This guide is the ultimate resource for learning about IRS Form 944, the annual employer tax return. Whether you’re a business owner looking to understand the filing process or an employee trying to figure out how your employer’s taxes are handled, this comprehensive guide will provide all the information you need.
This guide has everything from learning what forms to fill out and when to understanding how payments are processed! So let’s get started and explore the world of Form 944.
Key Takeaways
- Employers subject to FICA tax withholding (with annual employment tax liability <$1,000) must file Form 944 and pay federal income taxes.
- Failing to file Form 944 can result in penalties from the IRS, typically 5% of the total tax due and an additional 5% each month for up to 5 months.
- Form 941 is a quarterly, and Form 944 is an annual federal tax return for employers, used to report wages paid to employees.
What is IRS Form 944?
IRS Form 944 is an annual tax return form required by employers. You can use it to report total Social Security and Medicare and federal income tax withheld from employee paychecks throughout the year and any additional income tax.
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As the federal government dictates, FICA taxes consist of Social Security Tax and Medicare Tax. Employers must deduct these taxes from their employees’ salaries before transferring them to the Internal Revenue Service (IRS).
Federal payroll tax rates for the 2022 tax year were:
- Social Security: 6.2% for employees and 6.2% for employers (12.4%) with a wage limit of up to $147,000
- Medicare: 1.45% for employees and 1.45% for employers (2.9%) with no wage limit
- FUTA: 6% for the employer on the first $7,000 paid to the employer
FICA taxes fund Social Security, Medicare, and other programs critical to retirees and other members of society.
Discover the Cutting-Edge Updates to Form 944:
- Taxable Social Security and Medicare Tax for 2022: 6.2% each for employer and employee or 12.4% for both
- Qualified Sick Leave Wages and Qualified Family Leaves Wages paid in 2022 for leave taken after March 31, 2020, and before April 1, 2021, are excluded from the employer’s share of Social Security tax.
- Employers can claim the credit on 2022 Form 944 for qualified sick and family leave wages taken after March 31, 2020, and before October 1, 2021.
- Employee Retention Credit enacted under the CARES Act and amended/extended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020: qualified wages paid after March 12, 2020, and before July 1, 2021.
When is the due date for Form 944?
If your quarterly FICA tax withholding is $1,000 or less, you must file Form 944 with the IRS every year by January 31 of the following year. This form reports your annual social security and medicare tax liability and pays federal income taxes.
If your total payroll taxes (after adjustments and nonrefundable credits) are less than $2,500 for the year, you can pay them with your Form 944 return. However, if the liability for those taxes is $2,500 or greater, you must deposit them before filing the return.
Failure to file Form 944 may result in penalties from the IRS. Generally, the liability for unpaid tax is 5% of the total amount, with a minimum fine of $205 or 100% of the due tax (whichever is lower). If filing is late by more than 60 days, the penalties may increase.
What distinguishes Form 944 from Form 941?
Form 941 is an employer’s quarterly federal tax return, while Form 944 is a yearly federal tax return. Employers use both forms to report wages paid to their employees throughout the year.
| Form | 941 | 944 |
| Frequency | Quarterly | Annually |
| Criteria for Filing | If you operate a business and have employees working for you. You need to file form 941. | Annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less for the year, and you may file Form 944 annually instead of Form 941. |
| Deadline for Filing | The last day of the month following that quarter. | January 31st of the following year. |
How to Fill Out IRS Form 944?
The due date is fast approaching, so it’s vital to prepare Form 944 and double-check it before submitting it. Here’s what employers need to report in Form 944:
- Total wages paid to all employees during the year
- Number of employees who received wages from an employer
- Taxes withheld from employee wages
So now you understand more clearly about Form 944, the instructions below will help you fill out this form correctly:
Part 1
In Part 1 of IRS Form 944, you will report both the total wages paid to your employees and the federal income tax withheld from these wages. If the wages are subject to Social Security or Medicare taxes, you must complete line item 4 and its four sub-parts.
Social Security and Medicare Tax
To calculate your taxable medicare and social security taxes through line item 4 on Form 944, you must fill column 1 with the corresponding wages and tips, multiply each box in column 1 by the tax rate specified, and record the totals in column 2. The decimal amounts on Form 944 indicate the percentage of wages and tips that get deducted from Social Security and Medicare taxes.
Next, in line 5, you can calculate your total taxes before adjustments by adding lines 2 and 4e. Line 6 is the current year’s adjustment, and you add the number from this line to line 5 to get to line 7, which is the total taxes after adjustments. Enter the total in box 7 to find your total taxes after adjustments.
To find your final employment tax liability, enter any applicable research tax credit in box 8 and subtract it from box 7. You can then report the total taxes after adjustments and credits in box 9:
- If the total in box 9 is higher than deposits made for the year (recorded in box 10), you must pay the difference as tax liability to the IRS.
- If line 10 exceeds line 9, indicate overpayment in box 12 and choose whether you’d like a refund or apply it to your next return.
Part 2
After completing Part I, you move to Page 2 of Form 940 to the end. If total taxes after adjustments and credits (line 9) is less than $2,500, proceed to Part 3; if greater than $2,500, enter tax liability for each month, add numbers in boxes 13a-13l, and record a total liability for the year in 13m. The total amount must match line 9.
Part 3
If any questions in Part 3 (questions 14 to 26) don’t apply to you, leave them blank and move on to Part 4.
Part 4
Part 4 of IRS Form 944 asks if you give the IRS permission to speak with a third-party designee (employee, tax preparer, or another person). By providing a third-party designee, they can answer questions, provide missing info and respond to notices. Check the “no” box in Part 4 if you don’t want to provide one.
Part 5
Part 5 of IRS Form 944 requires you to sign and date and provide your name, title, and phone number. If you used a paid preparer, they should fill in their name, signature, date, and PTIN. Additionally, they should provide your business’s name, EIN, address, and phone number.
Make a payment to the IRS
Once you complete Part 5, you must send or e-file Form 944 to the IRS. To make a payment with IRS Form 944, you should do so if the following:
- When your total taxes after adjustments and credits (box 9) are less than $2,500, you can report this amount.
- If your net taxes for the first three quarters of the year and your fourth quarter are equal to or greater than $2,500, and you have already made the required deposits, you are all set.
If you file a tax return and discover that you still owe them money, you’ll have to make an additional payment using the payment voucher on form 944-V.
Then you can make a payment using the following methods:
- Electronically: through the Electronic Federal Tax Payment System (EFTPS) or your tax professional.
- By Mail: to IRS, P.O. Box 804525 Cincinnati, OH 45280-4525.
Common Mistakes When Filing Your Form 944
Even if you follow these instructions closely, filing the IRS Form 944 can be challenging for new filers, and it is easy to make mistakes. Here are three common mistakes to avoid when filing:
#1: Failing to review the form for accuracy
It’s essential to go through the form and ensure all the information is accurate and up-to-date before submitting. This includes providing all entries, such as business name, tax year, and more, that are correct. Taking this extra step can help prevent problems while processing your form.
#2: Not providing a third-party designee
With a third-party designee, you may be able to access or correct any errors or discrepancies found by the IRS. Furthermore, failing to provide a third-party designee can be seen as an attempt to avoid paying taxes, so it’s essential to ensure this information is included on your form before submitting.
#3: Wrongly calculating taxes due or refund amounts
Always double-check your calculations when filling out the form, as even minor errors can cause a discrepancy in the tax amounts due or refunds requested. If the IRS finds a difference between what you owe and what you reported, they may ask you to correct the return by filing an amended tax return and pay any taxes owed if necessary.
To ensure accuracy, use tax calculation software or consult an experienced accountant when preparing this form.
Wrap-Up
With all information gathered and IRS Form 944 completed, all that is left is to submit it to the IRS. As long as you have ensured everything is correct and up to date, IRS should accept your form with no issues.
Making sure Form 944 is filled out correctly and on time helps keep your business in good standing with the IRS and ensures that you pay the correct total amount of taxes each year.
