Form 944 - Employer’s Annual Federal Tax Return

            Normally, an employer that pays wages to any employees is required to file a quarterly Form 941 to report wages paid and taxes withheld, as well as the employer portion of social security and Medicare taxes.  The IRS has tried to take some of the burden off of small employers by creating Form 944, the Employer’s Annual Federal Tax Return.  Rather than filing quarterly returns, some qualified employers can file an annual return.

            Which employers qualify to file Form 944?  Employers with an annual liability for social security, Medicare, and federal income tax withholding of no more than $1,000 are eligible to use Form 944.  The IRS will notify those employers who qualify that they must file Form 944 annually.  Employers have a certain amount of time following this notification to respond and elect not to file Form 944.  If they do not respond within the time limits, they must file Form 944.

            Form 944 is required to be filed every year, even for years with nothing to report, or for years when your total taxes are greater than $1,000, unless the IRS has notified you of a change in your filing requirement.  The only other exception is after you have filed a final return.

            A new employer may also be eligible to file Form 944 instead of Form 941.  The determination will be made when they apply for their Federal Employer Identification Number (FEIN).  Part of the application asks if the employer expects to have $1,000 or less of employment taxes in a calendar year, and also asks for an estimate of the highest number of employees anticipated.  At the time the FEIN is issued, the employer will be notified of their filing requirement for employment tax.

            Certain employers are not able to file Form 944.  Employers who are not notified by the IRS that they are required to file Form 944 cannot file the form.  Those employers do have the option of calling the IRS on or before April 1, 2008 in order to determine their eligibility to file Form 944 for 2008.  Employers of only household employees would file Schedule H, Household Employment Taxes, rather than Form 944 or Form 941.  Likewise, employers of only agricultural employees would file Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees.

           After the end of the year, employers are required to report wage and tax information on Forms W-2 for their employees.  The totals of all W-2s for an employer are reported on Form W-3, Transmittal of Wage and Tax Statements.  The amounts reported on Form W-3 are matched by the IRS with the reported amounts from the employer’s annual Form 944.  The amounts reconciled are federal income tax withholding, social security wages and tips, Medicare wages and tips, and advance EIC payments.  If any discrepancies are found, the employer will be notified by the IRS or the Social Security Administration.

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