Form 944 (2018): Employer’s Annual Federal Tax Return
Form 944 is filed only if the IRS notified you in writing to report annual employment taxes instead of quarterly Form 941 filings. For 2018, this form captures wages, withholdings, Social Security and Medicare taxes, and applies the qualified small business payroll tax credit for research activities on line 8.
Year-Specific Filing Steps
Step 1: Confirm IRS Notification Requirement
You may file Form 944 only if you received written IRS authorization; otherwise, file quarterly Form 941. This 2018 instruction continues the threshold-based assignment rule and requires no change from prior authorization letters. Form 944 is designed for the smallest employers, whose annual liability for Social Security, Medicare, and withheld federal income taxes is $1,000 or less. If the IRS has notified you to file Form 944, you must file it even if your tax liability for 2018 exceeds $1,000.
Step 2: Complete Entity Information
Complete entity information with current EIN and address. If you applied for an EIN after the due date, write “Applied For” and the application date in Box 1 of Form 944-V. The 2018 instructions specify this notation for pending EIN situations. Always use your business legal name as it appears on your EIN application. Enter your EIN on all pages and attachments.
Step 3: Report Wages and Withholding
Enter line 1 (wages, tips, and other compensation) and line 2 (federal income tax withheld) for the full 2018 calendar year. Employers in U.S. territories (American Samoa, Guam, Northern Mariana Islands, U.S. Virgin Islands, Puerto Rico) skip lines 1 and 2 unless employees are subject to U.S. income tax withholding. Include all wages that would be reported in box 1 of employees’ Forms W-2, including sick pay paid by a third party if you received a timely notice and liability was transferred to you.
Step 4: Calculate Social Security and Medicare Taxes
Calculate taxable Social Security wages at 12.4% (line 4a), Social Security tips at 12.4% (line 4b), Medicare wages and tips at 2.9% (line 4c), and wages subject to Additional Medicare Tax withholding at 0.9% (line 4d) for 2018. Combine column 2 results on line 4e.
For 2018, the Social Security tax rate remains 6.2% each for the employee and employer (total 12.4%), with a wage base limit of $128,400. The Medicare tax rate remains 1.45% each for employee and employer (total 2.9%), with no wage base limit. Additional Medicare Tax of 0.9% applies to wages exceeding $200,000 in a calendar year.
Step 5: Report Current Year Adjustments
Report the current year’s adjustments on line 6, as per the 2018 instructions. These adjustments may include adjustments for sick pay withholding, fractions of a cent, tips, and group-term life insurance premiums. Attach the required documentation as specified in the separate instructions. Enter the total on line 6, using a minus sign or parentheses for negative amounts.
Step 6: Complete Deposit Schedule and Tax Liability
If your total tax liability (line 9) equals or exceeds $2,500, complete Part 2 by entering the monthly tax liability for each of the 12 months (lines 13a through 13l), and verify that the sum on line 13m matches line 9. If you are a semiweekly depositor or have accumulated $100,000 or more on any single day in a deposit period, complete Form 945-A instead of these boxes.
If line 9 is less than $2,500, check the box in Part 2 and proceed to Part 3. You may pay the tax with your return instead of making deposits. However, if you are unsure whether your tax liability will be less than $2,500, deposit under the applicable monthly or semiweekly schedule rules.
Step 7: Apply Qualified Small Business Payroll Tax Credit
Apply the qualified small business payroll tax credit for increasing research activities on line 8 only if you attach Form 8974 for 2018. This credit reduces total taxes after adjustments on line 9. For tax years beginning after 2015, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit against the employer’s share of social security tax. The election must be made on an original, timely filed income tax return. The credit amount is determined on Form 6765 and then reported on Form 8974, line 12, which is transferred to Form 944, line 8.
Step 8: Reconcile Deposits
Enter total deposits (line 10), including overpayments applied from prior years or from Form 944-X, 944-X (SP), 941-X, or 941-X (PR) amended returns filed for 2018 or earlier years. This reconciliation ensures accurate reporting of all payments made throughout the year. Include all federal tax deposits made electronically through EFTPS or other electronic payment methods, as well as any credit carry-forwards from previous returns or amended returns.
Step 9: Determine Balance Due or Overpayment
Determine the balance due (line 11) or overpayment (line 12), and select the refund method if applicable. For 2018, you may apply overpayment to the next return or request a refund. If line 9 is more than line 10, enter the difference on line 11 as the balance due. If line 10 is more than line 9, enter the difference on line 12 as overpayment and check the appropriate box to either apply it to your next return or receive a refund.
Step 10: Report Business Status Changes
Complete Part 3 to report business closure or wage payment cessation for 2018 if applicable. If you go out of business or stop paying wages to employees, check the box in Part 3 and enter the final date you paid wages. This makes Form 944 your final return. Attach a statement showing the name and address of the person keeping payroll records.
Step 11: Designate Third-Party Representative
Designate a third-party representative in Part 4 if the IRS may discuss this return with an employee, paid preparer, or other authorized person. Create a 5-digit PIN for the IRS contact. This allows the IRS to contact your designated representative about questions regarding this return.
Step 12: Sign and Submit
Sign Part 5 under penalties of perjury and include your daytime phone number. If a preparer completes the return, they must sign, enter their PTIN, and provide firm information. Both pages of Form 944 must be completed and signed. The return is not valid without proper signatures and dates.
2018 Year-Specific Updates
Form 944-V Payment Voucher Requirements
Form 944-V (2018 Payment Voucher) must accompany any payment made with Form 944 if the total tax (line 9) is less than $2,500 and paid in full with a timely filed return, or if you are a monthly schedule depositor making an Accuracy of Deposits Rule payment. Do not staple the voucher to Form 944 or enclose cash.
Semiweekly Depositors and Form 945-A
Semiweekly depositors or those who accumulated $100,000 or more liability on any single day during a deposit period in 2018 must complete Form 945-A instead of the monthly boxes in Part 2. This rule prevents the double reporting of monthly liabilities.
Qualified Small Business Payroll Tax Credit
The qualified small business payroll tax credit for increasing research activities (line 8) requires the attachment of Form 8974 for 2018. This credit is available only to employers meeting the wage threshold and research activity requirements specified in that year’s Form 8974 instructions.
U.S. Territory Employer Exemptions
U.S. territory employers (American Samoa, Guam, Northern Mariana Islands, U.S. Virgin Islands, Puerto Rico) are instructed to skip lines 1 and 2 unless they have employees subject to U.S. income tax withholding. This exclusion reflects 2018 territory-specific employment tax rules.
Amended Return Overpayments
Overpayments from amended returns (Form 944-X, 944-X (SP), 941-X, or 941-X (PR)) filed for 2018 or prior years may be included in line 10 deposits. The 2018 form explicitly references these amended return forms in the deposit reconciliation line.
Filing Deadlines
For 2018, file Form 944 by January 31, 2019. However, if you made timely and full deposits to cover the taxes due for the year, you may file the return by February 11, 2019.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
