Form 945 is used specifically to report federal income tax withheld from non-payroll payments, like pensions, IRAs, gambling winnings, or backup withholding on interest and dividends.
It’s filed annually, not quarterly like payroll forms, and it’s usually due by January 31 of the following year. So for 2024 payments, Form 945 is due January 31, 2025.
Form 945 is separate from forms like 941 or 944 because it’s only for withholding that doesn’t involve regular wages or employee compensation.
Even if you’ve already filed other payroll forms, you still need to file Form 945 if you had any non-payroll tax withholding during the year. It’s not optional if the withholding happened.
Electronic filing is available and often recommended, especially for businesses with multiple reporting obligations. The IRS encourages e-filing to reduce errors and speed up processing.
Gambling with nonpayroll withheld taxes? Grab form 945 instead.
Form 945, Annual Return of Withheld Federal Income Tax, is a tax form used by businesses to report withheld federal income tax from various nonpayroll payments. Its purpose is to ensure that the appropriate amount of federal income tax is withheld and paid to the Internal Revenue Service (IRS) for these types of payments.
Nonpayroll payments that are subject to reporting on Form 945 include pensions, military retirements, gambling winnings, and Indian gaming profits. Additionally, certain government payments, distributions from tax-favored retirement plans, and backup withholding are also included.
It is important for businesses to accurately report these payments on Form 945 as failure to do so may result in penalties or fines. This form helps businesses track and reconcile the federal income tax withheld from these nonpayroll payments throughout the year.
When filing Form 945, businesses must provide information about the type of payments made, the amount withheld, and the corresponding tax liability. This information helps the IRS ensure that the appropriate amount of federal income tax is collected and allocates it properly. Because the form requires an EIN, don’t use your social security or individual tax payer identification number.
In summary, Form 945 is used to report withheld federal income tax from various nonpayroll payments such as pensions, military retirements, gambling winnings, and Indian gaming profits. It ensures that businesses accurately report and pay the appropriate amount of federal income tax to the IRS for these types of payments.
Who Files IRS Form 945?
IRS Form 945 is filed by employers or small business owners to report federal income tax withheld from various types of payments. It’s important for accurately tracking and reporting the amount of taxes withheld for a variety of reasons, such as pensions, annuities, individual retirement plans (IRAs), and non-payroll payments.
Employers who have withheld federal income tax from their employees’ wages report this information on Form 941, whereas Form 945 is specifically designed to report federal income tax withholding from non-payroll payments. These non-payroll payments include military retirements, gambling winnings, Indian gaming profits, as well as voluntary withholdings on certain government payments.
When completing Form 945, employers or business owners need to identify the type of payments made, the amount of federal income tax withheld, and the corresponding tax liability. This information is crucial for the Internal Revenue Service (IRS) to ensure that the correct amount of federal income taxes are collected and allocated properly.
By filing Form 945 accurately and on time (skip paper returns for a faster process), businesses can avoid penalties or fines and maintain compliance with federal tax regulations. It is essential for employers and small business owners to understand their responsibility in filing Form 945 and reporting on your tax return.
What Form 945 Does
IRS Form 945 plays a crucial role in accurately reporting and tracking withheld federal income tax from non-payroll payments and distributions from qualified retirement plans. This form serves as a vital tool for employers and business owners to ensure that the correct amount of federal income tax is withheld and allocated appropriately.
Form 945 is specifically designed to report federal income tax withheld from various types of payments, including military retirements, gambling winnings, and Indian gaming profits. Additionally, it is used to report voluntary withholdings on certain government payments. The form also covers distributions made from qualified retirement plans, such as pensions, annuities, and individual retirement plans (IRAs).
It is important to note that the IRS requires electronic filing (e-filing) of Form 945 for certain employers. If an employer has more than 250 returns to file, they are required to file electronically. E-filing reduces the chances of errors and ensures a more efficient processing and allocation of tax payments.
In summary, IRS Form 945 serves the purpose of reporting withheld federal income tax from non-payroll payments and distributions from qualified retirement plans. It helps employers and business owners accurately track and report these withholdings, ensuring proper compliance with tax regulations. E-filing is required for certain employers, promoting accuracy and efficiency in the processing of tax payments.
The Main Reason Why You Might Need to Fill out the Form
The main reason why businesses might need to fill out Form 945, Annual Return of Withheld Federal Income Tax, is to report federal income tax withheld from certain types of payments. This form is necessary when backup withholding, federal income tax withholding, and non-payroll payments are involved. Otherwise you could wind up with a hefty federal tax liability.
Backup withholding occurs when the payer withholds a percentage of payments made to a payee who has not provided a valid taxpayer identification number. In such cases, businesses must use Form 945 to report the backup withholding amount to the IRS.
Federal income tax withholding applies to various payments, such as pensions, annuities, and individual retirement plans (IRAs). If businesses have made these payments and have withheld federal income tax from them, Form 945 is required to report these withholdings accurately.
Non-payroll payments, including military retirements and gambling winnings, also trigger the need to file Form 945. Any business that has made such payments and has withheld federal income tax must report this information to the IRS using this form.
In addition to these scenarios, businesses must also use Form 945 to report other types of payments, such as distributions from tax-favored retirement plans. By properly reporting these withholdings, businesses ensure compliance with IRS regulations.
How to Fill out IRS Form 945, Including How to Use Your EIN
Internal Revenue Service Form 945 is used to report federal income tax withheld from nonpayroll payments. If you are a business owner or an individual who makes nonpayroll payments, such as backup withholding or distributions from tax-favored retirement plans, you are required to complete this form. Here’s a step-by-step guide on how to fill out IRS Form 945:
1. Start by entering your business information, including your name, address, and employer identification number (EIN). Your EIN is essential for accurate identification of your business.
2. Check the box on line 5 if you are going out of business or transferring ownership. This ensures the IRS is aware of any changes in your business status.
3. Proceed to line 1 and enter the total federal income tax withheld from nonpayroll payments. This includes backup withholding and any other applicable taxes.
4. If you have made any deposits during the year, report the total deposits on line 2. This is the total amount you have already remitted to the IRS.
5. Calculate the balance due or overpayment by subtracting line 2 from line 1. If the result is positive, you owe the balance. If it is negative, you have overpaid and may be eligible for a refund.
6. On line 6, indicate how you would like any overpayment to be applied – whether as a credit towards your next tax liability or refunded to you.
7. If you would like to designate a third-party to discuss the form with the IRS and address any potential math errors, you can provide their information on line 7.
Remember to review your form for accuracy and sign it before submitting it to the IRS. By following these steps and using your EIN correctly, you can easily fill out IRS Form 945 and fulfil your tax obligations.
Video by Forrest Baumhover.
IRS Form 945 Deadlines
Visiting Kansas City? Keep an eye on your federal tax liability. Taxpayers may need to file Form 945 if they have withheld federal income taxes from nonpayroll payments. Nonpayroll payments include income sources such as military retirements, gambling winnings, and distributions from tax-favored retirement plans. When a business makes these types of payments and withholds Federal income tax, they are required to report this information to the IRS using Form 945.
However, it’s important to note that there is an exception to filing Form 945 for withholding taxes from the income of a foreign person. In such cases, businesses would need to file Form 1042 instead. Form 1042 is used to report payments to foreign persons that are subject to withholding, including nonpayroll income.
In summary, if a taxpayer has withheld Federal income tax from nonpayroll payments such as military retirements or gambling winnings, they would need to file Form 945 to report these withholdings to the IRS. However, if the withholding pertains to the income of a foreign person, the taxpayer would need to file Form 1042 instead.
1. Who needs to file Form 945? You need to file Form 945 if you withheld federal income tax on certain types of non-payroll payments. This includes payments like pensions, IRAs, military retirement, gambling winnings, and even some payments to independent contractors if backup withholding was required. If you’re a business owner, a government entity, or a financial institution and you withheld taxes on these types of payments, then this form is for you. You don’t need to file it if you didn’t withhold anything, but once you’ve had that kind of withholding, you’re on the hook to report it.
2. What’s the difference between Form 945 and Form 941? Form 941 is used to report employment taxes—things like federal income tax withheld from employee paychecks, as well as Social Security and Medicare taxes. Form 945, on the other hand, is only for federal income tax withheld from non-payroll payments. These are payments that don’t involve wages or salaries. So if you’re running payroll, Form 941 handles that side of things. If you also have retirement accounts or issue payments that require backup withholding, then Form 945 comes into play.
3. What counts as a non-payroll payment for this form? Non-payroll payments can include a wide range of things. Most commonly, it’s retirement account distributions, like from a pension plan or IRA. It can also be gambling winnings that exceed the IRS reporting threshold. If you had to apply backup withholding on interest payments or dividends, maybe because a taxpayer didn’t provide a correct TIN, that’s included too. These payments don’t involve wages, so they fall under Form 945 instead of payroll tax forms.
4. What if I made non-payroll payments but didn’t withhold any taxes? If you didn’t withhold any federal income tax from your non-payroll payments, then you don’t have to file Form 945. This form is strictly for reporting amounts you actually withheld. However, once you’ve filed it in the past, the IRS may expect you to continue filing unless you notify them otherwise. It’s a good idea to officially close your Form 945 account if you no longer need it, to avoid unnecessary notices or penalties.
5. What happens if I forget to file Form 945 or pay the withholding taxes? If you miss the filing deadline or don’t pay the withheld taxes, the IRS can assess penalties and interest. This isn’t something they take lightly because you’re holding back taxes on behalf of someone else. The penalties can add up quickly, especially for late deposits or missing the filing deadline entirely. If you realize you forgot, it’s better to file it late than not at all. And if you’re unsure how to catch up, the IRS offers payment plans and resolution options for businesses that are behind.
Jessie Seaman
Jessie Seaman, Esq. & EA, is a Florida attorney and IRS Enrolled Agent with over 12 years of experience in state and federal tax controversy resolution. Passionate about helping individuals and businesses navigate complex tax challenges, Jessie combines her legal expertise with a dedication to education, often mentoring future tax professionals and speaking at national conferences. A double major graduate from the University of South Florida and a Juris Doctor recipient from Florida Coastal School of Law, she has overseen tens of thousands of tax resolution cases, from simple privacy plans to high-profile matters. Jessie currently resides in Chicago, enjoying outdoor adventures with her Pomsky, Fisher.
