As a small business owner, you’re spending countless hours grinding, doing everything you can to turn a profit. And, suddenly, you receive a notice from the IRS that completely catches you off guard – a Form 944.

However, receiving a Form 944 should not elicit fear. In fact, numerous small business owners receive this notice. But, wait a second. What exactly is a Form 944, and why has it landed on your desk? Have you done something wrong or missed a deadline? Keep reading — we have the answers! 

What Is IRS Form 944?

IRS Form 944, officially titled the “Employer’s Annual Federal Tax Return,” is a tax document designed for small businesses with a federal tax liability of $1,000 or less annually. It is designed to simplify the process of reporting and paying taxes for eligible employers by replacing the quarterly Form 941 (more to come on this later) with an annual filing requirement. This means that instead of submitting payroll tax information every quarter, small businesses using Form 944 can report these details just once a year.

Form 944 is essential for tracking federal income tax and Federal Insurance Contributions Act (FICA) taxes, including Social Security and Medicare. Since FICA taxes are split equally between the employer and employee, the form helps ensure accurate reporting of:

• Employee wages and tips;
• Federal income tax withheld;
• Employer and employee shares of Social Security and Medicare taxes; and
• Adjustments to Social Security and Medicare wages and tips including those related to sick leave wages or group-term life insurance. 
• The form also covers small business payroll tax credits, such as:
• The research activities credit;
• Credits for sick and family leave wages;
• The employee retention credit; and 
• COBRA premium assistance credit.

Who Must File a Form 944?

Only employers who receive written notice from the IRS are eligible to file Form 944, as it exists solely to streamline the tax reporting process for the smallest businesses. Filing Form 944 will likely save businesses time and administrative effort while keeping you compliant with federal tax regulations.

If you're a new employer and expect to fall beneath the $1,000 threshold, you can request to file Form 944 when you apply for an employer identification number (EIN). Employers currently filing Form 941 who believe they qualify for Form 944 can request IRS approval to switch.

Large employers with more than $1,000 in annual federal tax liability cannot file Form 944. If your business grows and your liability exceeds $1,000, you may need to file Form 941 instead. 

What Are the Differences Between Forms 940, 941, and 944?

While Forms 940, 941, and 944 all serve the purpose of keeping your business compliant with federal payroll tax requirements, each form is designed for a specific purpose and audience. Here’s how they differ. 

Form 940

Form 940 is an annual filing that focuses on the Federal Unemployment Tax Act (FUTA). This tax supports unemployment benefits for workers who lose their jobs. Importantly, FUTA is an employer-only tax, meaning it’s not deducted from employees’ paychecks. 

An employer must file Form 940 if the company paid at least $1,500 in wages to employees in any calendar quarter or had one or more employees working for at least 20 weeks in a year (full-time, part-time, or temporary).

Form 940 must be filed annually by Jan. 31 of the following year. Quarterly payments are required if your FUTA tax liability exceeds $500.

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Form 941

Form 941 is for reporting federal income tax withholding and FICA taxes, which include Social Security and Medicare taxes. Unlike Form 940, this form captures taxes shared by employers and employees.

An employer must file Form 941 if the company withheld federal income, Social Security, or Medicare taxes from employees’ wages, or the business is required to pay the employer’s share of Social Security and Medicare taxes. However, seasonal employers, farmworkers, and household employers are exempt. 

Quarterly filing deadlines are April 30, July 31, Oct. 31, and Jan. 31. 

Form 944

As previously mentioned, Form 944 is designed to simplify tax reporting for small employers with minimal tax liability. 

If your business grows or tax liabilities change, the IRS may require you to switch between Form 941 and Form 944. Always double-check with the IRS to confirm which form you’re required to file.

Step-By-Step Instructions for Completing Each Part of Form 944

Filing Form 944 might seem daunting at first, but breaking it into manageable steps can make the process much smoother. Here's a clear guide to completing Form 944 and reporting your small business's annual federal payroll taxes.

Step 1: Gather the Necessary Information

Before you start, ensure you have all the required data at your fingertips. Here’s what you’ll need:

• Business information: Your employer identification number (EIN), business name, trade name (if applicable), and business address.
• Employee wage details: Total wages, tips, and other compensation paid to employees during the tax year.
• Tax information: Federal income tax withheld, Social Security wages, and Medicare wages, including any taxable employee benefits and adjustments.

If you’re using payroll software, such as OnTheClock Payroll, these numbers should be readily accessible.

Step 2: Fill Out Your Business Information

Start at the top of the form by providing your EIN, business name and trade name (if applicable), and address.

If you don’t yet have an EIN, you’ll need to apply for one through the IRS before continuing. Accuracy here is crucial, as this information identifies your business.

Step 3: Complete Part 1 – Calculating Taxes

This section captures detailed tax information, so take your time:

1. Line 1: Enter the total wages, tips, and compensation paid during the year.
2. Line 2: Report the federal income tax withheld from employees.
3. Lines 4a-4e: Calculate and report Social Security and Medicare taxes. Be mindful of taxable limits like the Social Security wage base and any additional Medicare taxes for high earners.
4. Line 5: Add the federal income tax from Line 2 and Social Security and Medicare taxes from Line 4e to calculate total taxes before adjustments.
5. Lines 6-9: Account for any adjustments, credits, or prior payments, and calculate your total liability for the year.

If your total tax liability is less than $2,500 (Line 9), you may pay directly with the form. If it’s higher, you'll need to deposit your taxes electronically.

Step 4: Complete Part 2 – Deposit Schedule and Tax Liability

If your tax liability from Line 9 is less than $2,500, skip Part 2 and move on. If it’s more, report your monthly tax liability for the year. Ensure accuracy here, as discrepancies can lead to penalties.

Step 5: Complete Part 3 – Business Status

If your business closed during the tax year or you stopped paying wages, indicate that here and provide the final date wages were paid. Otherwise, leave this section blank.

Step 6: Complete Part 4 – Third-Party Designee

Decide if you want to authorize a third party (e.g., a CPA, payroll service, or another representative) to discuss the form with the IRS. If so, provide the third-party company’s contact information here.

Step 7: Complete Part 5 – Signature

Finally, review all information carefully for accuracy. Sign, date, and include your title to certify the form is complete and correct.

When and Where to Submit Form 944

As previously mentioned, the deadline for Form 944 is Jan. 31 of the following year (i.e., for the 2024 tax year, the deadline is Jan. 31, 2025). If a company has made all deposits on time in full, the deadline may be extended to Feb. 10. 

The form may be filed electronically using the IRS’s e-filing system or through an authorized IRS e-file provider. The forms may also be sent via mail:

Without a payment:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0044

With a payment:
Internal Revenue Service
PO Box 932400
Louisville, KY 40293-2400

For a detailed, state-specific address list or more information, visit www.irs.gov.  

Filing Mistakes and How to Correct Them

Even the most organized businesses can make mistakes when filing Form 944. Common mistakes include filing the wrong amounts; miscalculating Social Security, Medicare, or withheld income taxes; filing late; using an incorrect EIN; failing to sign a form; etc. However, the good news is that the IRS provides clear steps for correcting errors. 

Corrections may be made using a Form 944-X, “Adjusted Employer’s Annual Federal Tax Return or Claim for Refund.” When submitting, clearly explain the error and provide supporting calculations or justifications in the designated sections. If you have unpaid or underpaid taxes, address those immediately to avoid accruing interest. Payments can be made via the Electronic Federal Tax Payment System (EFTPS). 

Tips for Accurate and Timely Submissions

Submitting IRS Form 944 accurately and on time is essential for avoiding penalties and ensuring compliance with federal tax regulations. 

However, completing taxes, including Form 944, can be complex, especially when managing other business priorities. Many small business owners turn to professionals to ensure accurate submissions. Platforms, like OnTheClock Payroll, simplify payroll tax management, providing a seamless solution for tracking employee hours, wages, and withholdings. In addition, those utilizing OnTheClock can track employees’ time, manage paid time off (PTO), automate schedules, pinpoint their locations at any given time, and more. For more information, or to request a demo of OnTheClock and/or OnTheClock Payroll, visit www.ontheclock.com.