Federal 944 Payroll Tax Guidelines

By Jennifer A. Thieme

Beginning in 2006, the Internal Revenue Service changed the rules for certain small businesses to file and pay their federal employment taxes. Called the 944, this form was designed so that the smallest employers, those who annually owe less than $1,000 for Social Security, Medicare, and federal withholding combined, will have a reduced burden to file and pay these taxes.

Who Can Use Form 944?

In order to qualify for form 944, businesses must have been notified by the IRS. You cannot file the 944 without notification from the IRS, even if you otherwise qualify. If you were notified to file 944, you must do so, even if you prefer to file quarterly with the 941, unless you meet certain exceptions.

When is the 944 Due?

Form 944 is due by January 31 of the next year. If you file it electronically, do not also file a paper copy. Regardless of how you file, only file once per year.

What About Tax Payments Under the 944 Rules?

If you file the return on time, and your combined federal tax liability (FICA and FIT) is less than $2,500, you may pay the tax with the return. Or, if you wish, you may choose to make prepayments throughout the year (also called, "tax deposits").

If your combined federal tax liability is $2,500 or more for the year, but less than $2,500 for the quarter, you can make a tax deposit by the last day of the month after the end of the quarter. For example, the second quarter ends on June 30. Make a tax payment by July 31 under this rule.

If this occurs in the fourth quarter, you may pay the fourth quarter's amount owed with a timely filed 944.

If the combined federal tax liability is more than $2,500 for the quarter, the 944 payment rules do not apply. Use the 941 payment rules. This means that you must pay the taxes under the semi-weekly, monthly, or $100,000 payment schedules, whichever applies. See section 11 of Publication 15 at the IRS website.

How to Remit Tax Payments?

If you make tax payments before filing the return, the easiest way is to signup for the Electronic Federal Tax Payment System, aka, EFTPS. It takes a couple weeks to get the paperwork processed, but it's much better than the old system of paper coupons and trips to the bank. Click here to go to the site and register your business for this free service.

If you otherwise qualify, send the payment with the return. Note that returns with a payment are sent to a different address than returns without a payment.

About the Author: Jennifer A. Thieme offers inexpensive payroll solutions to small businesses. She's Certified QuickBooks ProAdvisor who brings unique insight, clear instructions, and over ten years of experience to all of her accounting articles. Owner of Solid Rock Accounting Services, Jennifer's clients enjoy these same benefits on a personal and regular basis. You can too - visit http://www.jenniferthieme.com and contact Jennifer today.

For more information, see these links: Publication 15 Form 944 Instructions for 2006 Instructions for 2007 did not appear to be available at the IRS website as of this writing.

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