Form 944 (2021) Annual Employer Federal Tax Return Checklist
Form 944 is filed only by employers receiving IRS written notification to report annual (not quarterly) federal employment taxes. For 2021, qualified sick and family leave wage credits are split into two distinct periods: leave taken before April 1, 2021 (lines 4a(i), 4a(ii), 8b, 10d) and leave taken after March 31, 2021 (lines 4a, 8d, 10f), with separate nonrefundable and refundable credit calculations.
The reporting structure distinguishes between pre-April and post-March periods because the American Rescue Plan Act changed the tax treatment mid-year. Pre-April leave wages are not subject to the employer's share of social security tax, while post-March leave wages are subject to both the employer's and employee's shares.
Employee retention credit (ERC) claims also distinguish nonrefundable (line 8c) and refundable (line 10e) portions. For the fourth quarter of 2021, only recovery startup businesses remain eligible for the ERC due to the limitations imposed by the Infrastructure Investment and Jobs Act. Recovery startup businesses must separately report third- and fourth-quarter ERC amounts on lines 25–26.
Completion Steps
1. Verify Filing Authorization
Confirm the IRS written notification exists for the 2021 annual filing. Do not file Form 944 without prior written IRS approval to use the yearly schedule instead of the quarterly Form 941. If you received a notification to file Form 944, you must continue filing it even if your annual tax liability exceeds $1,000 until the IRS notifies you otherwise. Contact the IRS at 800-829-4933 if you are unsure of your current filing requirement.
2. Complete Entity Information
Enter your employer identification number (EIN), legal business name (not trade name), and complete address, including foreign address fields if applicable. Verify all entity information matches IRS records exactly. If you file electronically, a valid EIN is required at the time of filing, or the return will not be processed, which may result in penalties.
3. Report Total Compensation and Withholding
Report total wages, tips, and other compensation on line 1, and federal income tax withheld on line 2 for the entire 2021 calendar year. These amounts should reflect all payments made to employees throughout the year, including any bonuses, commissions, and taxable fringe benefits.
4. Calculate Social Security Tax
On line 4a, enter all taxable social security wages, including qualified sick leave wages and qualified family leave wages for leave taken after March 31, 2021, and before October 1, 2021. Multiply the total amount in column 1 by 0.124 (the combined 12.4% employer and employee rate) and enter the result in column 2.
Separately report qualified sick leave wages for leave taken before April 1, 2021, on line 4a(i) and qualified family leave wages for leave taken before April 1, 2021, on line 4a(ii). These pre-April amounts are multiplied by 0.062 (6.2%) because they are exempt from the employer's share of Social Security tax. The social security wage base limit for 2021 is $142,800 per employee.
5. Calculate Medicare Tax
Calculate taxable Medicare wages and tips on line 4c. Enter all wages subject to Medicare tax in column 1, including qualified sick and family leave wages, tips, sick pay, and taxable fringe benefits. Unlike social security wages, there is no wage base limit for the Medicare tax.
Multiply the amount in column 1 by 0.029 (the combined 2.9% rate representing 1.45% for the employer and 1.45% for the employee) and enter the result in column 2. Include all tips your employees reported during the year, even if you were unable to withhold the employee share of Medicare tax.
6. Calculate Additional Medicare Tax
On line 4d, enter wages subject to Additional Medicare Tax and multiply by 0.009 (0.9%). This additional tax applies only to wages paid to an employee in excess of $200,000 in a calendar year. Employers must withhold this additional tax on wages exceeding this threshold, regardless of the employee’s filing status. There is no employer match for the Additional Medicare Tax.
Sum all social security and Medicare tax columns on line 4e to arrive at total taxes on wages.
7. Determine Total Taxes Before and After Adjustments
Add lines two and 4e to reach total taxes before adjustments (line 5). Apply any current-year adjustments on line 6 for items such as fractions of cents, sick pay, tips, and group-term life insurance adjustments. Combine lines 5 and 6 to calculate total taxes after adjustments (line 7).
8. Claim Nonrefundable Credits
Claim nonrefundable credits in the following sequence:
● Line 8a: Form 8974 qualified small business payroll tax credit for increasing research activities (against the employer share of social security tax)
● Line 8b: Nonrefundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021 (against employer share of social security tax)
● Line 8c: Nonrefundable portion of employee retention credit (against employer share of social security tax for wages paid before July 1, 2021; against employer share of Medicare tax for wages paid after June 30, 2021)
● Line 8d: Nonrefundable portion of credit for qualified sick and family leave wages for leave taken after March 31, 2021, and before October 1, 2021 (against employer share of Medicare tax)
● Line 8e: Nonrefundable portion of COBRA premium assistance credit (against employer share of Medicare tax)
If claiming the COBRA premium assistance credit, also report the number of individuals provided COBRA premium assistance on line 8f. Sum all nonrefundable credits on line 8g and subtract from line 7 to determine net taxes after nonrefundable credits (line 9).
9. Calculate Deposits and Refundable Credits
Enter total deposits made for the year and any prior-year overpayments applied to the current year on line 10a. Add all refundable credits, including refundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021 (line 10d), refundable portion of employee retention credit (line 10e), refundable portion of credit for qualified sick and family leave wages for leave taken after March 31, 2021 (line 10f), and refundable portion of COBRA premium assistance credit (line 10g).
Subtract any advances received from filing Form 7200 (Advance Payment of Employer Credits Due to COVID-19) on line 10i. Calculate net deposits and refundable credits on line 10j by combining deposits, refundable credits, and subtracting advances.
10. Determine Balance Due or Overpayment
Calculate the balance due on line 11 if line 9 exceeds line 10j. Pay any balance due by the return due date to avoid penalties and interest. Calculate overpayment on line 12 if line 10j exceeds line 9. Check the appropriate box to either apply the overpayment to your next return or request a refund.
11. Complete Deposit Schedule Classification
Determine your deposit schedule classification based on the information on line 9. If line 9 is less than $2,500, you may proceed to Part 3 without completing the deposit schedule lines. If line 9 is $2,500 or more, you must have made deposits in accordance with your assigned schedule.
If you are a monthly schedule depositor, enter your monthly tax liability on lines 13a through 13l. Do not complete these lines if you are a semiweekly schedule depositor.
If you are a semiweekly schedule depositor, you must complete and submit Form 945-A (Annual Record of Federal Tax Liability) in addition to Form 944. Form 945-A is a separate form filed with your Form 944 to report your tax liability by semiweekly period. Failure to complete and submit Form 945-A may result in deposit penalties.
Note that if you accumulate $100,000 or more of tax liability on any single day during a deposit period, you must deposit that tax by the next business day. Additionally, if you are a monthly depositor and accumulate $100,000 or more on any day, you immediately become a semiweekly schedule depositor for the remainder of the calendar year and the following calendar year, which triggers the Form 945-A filing requirement.
12. Complete Part 3 Business Information
Complete Part 3 by entering the date you made your final wage payment for the year on line 14. This information helps the IRS understand your reporting period.
Report qualified health plan expenses and wages allocable to qualified sick and family leave credits for both pre-April one and post-March 31 periods on lines 15 through 24. These lines require detailed breakdowns of the health plan expenses that increased your credit amounts.
If you are eligible as a recovery startup business for the third quarter or fourth quarter employee retention credit, report those quarter-specific amounts on lines 25 and 26. Recovery startup businesses are the only employers eligible for ERC in the fourth quarter of 2021 under the Infrastructure Investment and Jobs Act provisions.
13. Sign and Submit Form 944
Sign and date Form 944 in Part 5. All three pages of the form must be submitted. Include authorized signer information and ensure the signature is from an approved role such as owner, corporate officer, partner, or authorized agent.
If you use a paid tax preparer, the preparer must complete and sign the paid preparer section, including their Preparer Tax Identification Number (PTIN), firm information, and contact details.
Attach Form 944-V (payment voucher) only if you are making a payment with the return and your line 9 amount is under $2,500, or a specific deposit exception applies. Do not use Form 944-V if you are required to make deposits electronically through EFTPS.
Year-Specific Regulatory Changes for 2021
Qualified Sick and Family Leave Wage Credits
The credit structure for qualified sick and family leave wages changed mid-year. Leaves taken before April 1, 2021, are used on lines 4a(i), 4a(ii), 8b, and 10d with the 0.062 multiplier, as these wages are exempt from the employer's share of social security tax.
Leave taken after March 31, 2021, and before October 1, 2021, uses line 4a with the 0.124 multiplier and credits reported on lines 8d and 10f, with the nonrefundable portion applied against the employer share of Medicare tax rather than social security tax.
Employee Retention Credit Extensions and Limitations
The employee retention credit was extended through September 30, 2021, for all eligible employers, but the Infrastructure Investment and Jobs Act limited fourth-quarter 2021 eligibility to recovery startup businesses only. The nonrefundable and refundable portions appear on separate lines (8c and 10e). Recovery startup businesses must separately identify third and fourth quarter ERC amounts on lines 25 and 26.
For wages paid before July 1, 2021, the nonrefundable portion of the ERC is claimed against the employer share of the social security tax. For wages paid after June 30, 2021, the nonrefundable portion is claimed against the employer share of Medicare tax.
COBRA Premium Assistance Credit
The COBRA premium assistance credit is new for 2021 under the American Rescue Plan Act. Employers who paid employee premium portions under section 4980B for assistance-eligible individuals are eligible for this credit. Report the nonrefundable portion on line 8e and the refundable portion on line 10g. You must also report the number of individuals provided COBRA premium assistance on line 8f. This credit is available for periods of coverage beginning on or after April 1, 2021, through periods starting on or before September 30, 2021.
Form 945-A Requirement
Form 945-A (Annual Record of Federal Tax Liability) is required for all semiweekly schedule depositors filing Form 944. The $100,000 next-day deposit rule automatically converts monthly depositors to semiweekly depositor status when the threshold is met on any single day. Once you become a semiweekly depositor, you must file Form 945-A with your Form 944 and should not complete the monthly liability lines 13a through 13l.
Expanded Part 3 Reporting
Part 3 was expanded with lines 19 through 24 to account for qualified sick and family leave wages and allocable qualified health plan expenses for the period after March 31, 2021. This reflects the mid-year shift in credit rules under the American Rescue Plan Act and ensures proper documentation of the expenses that support your claimed credits.
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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.
