Form 945 (2018) Checklist
Purpose
Form 945, Annual Return of Withheld Federal Income Tax, is used to report federal income taxes withheld from non-payroll payments for the 2018 tax year. These payments include pensions, annuities, IRAs, military retirement pay, gambling winnings, Indian gaming profits, and backup withholding reported on various Form 1099 series returns. Unlike Form 941 or Form 944, IRS Form 945 does not cover wages and salaries. It applies only to nonpayroll taxes withheld under Section 3402 and related provisions of Title 26.
For 2018, the Tax Cuts and Jobs Act reduced the backup withholding rate from 28% to 24%. Employers, payers, financial institutions, and plan administrators must reconcile withheld federal income tax with federal tax deposits made through the Electronic Federal Tax Payment System, following deposit rules outlined in the Employer’s Tax Guide, Publication 15, and Publication 15-A.
Required Steps
1. Verify Employer Identification Number and address
Enter the Employer Identification Number exactly as issued by the Internal Revenue Service. The EIN must match IRS records under Section 6109 to avoid processing delays. Do not substitute a Social Security Number or Individual Taxpayer Identification Number. If you have not yet received an EIN, write “Applied For” and include the application date. EINs are requested using Form SS-4.
Update the address only if it has changed since the prior Form 945 filing. Check the address change box if applicable. Accurate payer information is essential for electronic filing and proper account posting in the IRS Business Tax Account.
2. Complete Line 1 for federal income tax withheld
Report all withheld federal income tax from non-payroll payments made during 2018. This includes withholding from pensions, annuities, IRAs, section 401(k) and section 403(b) plans, governmental section 457(b) plans, military retirement funds, Alaska Native Corporation distributions, and gambling winnings reported on Form W-2G.
Amounts on Line 1 should align with information returns such as Form 1099-R, Form 1099-DIV, Form 1099-MISC, and Form 1099-NEC. Include voluntary withholding elected by recipients, but exclude wage withholding. Wages are reported separately on Form 941, Form 943, Form 944, or Schedule H, depending on the payer.
3. Complete Line 2 for backup withholding
Enter backup withholding at the 24 percent rate applicable for 2018. Backup withholding applies when payees fail to provide a valid taxpayer identification number or are subject to IRS backup withholding notices, as described in Publication 1281.
This includes backup withholding from interest, dividends, nonemployee compensation, barter exchanges, gambling winnings, and certain payments to H-2A visa holders without valid TINs. Backup withholding reported here should match amounts reported on the applicable Form 1099.
4. Calculate Line 3 total taxes
Add Lines 1 and 2 to determine the total withheld federal income tax for the year. This amount represents your annual tax liability under Form 945.
If total nonpayroll taxes are less than $2,500, you are not required to complete the $2,500 year summary or Form 945-A. If total taxes are 2,500 or more, the total must reconcile exactly to either the monthly summary on Line 7 or to Form 945-A, depending on your deposit schedule.
5. Report Line 4 deposits and prior-year overpayments
Enter all federal tax deposits made for 2018 using the Electronic Federal Tax Payment System, electronic funds transfer, or other authorized methods. Include overpayments applied from Form 945-X or prior-year returns.
Do not include payments sent with Form 945 unless you qualify for the limited exceptions described in Publication 15. Payments made with the return generally apply only when the total liability is under $2,500 or when permitted under the Accuracy of Deposits Rule.
6. Determine your 2018 deposit schedule
Your deposit schedule depends on your 2017 Form 945 tax liability. If Line 3 of your 2017 return was 50,000 or less, you are a monthly depositor for 2018. If it exceeded 50,000, you are a semiweekly depositor.
If you were a monthly depositor and accumulated 100,000 or more in tax liability on any single day during 2018, you became a semiweekly depositor immediately for the remainder of the year and all of 2019. This rule frequently affects growing businesses and pension administrators.
7. Complete Line 7 monthly summary if required
Monthly depositors with total taxes of 2,500 or more must complete Lines 7A through 7M. Enter the tax liability for each month based on the date payments were made, not the date deposits were submitted.
Line 7M must equal Line 3 exactly. Do not complete Line 7 if you were a semiweekly depositor at any time during the year or if total taxes were under $2,500.
8. Attach Form 945-A for semiweekly depositors
If you were a semiweekly depositor at any point during 2018, file Form 945-A with your return. Form 945-A reports tax liability by payment date and replaces the monthly summary.
9. Prepare Form 945-V if submitting a payment
Form 945-V is used only when submitting a payment with the return under the allowed exceptions. Enter your Employer Identification Number, payment amount, and business details. Make checks payable to the United States Treasury and include your EIN, Form 945, and 2018 on the payment.
Do not staple the voucher or payment to the return. Electronic balance due payments, direct deposit, or electronic filing options through approved tax software are preferred and reduce processing errors.
10. Designate a third-party designee if needed
You may authorize a third party to discuss the return with the Internal Revenue Service by completing the Third-Party Designee section. Provide the designee’s name, phone number, and a five-digit PIN. This authorization expires one year after the filing deadline and does not permit representation before the Department of Justice or the execution of binding agreements.
11. Sign and date the return
An authorized individual must sign Form 945 under penalties of perjury, as required by the Paperwork Reduction Act and the OMB control number rules. Print your name, title, and date.
If a paid preparer assisted, they must also sign and include their Preparer Tax Identification Number, firm name, EIN, and contact information. Preparers must indicate self-employed status when applicable.
12. File on time to avoid penalties
For tax year 2018, Form 945 was due January 31, 2019. If all federal tax deposits were made on time and in full, the filing deadline would be extended to February 11, 2019.
Late filing or payment triggers penalty charges and interest charges under Title 26. Failure-to-file penalties generally accrue at 5 percent per month, while failure-to-pay penalties accrue at 0.5 percent per month, both capped at 25 percent. Interest accrues until paid in full.
Year-Specific Updates for 2018
Backup withholding rate change
The Tax Cuts and Jobs Act reduced the backup withholding rate to 24 percent, effective January 1, 2018. Use only the 2018 versions of Publication 15 and Publication 15-A when reviewing withholding rates and deposit rules.
Reporting thresholds unchanged
The 2,500 threshold for Line 3 remained unchanged. Monthly depositors reconcile liability on Line 7, while semiweekly depositors use Form 945-A.
Filing address changes
IRS filing addresses changed during 2019. Returns filed before and after June 17, 2019, used different addresses. Always verify the correct address using the 2018 Instructions for Form 945 when filing on paper.
Summary
Form 945 is a critical compliance return for reporting withheld federal income tax from non-payroll payments. Accurate reporting, proper deposit classification, and timely filing help avoid penalties and interest. Employers, payers, and tax professionals should rely on Publication 15, Publication 15-A, and related IRS guidance to ensure correct handling of nonpayroll taxes for the 2018 tax year.
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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.
