IRS Form 944 Explained

IRS Form 944, Employer’s Annual Federal Tax Return, is an official tax document used by smaller employers who pay taxes only once a year instead of quarterly and whose annual tax liability is less than $1,000 for FICA taxes, such as Social Security taxes, Medicare Taxes, and withheld federal income taxes. The purpose of this tax form is to update the IRS about how much FICA tax and income tax are owed every year.

Part I of IRS Form 944 is the section used to input payroll information and calculate the employment tax liability for the year. 

The taxpayer must input the total wages, tips, and compensation paid to their employees, the federal income tax withheld from their wages, the FICA tax withheld from their wages, and the total taxes before adjustments. Next, the filer must report any relevant adjustment, such as a tax credit. 

Upon following the instructions, if the value on line 9 is greater than the value on line 10H, the difference between the two represents the tax liability due and should be input on line 11.

If the value on line 9 is less than the value on line 10H, there has been an overpayment of taxes, and this difference should be reported on line 12. In a situation in which the taxpayer overpaid, can also choose if they wish to apply the overpayment amount toward the next year’s tax return or if they’d prefer to receive the sum in the form of a tax refund. 

Part II of IRS Form 944 is the section where taxpayers must report the deposit schedule for the business and tax liability owed for this tax year. If the tax liability for the full tax year was less than $2,500, the filer can skip Part II and move on to Part II of IRS Form 944.

If the small business’s tax liability was more than $2,500 for the tax year, the tax liability for each month must be reported on lines 13a through 13l of part III, with the total liability being reported on line 13m. The sum of the tax liabilities for each month that is listed on line 13m should match the value listed on line 9 of Part I. 

There are also circumstances in which the small business earned more than $2,500 for the tax year but they are not required to fill out the boxes in Part II of IRS Form 944. If the business deposits tax payments on a semiweekly schedule or if they adopted this schedule due to the accumulation of tax liability of $100,000 or more during a deposit period, IRS Form 945-A should be used instead.  

Once all of the sections of IRS Form 944 have been filled out, it is time for the taxpayer to finish filing the form with the IRS. Similar to other types of tax forms, there are multiple ways IRS Form 944 can be filed, such as electronically or sending a physical copy through the mail. However, no matter which method of filing they choose, they must follow the deadline of Form 944 for their situation to avoid facing late filing penalties.

If taxpayers are in a specific situation where they owe tax liability to the IRS after filling out the five parts of IRS Form 944, they may also need to submit a tax payment with the form. The amount that they must pay when they submit this tax form depends on how much the business owes in taxes for the year. For most businesses, employment tax deposits are required to be submitted throughout the year, usually on a monthly or quarterly basis. If submitting payments throughout the year, the IRS recommends that the taxpayer uses the Electronic Federal Tax Payment System (EFTPS), but if they prefer to use a different method to electronically submit their tax payments, a tax professional, payroll software, or another payroll service can organize another solution to make regular deposits.

Taxpayers will be required to submit payments when they file IRS 944 if they meet the following requirements:

• The tax liability calculated and reported on Line 9 of IRS Form 944 reveals a value that is less than $2,500.


• The tax liability calculated and reported on Line 9 of IRS Form 944 reveals a value that is greater than $2,500, the taxpayer has already submitted tax payments owed to the IRS for the first three quarters of the year, and their net taxes for the fourth quarter of the year is a value less than $2,500.


• The taxpayer who has a monthly deposit schedule owes a small balance to the IRS of less than $100 or 2% of the total tax liability, whichever of these figures has a greater value.

Taxpayers who reveal that they should be submitting a tax deposit when they file IRS Form 944 must choose a method to make the payment on their tax balance. Taxpayers who prefer to file a physical copy of IRS Form 944 in the mail can complete the payment voucher Form 944-V that is attached to the end of IRS Form 944. After filling out IRS Form 944 and the payment voucher, taxpayers can settle the tax liability by attaching a check or money order and mailing the items to the appropriate address. Business owners have a lot of responsibility when it comes to managing their company and keeping organized when it comes to payroll taxes and employment taxes. If you want to request help with reporting payroll information and managing tax liability calculations for your company, the tax professionals at Ideal Tax are licensed and ready to guide you through the tax preparation process. We offer a free tax consultation.