What IRS Form 945 Is For
IRS Form 945 (2020) is used to report withheld federal income tax on nonpayroll payments, such as pensions, annuities, and certain gambling winnings. Businesses and organizations are required to file this form when they withhold federal income tax from payments made to payees, including nonemployee compensation, dividends, and other taxable distributions.
Filing Form 945 ensures businesses comply with federal tax laws by accurately reporting the withholding amount and meeting their annual return obligations. Timely and accurate filing of this form helps businesses avoid penalties. Electronic filing is recommended to speed up processing and reduce the risk of delays.
When You’d Use IRS Form 945
IRS Form 945 is used when businesses or organizations are responsible for withholding federal income tax from nonpayroll payments made to payees, such as pensions, annuities, or certain gambling winnings. The form is required to report the amount of federal income tax paid on such payments, ensuring compliance with tax laws.
Form 945 must be filed annually, with submission deadlines typically in January or October, as specified by the IRS. If the filing is missing or incorrect, businesses should prepare to correct their filings as soon as possible.
Businesses can file the return by mail or electronically. Electronic filing is encouraged to minimize errors. Keep a copy of the form for your records, as it may be needed for future reference or audits.
Key Rules or Details for 2020
For the 2020 tax year, IRS Form 945 includes several key updates for businesses and organizations. Form 945 must be filed annually, ensuring that the statement reflects accurate withholding amounts. Carefully follow the instructions to avoid penalties and delays in processing.
Businesses must report all relevant nonpayroll withholding and ensure compliance with the line requirements on the form. If filing by mail, address the form to the correct IRS office, which may vary by location, such as Louisville, KY. Electronic filing is encouraged to minimize errors and expedite processing.
Step-by-Step (High Level)
- Gather records: Collect all relevant tax records, including prior filings, IRS transcripts, and documentation for nonpayroll payments.
- Complete Form 945: Ensure you fill out the withholding amount accurately, including information for payees such as pensions and certain gambling winnings.
- Choose your filing method: File electronically using IRS-approved e-file services or submit a paper return by mail, depending on your preference.
- Review and check: Verify that all information is correct and matches your records. Verify that no payees are missing and that withholding amounts are accurate.
- Submit and keep a copy: Submit the completed form by the due date and keep a copy for your records.
Common Mistakes and How to Avoid Them
- Incorrect withholding amount: Failure to report the correct withholding amount may result in penalties.
How to avoid: Double-check the total withholding amount for all payees and ensure it matches the records. - Incomplete or missing information: Leaving sections incomplete, such as payee details or the payment voucher, may cause processing delays.
How to avoid: Ensure all required fields are filled, and confirm the number of payees and withholding amounts are correct. - Using the wrong filing method: Filing a paper return when electronic submission is preferred can cause delays.
How to avoid: File electronically whenever possible to expedite processing and reduce errors. - Failure to provide necessary payment details: Not submitting the payment voucher or money order correctly can prevent the IRS from processing your return.
How to avoid: Always include the correct payment voucher and match the amount to the withholding amount on the form.
What Happens After You
After filing Form 945, the IRS will begin processing your return, which can take several weeks to several months, depending on whether it was filed electronically or by paper. If the form was filed correctly, the IRS will match your backup withholding amounts with your records, updating their system accordingly. If the IRS identifies discrepancies or missing information, they may send a notice requesting additional information or clarification.
For returns with outstanding balances, the IRS will calculate any applicable penalties and interest based on the deposit schedules. Make sure to note any communication from the IRS and respond promptly if requested. Keep a copy of the return and related documents for your records and future reference.
FAQs
What is the purpose of IRS Form 945?
IRS Form 945 is used to report withheld federal income tax from nonpayroll payments, such as backup withholding and income tax from dividends or certain gambling winnings. It helps businesses report the withholding amount accurately and meet their annual return obligations.
When is IRS Form 945 due?
Form 945 is generally due by January 31st of the year following the tax year. If you have a monthly deposit schedule, you must submit the form by the end of February if you have made all deposits on time.
How do I calculate the total amount of withheld federal income tax for Form 945?
To calculate the total amount of withheld federal income tax, identify all nonpayroll payments made throughout the year. Include backup withholding from payments like pensions, annuities, and certain gambling winnings, then sum these amounts to report on the form.
What is the difference between Form 945 and Form 945-X?
Form 945 is used for the original annual return for reporting nonpayroll withholding. Form 945-X is used when you need to correct errors in your original filing, such as misreporting the withholding amount or missing information.
How can I avoid penalties when filing Form 945?
To avoid penalties, ensure you file Form 945 accurately and on time. Determine your deposit schedules based on your tax liability and submit the annual return within the required timeframe.
Can I contact the IRS if I make a mistake on Form 945?
Yes, if you notice an error or need to provide additional information, you can contact the IRS for guidance. They may request a corrected form or clarification regarding discrepancies with the withheld federal income tax.
What happens if I file Form 945 late?
If Form 945 is filed late, the IRS will calculate penalties and interest based on the withholding amount and the delay period. You can request a penalty abatement if you can prove reasonable cause for the late filing.
Filers responsible for annual nonpayroll withholding reporting may refer to the Federal Fillable Tax Forms directory for additional federal forms, instructions, and related materials.
