STPS

What is IRS Form 945?

The IRS Form 945, also known as the Annual Return of Withheld Federal Income Tax, is a tax form used by employers to report the amounts of federal income taxes withheld from non-payroll payments. These non-payroll payments can include distributions from pension plans ((including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans), annuities, and IRA distributions), annuities, gambling winnings, military retirements, freelance or contract work, payments subject to backup withholdings and other similar payments.

Who Uses Form 945?

If you withhold or are obligated to withhold federal income tax (including backup withholding) from non-payroll payments, your business must file Form 945 with the IRS. In years where you do not have a responsibility to report, this form is not necessary. 

When Do You Pay Form 945?

Businesses can select between monthly or semiweekly deposit schedules for federal income taxes withheld. If your tax liability on your 2021 Form 945 was $50,000 or less, you are eligible to become a monthly depositor in 2022. If it exceeded $50,000, you met the requirements to become a semiweekly depositor. The Internal Revenue Service often asks you to go back two tax years; in 2023, you’ll have to locate your Form 945 from 2021. Keep your previous tax records till later!

Requirements for Filing Form 945

Seven lines make up the entire Form 945. The filer will have the choice to indicate whether or not they are submitting a final return after entering the basic business information, such as the name, address, and EIN of the business. If so, they must state the date and the total sum of the most recent payments.

Guidlines for Filing Form 945

1. Fill in the actual sum of federal income taxes withheld from all sources of income. 

2. Please enter that amount in line two if your company withheld additional funds for taxes during the year. 

3. Put in the entire amount you owe in taxes. Line 1 and Line 2 sum to give you this value. If the sum exceeds $2,500, it must match the total on line 7M of the form. Line M of your Form 945-A for semi-weekly deposits must correspond with the amount entered here. 

4. The annual deposit sum should be entered. In case of an overpayment, you must include the excess amount from your 945-X. 

5. Calculate the outstanding balance and key it in. If line 3 is less than $2,500, there will be a balance payable. 

6. If there was an overpayment, insert that number. Enter the difference between the two numbers if line 4 is larger than line 3. The IRS will either issue a check in your specified amount or apply it to your next tax return. 

7. Boxes A through L are for the monthly tax obligation, whereas box M is for the yearly total.

This is an image showing a section of IRS Form 945, which deals with annual returns of withheld federal income taxes. This particular portion shows lines 1 through 6, where the taxpayer must report details such as: Federal income tax withheld from pensions, annuities, IRAs, and other income. Backup withholding: Taxes withheld on payments like dividends or interest for those without a proper taxpayer identification number (TIN). Total taxes: If the total is $2,500 or more, it must match the liability reported elsewhere on the form. Total deposits: This line includes any overpayments from the prior year that were applied to the current year. Balance due: If the total deposits are less than the total taxes, the taxpayer must pay the balance. Overpayment: If the deposits exceed the taxes, the taxpayer can choose to either apply the overpayment to the next return or request a refund. There are also checkboxes at the bottom of the section to indicate filing conditions, such as if the taxpayer is a semiweekly schedule depositor or a monthly schedule depositor.
This image shows a section of IRS Form 945, specifically Part 7: Monthly Summary of Federal Tax Liability. The form includes a table that allows employers to enter their monthly federal tax liability from January through December. There is also a row at the bottom for totaling the tax liability for the year. This section is filled out by those who are monthly schedule depositors, meaning they report their total liability for each month, instead of semiweekly. The total liability for the year is calculated by summing the amounts from all months. This form helps to ensure that the IRS receives an accurate summary of a business's tax liabilities.

When is IRS Form 945 Due?

Unless January 31st falls on a federal holiday or weekend, in which case it will be due the following regular business day, Form 945 is due on that date. However, you may file before February 10th if your tax liability payments were completed promptly and in full. 

Please make sure your filing is properly addressed, has enough postage, and is postmarked by the US Postal Service by the deadline if you submit it by mail to ensure that it is received on time. Unless otherwise stated, the return will be regarded as submitted after it is actually received. 

What Will Happen if You File Form 945 Late?

If an employer fails to file a Form 945 or files an incorrect or incomplete form, they may be subject to penalties and interest charges. The penalty for failing to file a Form 945 is generally 5% of the total tax due for each month that the form is late, up to a maximum of 25%. The penalty for filing an incorrect or incomplete form is $50 for each incorrect form, up to a maximum of $550,000 per year.

Bottom Line:

Your business must submit Form 945 to the Internal Revenue Service if federal income tax is withheld on non-payroll payments or if it is required to be withheld. However, you are excluded from filing this form if you have no tax liability for the year.

You may face fines and interest if you don’t give a good reason for a delay in filing or paying. If you receive a penalty notice from the IRS, you should respond by explaining the circumstances surrounding the late filing of the form. Please get in touch with us via the form below if you have more questions or need assistance.

Request a Quote
Contact Us
Payroll Services

Written by Mike Ritzema

Before founding Superior Trucking Payroll Service, Mike was the CFO of a trucking company with 80 trucks and a thriving brokerage. This experience gave him the perspective that a payroll solution has to make the lives of the office people better.  All the solutions he has designed are to benefit everyone.  Our company mission is to help trucking families and that includes the company owners, the drivers, and the office.

Contact Us!