2020 Form 945 Checklist: Annual Return of Withheld Federal Income Tax
Purpose of Form 945
Form 945 reports Federal Income Tax withheld during 2020 from non-payroll payments, including pensions, annuities, IRAs, and gambling winnings. The Internal Revenue Service requires this annual return for all Withheld Federal Income Tax from nonpayroll sources. The $2,500 tax liability threshold for line 7 completion and monthly liability reporting requirements remains essential for 2020 filers subject to Backup withholding or withholding on distributions.
Preparation Steps
1. Verify Your Employer Identification Number
Confirm the Employer Identification Number (EIN) on IRS Form 945 matches your official records. If you haven’t received your EIN by the filing date, enter “Applied For” with your application date per the 2020 instructions. Electronic filing requires a valid account number at submission; returns without a valid EIN will not process and may incur interest charges.
2. Report Federal Income Tax Withheld (Line 1)
Enter all Federal Income Tax withheld from pensions (including governmental section 457(b) plans, section 401(k), and section 403(b) distributions), annuities, IRA distributions, Military retirement, Indian gaming profits, and gambling winnings. Include Voluntary withholding on certain government payments and Alaska Native Corporation distributions—reference accompanying Form 1099-R, Form 1099-MISC, Form 1099-NEC, or Form W-2G for accuracy. Regular gambling withholding appears on line 1; Backup withholding on gambling winnings goes to line 2.
3. Enter Backup Withholding (Line 2)
Report all backup withholding amounts from payees who failed to provide valid taxpayer identification numbers, as per Publication 1281 guidance. Backup withholding for 2020 covers interest, dividends, rents, royalties, commissions, and nonemployee compensation reported on Form 1099. Confirm withholding arose from missing or incorrect documentation, not Voluntary withholding requests.
4. Calculate Total Taxes (Line 3)
Add lines 1 and 2 to determine total tax liability. If line 3 totals $2,500 or more, you must complete line 7 (monthly summary) or Form 945-A, depending on your deposit schedule under Section 3402 of the Internal Revenue Code. The line 3 amount must equal the total liability reported on line 7M or Form 945-A line M.
5. Report Total Deposits (Line 4)
Enter all Federal tax deposits made during 2020 through the Electronic Federal Tax Payment System (EFTPS), including overpayments from 2019 and amounts from Form 945-X filed in 2020. Monthly deposits made via Electronic funds transfer should be reconciled against monthly liability entries. Direct deposit records should include dates, amounts, and EFTPS acknowledgment numbers.
6. Determine Balance Due or Overpayment
If line 3 exceeds line 4, enter the difference on line 5 as balance due. If line 4 exceeds line 3, enter overpayment on line 6. When a balance due exists, and line 3 is $2,500 or more, you must have made deposits via Electronic funds transfer during the year, as per Title 26 requirements. You should only have a balance due if total nonpayroll taxes are less than $2,500.
7. Special Rules for Amounts Under $2,500
Filers with tax liability less than $2,500 may skip line 7 and Form 945-A. You may pay with your timely return using a Form 945-V payment voucher rather than making monthly deposits. However, voluntary deposits during the year must still be reported on line 4.
8. Requirements for Semiweekly Depositors
Semiweekly schedule depositors must not complete line 7. Instead, file Form 945-A, Annual Record of Federal Tax Liability, with Form 945 per Publication 15 deposit rules. Form 945-A details tax liability for each business day and must accompany returns from semiweekly depositors regardless of annual totals.
9. Complete Monthly Tax Liability (Line 7)
Complete boxes A through L only if line 3 is $2,500 or more and you were a monthly depositor throughout the year. Monthly depositors had 2019 Form 945 line 3 totals of $50,000 or less. Enter tax liability accumulated each calendar month, not deposits made. Sum all months on line M, which must equal line 3. If you accumulated $100,000 or more on any day, you will be converted to semiweekly status and must use Form 945-A, as per the Employer’s Tax Guide.
10. Prepare Payment Voucher
Complete Form 945-V when making payments under $2,500 with your return. Make checks payable to “United States Treasury,” including your EIN, “Form 945,” and “2020.” Detach Form 945-V and mail it with your payment and Form 945 together (unstapled) to the address in the draft instructions. The Internal Revenue Service uses completed vouchers to credit payments promptly. Do not use Tax Deposit Coupon forms for Form 945 payments.
11. Sign and Date the Return
Authorized persons must sign under penalty of perjury, as per Section 6109. Include printed name, title, and date. Sole proprietors sign personally. Corporate officers (president, vice president, or principal officer) sign for corporations. Partnerships require authorized partners or members. If tax professionals or tax software preparers complete the return, they must provide their Preparer Tax Identification Number (PTIN) from Form W-12, complete address, and firm details in the paid preparer section.
12. File Using the Correct Method and Address
Electronic filing through the IRS e-file system is encouraged. For paper filing, mail to the addresses listed in the 2020 instructions, based on your location and payment status. Electronic Balance Due Payments should be made separately from return filing. If paying by Electronic funds transfer, credit card, or Direct deposit, file without payment enclosed. Returns with Form 945-V payments mailed together (unstapled) to payment-designated addresses.
2020 Regulatory Updates
The $2,500 threshold remained unchanged for 2020 under regulations implementing Section 3402 of the Internal Revenue Code. Instructions clarified that Form 945-X overpayments applied in 2020 must be reflected in the line 4 totals.
Monthly liability entries (line 7) apply only to monthly depositors. Semiweekly depositors use Form 945-A exclusively. Your schedule is determined by the 2019 Form 945 lookback per Publication 15-A guidance.
Payment voucher instructions warned that amounts of $ 2,500 or more require Electronic funds transfer deposits during the year. Payments submitted with returns instead of proper deposits trigger penalties under regulations cited in Publication 15.
Form 945 retained the address change checkbox to help the Internal Revenue Service match returns to prior-year records. The Backup withholding rate remained 24% for 2020 under temporary provisions affecting taxable years 2018-2025.
Filing Deadlines and Important Notes
For 2020, file Form 945 by February 1, 2021. If you made timely deposits in full, you may file by February 10, 2021. Corrections to previously filed returns require Form 945-X, as per the Section 6501(a) statute of limitations. Use Form 843 to request abatement of assessed penalties.
Form 945 differs from Form 941 (quarterly employment taxes) and Form 944 (annual employment taxes for small employers). Do not combine Form 945 nonpayroll taxes with Form 941 or Form 944 payroll taxes for deposit purposes.
Special reporting applies to Military retirement from the Armed Forces, H-2A visa compensation on Form 1099-MISC, and governmental Section 457(b) plans. Consult tax professionals or access your IRS Business Tax Account for specific guidance.
Remember that Federal Income Tax withholding from wages appears on Form W-2, not Form 1099, and must be reported on Form 941 or Form 944. Only non-payroll payments, including Retirement pay, Indian gaming profits, gambling winnings, and backup withhold amounts belong on Form 945.
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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.
