or Social Security taxes. You will check box 3 and continue on to box 5 if the response is no. However, if the response is “Yes”, you must finish line item 4 and its four subpart.
Calculating Taxable Social Security and Medicare Wages
You can determine your taxable social security and Medicare pay using the boxes on line item 4. Column 1 should be filled out with the proper social security wages, social security tips, Medicare wages and tips, as well as any additional Medicare withholding-affected wages and tips. Next, multiply each of the columns in column 1 by the applicable tax rate, and then enter the result in the corresponding box in column 2. The proportion of wages and tips that are withheld for Social Security and Medicare tax is shown in decimal numbers on Form 944 below.
You will add the figures in column 2 and enter this total in box 4e after performing these calculations and entering the proper amounts in columns 1 and 2.
You’ll then carry on filling out the Part 1 boxed next. To calculate your total taxes before adjustments, combine lines 2 and 4e in box 5. According to the IRS Form 944 instructions document, you must enter any adjustments for life insurance or sick compensation in box 6 of the form. You will add the totals from boxes 5 and 6 to calculate your final taxes after adjustments, and then enter the appropriate amount in box 7 to complete the tax return.
On the other hand, if line 10 exceeds line 9, you must show over payment in line item 12 and choose whether you want the IRS tax refund you that money or to put it towards your next tax return.
Step 3: Fill in Form 944 Part 2
You’ll proceed to the second sheet of IRS Form 944 and start filling out Part 2 after finishing line 12. You will be asked to submit your company’s deposit schedule as well as the annual tax liability in this section of the form. First, you must select whether line 9 is less than $2,500 or is greater than $2,500. Recall that line 9 pertains to your total taxes after deductions and credits.
You’ll continue to Part 3 if this sum is less than $2,500. The question to input your tax liability for each month of the year will only be asked if line 9 is higher than $2,500. The overall liability for the year is then recorded in box 13m by adding the figures in boxes 13a through 13l. This sum must correspond to the sum you entered in line 9.
Step 4: Fill in Form 944 Part 3
If your company has shut down or if you have ceased paying employees, you will be questioned about it in Part 3. If your company is affected, check the box and input the last day you paid employee wages. Leave question 14 blank if it does not relate to your company’s operations and continue to Part 4.
Step 5: Fill in Form 944 Part 4
If you permit the IRS access to talk with a designated third party, you must indicate this in Part 4 of IRS Form 944. You would authorize a third-party designee to communicate with the IRS on your company’s behalf regarding this report. This could be a worker, tax preparer, or another individual, such as your certified public accountant. By appointing a third party, you can ensure that this individual will be able to respond to IRS notices regarding this return, respond to any queries the IRS may have regarding your return, and provide any missing information. Simply select “no” in the fourth section of the form if you don’t want to provide a third-party designee.
Step 6: Fill in Form 944 Part 5
You will be asked to sign Form 944 Part 5, the final section, to indicate that you have read the return and, to the best of your knowledge, consider it to be accurate and complete. Additionally, you should put your name, position, and phone number in the corresponding boxes on IRS Form 944, as well as add a date. An enrolled agent, for instance, would enter their details in the field marked “Paid Preparer Use Only” if you used a paid preparer. In addition to providing their name, signature, date, and preparer tax identification number (PTIN), your paid preparer will also include the name, EIN, location, and contact information of your company.
Step 7: File Form 944 and Make a Payment to the IRS, if Necessary
Form 944 is finished when you, your tax accountant, or both have reviewed it and given your approval in Part 5. At this point, you must submit the document to the IRS. No matter how you file, you must meet the Form 944 deadline. You can submit physically or online.
You should make a payment when you submit IRS Form 944 in a few other particular circumstances as well. To be on the safe side, you ought to pay employment taxes all year long. The frequency of your deposits, which must be made via electronic funds transfer, will rely on the amount of tax liability owed by your company. The IRS advises using the Electronic Federal Tax Payment System (EFTPS), but you can also plan for a tax expert, payroll service, or other similar third-party to make these electronic deposits on your behalf.
Therefore, if any of the following apply, you must include a contribution with your IRS Form 944 when you file:
- Your overall taxes (in box 9) total less than $2,500.
- Your net taxes (in box 9) are $2,500 or more, you’ve already paid the taxes you owed for the first three quarters of the year, and your net taxes for the fourth quarter are less than $2,500.
- You are a monthly schedule depositor with a small balance of no more than $100 or 2% of the total tax owing, whichever is higher.
Depending on how you’re submitting Form 944, if you fall into one of these groups, there are a few different ways you can settle your balance. The payment voucher, Form 944-V, is available at the conclusion of the IRS 944 PDF on their website if you’re mailing in Form 944. In order to submit Form 944, you must fill out this payment voucher, include a check or money order for the appropriate amount, and mail all three items to the designated address.
However, if you submit your taxes electronically, you will be able to pay your balance online by electronic funds withdrawal using the method you are using, either through your tax-preparation software or tax expert. If your bank in particular charges fees for this kind of transaction, you will only incur fees with this option.
And lastly, you can choose to settle your balance with a credit or debit card for both paper filing and electronic filing. If you decide to do this, you will deal with a third-party payment processor employed by the IRS, and they will charge you a processing fee.
What is Due Date of IRS Form 944?
Every year, the form 944 is submitted on January 31. If January 31 occurs on a weekend, it must be submitted the next working day.
Why is IRS Form 944 So Important?
This form is an essential component of your small company taxes because it is the IRS tax form that details all of the taxes you’ve deducted from your employees’ paychecks.
These taxes consist of:
- Federal income tax
- Social security tax
- Medicare tax
Where Should We Send IRS Form 944?
In general, Form 944 must always be mailed to your state’s IRS location. In fact, you can attempt to find your state’s local IRS office by logging into IRS.gov, or you can just contact a tax expert or professional who can better guide you through the entire Form 944 filing process.
You have two additional options for submitting this Form 944: online or through a third party.