Form 945 (2016)—Annual Withheld Tax Return
IRS Form 945 reports federal income tax withheld from nonwage payments, including pensions, annuities, IRAs, gambling winnings, and backup withholding for the 2016 tax year. The Annual Return of Withheld Federal Income Tax is filed annually to report withholding from nonpayroll payments or distributions. The $2,500 threshold determines whether line 7 (Monthly Summary) or Form 945-A must be completed. Filers with tax liability under $2,500 may omit the monthly detail entirely, a provision that simplifies filing requirements for filers with lower tax liabilities.
Checklist
Employer Identification Number
1. Verify EIN appears on Form 945 header
If you have not yet received your EIN by the filing deadline, enter “Applied For” in the EIN field along with the date you submitted your application. You may apply for an EIN online through the IRS website, or by faxing or mailing Form SS-4. Always ensure the EIN on your return exactly matches the EIN assigned by the IRS to your business. Using an incorrect EIN or another business’s EIN may result in penalties and processing delays.
Reporting Withheld Taxes
2. Report total withheld federal income tax from pensions, annuities, IRAs, and regular gambling withholding on line 1
This line includes federal income tax withheld from pensions and distributions from tax-favored retirement plans such as section 401(k), section 403(b), and governmental section 457(b) plans, as well as annuities, IRA distributions, military retirement, and Indian gaming profits. Regular gambling withholding from gambling winnings should also be reported on line 1. Note that backup withholding on gambling winnings is reported separately on line 2, not on line 1. Also, include any voluntary withholding amounts on certain government payments and dividends, or other distributions by an Alaska Native Corporation, where the recipient has elected voluntary income tax withholding.
3. Enter backup withholding amounts on line 2
Report all backup withholding that you withheld or were required to withhold during 2016, including backup withholding on gambling winnings. Verify that your source documents match the backup withholding codes on Form 1099-B (broker transactions), Form 1099-DIV (dividends), Form 1099-INT (interest income), Form 1099-MISC (miscellaneous income), or Form 1099-OID (original issue discount). Backup withholding applies when payees fail to provide correct taxpayer identification numbers or meet other specified conditions.
4. Calculate line 3 total taxes
Add lines 1 and 2 to determine your total tax liability. If line 3 shows $2,500 or more, confirm this amount equals either Form 945-A line M or line 7M of the Monthly Summary of Federal Tax Liability. This reconciliation is mandatory for filers who made deposits via electronic funds transfer and helps distinguish high-liability filers from those exempt from monthly detail reporting. Understanding deposit requirements is essential, and detailed guidance is available in Publication 1281 and the Employer’s Tax Guide (Publication 15).
Deposits and Payments
5. Report all 2016 federal tax deposits on line 4
Include all deposits made during 2016, plus any overpayment applied from your 2015 return, and any overpayment applied from filing Form 945-X (Adjusted Annual Return). Retain all deposit receipts and confirmation numbers as proof of payment. All federal tax deposits must be made by electronic funds transfer using the Electronic Federal Tax Payment System (EFTPS) or through same-day wire payment arranged with your financial institution. Before 2011, many filers used IRS Form 8109 (Tax Deposit Coupon) for paper-based deposits, but electronic deposit methods are now mandatory for IRS Form 945 filings.
6. Reconcile line 5 (balance due) or line 6 (overpayment)
If line 3 exceeds line 4, enter the difference on line 5 as your balance due. If line 4 exceeds line 3, enter the difference on line 6 as an overpayment. You may choose to have any overpayment refunded or applied to your next return by checking the appropriate box. If you were required to make federal tax deposits during the year, you must pay any balance due by electronic funds transfer. Failure to make timely deposits or payments may result in accuracy-of-deposits penalties as described in the Employer’s Tax Guide, section 11.
Monthly Summary Requirements
7. Complete line 7 (Monthly Summary) only if you are a monthly schedule depositor for the entire year and line 3 is $2,500 or more
If your total tax liability on line 3 is less than $2,500, leave line 7 (Monthly Summary) and Form 945-A blank. Do not complete the monthly detail in this situation. The $2,500 threshold provides a simplified filing option for filers with lower annual tax liability. This threshold-based simplification reduces filing burden for smaller filers by eliminating the requirement to track and report monthly tax liability details.
8. If you are a semiweekly schedule depositor, do not complete line 7
Instead, attach Form 945-A showing your monthly tax liability totals for months A through L, with the sum reported on line M. Semiweekly schedule depositors are determined based on the prior lookback period. If the total tax reported on your 2014 Form 945 (line 3) exceeded $50,000, you are a semiweekly schedule depositor for 2016. Semiweekly depositors must use Form 945-A instead of completing line 7 directly on IRS Form 945.
Payment Voucher Instructions
9. Complete Form 945-V payment voucher if making a payment with Form 945
Use Form 945-V if your total taxes are under $2,500 and you are paying in full with a timely filed return, or if you are a monthly schedule depositor making an accuracy-of-deposits adjustment payment. When submitting Form 945-V, detach the voucher before mailing. Do not staple Form 945-V to your return or to your payment check. Mail the detached voucher with your payment and IRS Form 945 to the address specified in the Form 945 instructions for your location.
Signature and Authorization
10. Sign Form 945 under penalties of perjury with date; print name and title
The appropriate person must sign the return based on the type of your business entity. For sole proprietorships, the individual owner must sign. For corporations, including LLCs treated as corporations, the president, vice president, or other duly authorized principal officer must complete the signature section. For partnerships, including LLCs treated as partnerships, a responsible and duly authorized partner or member who is familiar with the organization’s affairs must sign.
If you wish to authorize a third party to discuss your Form 945 with the IRS, check “Yes” in the Third-Party Designee section and provide the designee’s name, telephone number, and a five-digit personal identification number (PIN) of the designee’s choosing. This authorization allows the IRS to contact your designated representative about questions during the return processing. Still, it does not authorize the designee to bind you to additional tax liability or otherwise represent you before the IRS. The authorization automatically expires one year from the return’s due date.
Important Filing Reminders
Deposit Schedules
Your deposit schedule for 2016 (monthly or semiweekly) is determined by the total tax you reported on your 2014 Form 945. If that amount was $50,000 or less, you are a monthly schedule depositor. If it exceeded $50,000, you are a semiweekly schedule depositor. However, if you are a monthly schedule depositor and accumulate $100,000 or more in tax liability on any single day during a calendar month, your deposit schedule immediately changes to semiweekly for the remainder of 2016 and for 2017. Consult Publication 1281 for additional guidance on deposit schedules and electronic payment procedures.
Electronic Filing and Payment
Federal tax deposits must be made by electronic funds transfer. You may use EFTPS, arrange for your tax professional or financial institution to make electronic deposits on your behalf, or arrange for same-day wire payment through your financial institution. If you file the Annual Return of Withheld Federal Income Tax electronically, you can e-file and use electronic funds withdrawal to pay any balance due in a single step using tax preparation software or through a tax professional.
Penalties and Interest
Penalties apply for filing IRS Form 945 late, paying or depositing taxes late, and failing to file required information returns such as Forms 1099 or W-2G. Interest is charged on taxes paid late at rates set by law. The trust fund recovery penalty may apply if taxes that are required to be withheld are not deposited or paid to the United States Treasury. This penalty equals the full amount of unpaid trust fund tax. It may be imposed on all persons determined to be responsible for collecting, accounting for, or paying over these taxes who acted willfully in not doing so.
State Withholding Considerations
California Withholding Requirements
California businesses with withholding obligations should be aware of parallel state reporting requirements. The Franchise Tax Board administers California’s withholding program through Form 592 (Resident and Nonresident Withholding Statement), FTB Form 592 variants including Form 592-B (Resident and Nonresident Withholding Tax Statement) for specific transactions, and Form 592-V (Payment Voucher for e-filed Returns) for payment submission. California withholding requirements may apply to real estate transactions, sales, or transfers of business interests, as well as distributions to non-resident partners or shareholders.
Businesses subject to California withholding should consult FTB Publication 1017 (Resident and Nonresident Withholding Guidelines) and FTB Publication 1023S for Spanish-language guidance on withholding requirements. The Franchise Tax Board provides detailed instructions on when California withholding applies, how to calculate withholding amounts, and proper reporting procedures that complement federal withholding obligations reported on IRS Form 945.
International Withholding Obligations
Entities making payments to foreign persons may have additional withholding obligations under international law and tax treaty provisions. These obligations are generally reported on Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons) rather than IRS Form 945. International withholding involves complex rules regarding tax treaty benefits, documentation requirements, and reduced withholding rates. Consult qualified tax professionals regarding international withholding obligations to ensure compliance with both U.S. tax law and applicable international law provisions governing cross-border payments.
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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.
