Form 944, also known as the Employer’s Annual Federal Tax Return, was created by the Internal Revenue Service to simplify tax filing for the smallest businesses. Instead of filing quarterly forms, eligible employers with an annual employment tax liability of $1,000 or less can file once a year. This streamlined process helps small business employers save time while meeting their tax obligations.

For those required to file, Form 944 covers employment taxes such as federal income tax withheld from employees’ wages, the employer and employee share of social security tax, and Medicare taxes. Filing correctly ensures that payroll taxes, wages subject to tax, and any tax deposits are accurately reported to the federal government. The form also reconciles annual income and tax payments with employee wage records, making it a vital compliance step for the employer and the IRS.

Penalties and interest may apply if you miss the deadline, file late, or report incorrect amounts. This guide will explain the filing requirement in detail, provide step-by-step instructions for completing the form, show how to correct mistakes with Form 944-X, and outline resolution options if you face unpaid tax or other issues. Whether you are paying wages for the first time, stopped paying wages during the year, or simply want clarity, this guide is designed to help you navigate your responsibilities with confidence.

Understanding Form 944

Form 944 is the Employer’s Annual Federal Tax Return used by small business employers with an annual employment tax liability of $1,000 or less. Instead of filing quarterly forms like Form 941, eligible employers file this single return each year. The form reports federal income tax withheld, social security tax, and Medicare taxes, along with any adjustments or tax deposits made during the tax year.

Who Must File Form 944?

The Internal Revenue Service determines which businesses must file Form 944 and notifies them in writing. Meeting the $1,000 annual liability threshold alone does not automatically qualify an employer. Eligibility is generally based on paying $5,000 or less in total wages subject to Social Security and Medicare taxes, typically resulting in employment tax liability below $1,000.

Employers who should not use Form 944 include:

• Household employers must use Schedule H instead, since this form is designed to report domestic wage taxes.
  
  
• Agricultural employers are required to file Form 943, which is used to report wages paid to agricultural employees.
  
  
• Employers instructed by the IRS to file quarterly forms must continue filing Form 941 even if their annual liability appears low.
  
  
• Employers who have never received written IRS notification cannot switch to Form 944 independently and must continue with their current filing requirement.

Form 944 vs. Form 941

Form 944 and Form 941 report payroll taxes, but apply to different filing requirements. The table below highlights key differences.

1. Filing Frequency

• Form 944: Filed once per year
• Form 941: Filed four times per year (quarterly)

2. Employer Type

• Form 944: For small businesses with an annual employment tax liability of $1,000 or less
• Form 941: For most employers with regular payroll obligations

3. IRS Notification

• Form 944: Employers must receive IRS approval/notification to be eligible
• Form 941: Standard requirement unless the IRS instructs otherwise

4. Taxes Reported

• Form 944: Reports federal income tax withheld, Social Security and Medicare taxes, and required deposits — but on an annual basis
• Form 941: Reports the same taxes, but on a quarterly basis

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Filing Deadlines and Requirements

Employers must file Form 944 by January 31 following the tax year. For example, the 2024 return is due January 31, 2025. If all required tax deposits are made on time and in full, the deadline is extended to February 10.

The filing requirement ensures that withheld federal income taxes, the employer and employee share of social security and Medicare taxes, and total tax liability are accurately reported to the federal government. Keeping complete records of employee wages, income tax withholding, and tax payments helps Medicare avoid IRS penalties.

Step-by-Step Guide to Filing Form 944

Filing Form 944 requires careful preparation and accurate reporting of payroll taxes, employee wages, and income tax withholding. Following a structured approach helps small business employers meet their filing requirements without unnecessary errors or penalties.

Step 1: Gather Required Information and Documents

Before beginning, employers should collect all records that support annual employment tax liability. These include:

• Employers should review employee wage and tax records, which detail the taxable wages paid during the tax year.
  
  
• Employers must have copies of Forms W-2 issued to employees, since these must match the information reported on Form 944.
  
  
• Employers should confirm records of federal income tax withheld and Medicare taxes withheld to ensure accurate reporting.
  
  
• Employers need documentation of tax deposits made throughout the year, which verifies that payments were submitted to the United States Treasury.
  
  
• The employer identification number must be available because it is required for every Form 944.
  
  
• If available, employers should refer to a previously filed form to confirm the figures are consistent with earlier tax years.

Step 2: Obtain the Current Form and Instructions

Employers should always download the most recent version of Form 944 and its instructions from IRS.gov. Using the current form is important because the IRS updates wage limits, social security tax rates, and Medicare tax rules each year. Filing with an outdated version may cause errors or processing delays.

Step 3: Complete the Form Line by Line

When filling out the form, accuracy is critical:

• In the header section, employers must enter their employer identification number, legal business name, and correct mailing address.
  
  
• Employers should report total employee wages, including all taxable wages subject to Social Security and Medicare taxes.
  
  
• Employers must calculate and report the correct amounts of employee income tax withholding, social security tax, and Medicare wages.
  
  
• Employers are responsible for reporting the employer and employee share of social security and Medicare taxes, determining the total tax liability.
  
  
• Employers should record any Medicare tax adjustments, tax credits, or corrections to their deposit schedule in the appropriate sections of the form.

Step 4: Reconcile With Forms W-2 and W-3

The IRS compares the totals reported on Form 944 with those listed on Form W-3, which summarizes all employee W-2s. Employers should ensure that total wages paid, withheld federal income taxes, and social security and Medicare amounts are consistent across all forms. Mismatched records often trigger IRS notices or penalties.

Step 5: File the Return

Employers may choose between electronic filing and paper filing. Electronic filing through IRS-approved tax preparation software is often recommended because it is faster, more secure, and provides immediate confirmation of receipt. Employers who prefer paper filing must use the correct IRS mailing address listed in the instructions and include a payment voucher if taxes are owed.

Correcting Errors With Form 944-X

Mistakes on an employer’s annual federal tax return can happen, but the IRS provides a correction process through Form 944-X. Employers should use this form rather than resubmitting Form 944.

When to Use Form 944-X

Form 944-X should be used when:

• Employers reported incorrect employee wages, either by underreporting or overreporting taxable wages.
  
  
• Employers listed the wrong amounts of federal income tax withholding, social security tax, or Medicare taxes.
  
  
• Medicare entered tax deposits incorrectly, which caused an inaccurate balance of unpaid tax or overpayment.
  
  
• Employers included employee information that was missing or inaccurate on the original return.

Deadlines for Filing Corrections

• Employers correcting overreported taxes must file Form 944-X within three years of the original return filing or within two years of the taxes being paid, whichever is later.
  
  
• Employers correcting underreported taxes must file Form 944-X by the due date of the return for the period when the error was discovered.

Filing Process for Form 944-X

Employers should take the following steps when correcting errors:

1. Employers must download the most recent version of Form 944-X and its instructions from IRS.gov.
   
   
2. Employers must complete the form by showing the original and corrected amounts and their differences.
   
   
3. Employers should attach payroll records or other supporting documentation that explains why the correction is necessary.
   
   
4. Employers must submit Form 944-X separately from the current year’s return and pay any additional tax due directly to the United States Treasury.

IRS Penalties and Interest Related to Form 944

Failing to meet filing requirements or making late tax payments can result in significant penalties. The Internal Revenue Service imposes fines for late filings, incorrect or missed tax deposits, and unpaid employment tax liabilities. Interest also accrues on overdue balances, which increases the total tax owed if issues are not addressed quickly.

Failure to File Penalty

Employers who do not file Form 944 by the deadline may face a penalty equal to 5 percent of the unpaid tax for each month or part of a month when the return is late. This penalty can continue until 25 percent of the total tax liability is paid. The minimum penalty for returns filed more than 60 days late is the smaller of $485 or 100 percent of the unpaid tax. Filing on time, even if full payment cannot be made, helps reduce this penalty.

Failure to Pay Penalty

Employers who file Form 944 on time but fail to pay the tax owed are subject to a failure-to-pay penalty. This penalty is calculated at 0.5 percent of the unpaid tax for each month or part of the outstanding balance, up to 25 percent of the total liability. If the employer is on an approved installment agreement, the monthly penalty may be reduced to 0.25 percent. Making timely tax payments, even partial ones, can limit how much this penalty grows.

Deposit Penalties

Employers must follow a deposit schedule for federal income tax withheld, social security tax, and Medicare taxes. Missing a deposit deadline can result in additional penalties:

• Deposits one to five days late result in a 2 percent penalty on the unpaid amount. This applies even if the tax is paid in full a few days after the due date.
  
  
• Deposits that are six to fifteen days late result in a 5 percent penalty on the unpaid amount, which makes even short delays costly.
  
  
• Deposits over sixteen days late result in a 10 percent penalty on the unpaid amount, significantly increasing the employer’s total tax liability.
  
  
• Deposits that remain unpaid more than ten days after the IRS issues its first notice result in a 15 percent penalty on the unpaid amount, representing the highest level of deposit-related penalty.

Interest Charges

In addition to penalties, interest is charged on any unpaid tax from the return's due date until the liability is paid in full. Interest accrues daily and is based on quarterly rates that the IRS updates. Because interest compounds, the longer a balance remains unpaid, the faster the debt grows. Employers can reduce interest charges by making payments as soon as possible, even if the full balance cannot be paid immediately.

Trust Fund Recovery Penalty

The IRS may also impose the Trust Fund Recovery Penalty, one of the most serious enforcement actions available. This penalty applies when an employer fails to turn over withheld federal income tax and the employee share of social security and Medicare taxes. In these cases, the IRS can hold specific individuals—such as corporate officers, business owners, or anyone responsible for payroll decisions—personally liable for the full amount of unpaid trust fund taxes. Because this penalty equals 100 percent of the unpaid trust fund amount, it can create a substantial financial burden for the business and the responsible individuals.

Interest Charges

Interest accrues on unpaid taxes and penalties from the date the return was due until the balance is fully paid. The IRS sets interest rates quarterly, and interest compounds daily, meaning balances can proliferate.

Trust Fund Recovery Penalty

The Trust Fund Recovery Penalty may apply when employers fail to remit withheld federal income taxes and the employee share of social security and Medicare taxes. The IRS can hold corporate officers, business partners, or other responsible individuals personally liable for these unpaid payroll taxes. This penalty is equal to 100 percent of the unpaid trust fund amount.

Resolution Options for IRS Issues

Small business employers who cannot pay their total tax liability or face penalties after filing Form 944 still have options. The Internal Revenue Service offers programs to help taxpayers resolve unpaid tax, reduce penalties, and manage employment tax liability over time.

Payment Plans and Installment Agreements

Employers who cannot pay their full tax bill at once may qualify for installment agreements:

• A short-term payment plan allows employers up to 180 days to pay the balance in full. While there is no setup fee, penalties and interest accumulate until the tax liability is paid.
  
  
• A long-term installment agreement allows employers to make monthly payments over time. It is generally available to those who owe $25,000 or less in employment tax liability and have filed all required tax forms.
  
  
• The In-Business Trust Fund Express installment agreement provides a faster approval process for small businesses currently paying employees wages and have limited payroll tax debt, provided that they meet specific IRS criteria.

Penalty Abatement Options

The IRS may remove or reduce penalties in certain situations:

• The First-Time Abate program grants relief to employers with a clean compliance history, meaning no significant penalties in the past three years and all required tax forms filed on time.
  
  
• Reasonable cause abatement is available when employers can show that events outside their control, such as a natural disaster, serious illness, or an electronic filing system failure, prevented them from meeting their tax obligations. Employers must provide detailed documentation to support their request.

Offer in Compromise

An Offer in Compromise allows employers to settle their tax debt for less than the full balance owed when paying in full would cause financial hardship or when collection is unlikely.

• Employers seeking this option must submit Form 656, financial documentation, and a nonrefundable application fee.
  
  
• Payments can be made in lump sums or periodic installments while the IRS reviews the application, which may take many months.
  
  
• Employers who meet the low-income certification guidelines may qualify for a waiver of both the application fee and the initial payment.

Currently Not Collectible (CNC) Status

When an employer can prove that paying taxes would create a severe financial hardship, the IRS may assign the account to Currently Not Collectible status.

• Employers must submit detailed financial statements, such as Form 433-B, demonstrating that expenses leave no funds for tax payments.
  
  
• While the CNC status halts IRS collection actions like bank levies and wage garnishments, penalties and interest continue to grow until the debt is resolved.
  
  
• The IRS reviews accounts in CNC status yearly to determine whether the employer’s financial situation has improved enough to resume payments.

Frequently Asked Questions

What is the purpose of filing Form 944?

Filing Form 944 allows small business employers with an annual employment tax liability of $1,000 or less to submit one annual federal tax return instead of quarterly forms. This simplified IRS form reports federal income tax withheld, social security tax, Medicare taxes, and total wages paid. It helps reduce the filing requirement for small businesses while ensuring proper tax deposits and payments are made to the Internal Revenue Service.

How does Form 944 report federal income tax withheld from employees?

Form 944 requires employers to report federal income tax withheld and social security and Medicare taxes withheld from employee wages. The form reconciles total taxable wages paid and income tax withholding with W-2 forms provided to employees. By accurately reporting withheld federal income taxes, the employer and the IRS can confirm that payroll taxes, tax deposits, and other employment tax obligations are handled correctly.

What happens if I miss the Form 944 filing requirement or have unpaid tax?

If employers miss the filing requirement or leave unpaid tax, the Internal Revenue Service may assess penalties and daily interest. These charges can apply to employment tax liability, including federal income tax, Medicare wages, and Social Security tax owed. Making partial tax payments reduces penalties even if the full annual liability cannot be met. Consulting a tax professional or tax preparer can help employers address back taxes and correct previously filed forms.

Can I use electronic filing or tax preparation software for Form 944?

Employers can use electronic filing systems or IRS-approved tax preparation software to submit Form 944. Electronic filing is faster, provides receipt confirmation, and reduces tax calculation errors. This process ensures the employer identification number, taxable wages, and employee income tax withholding are reported correctly. Filing electronically also allows employers to schedule tax deposits and submit a payment voucher if taxes are withheld or the total tax liability remains due to the United States Treasury.

Do household employers or agricultural employers file Form 944?

Household employers and agricultural employers generally do not file Form 944. Household employees are reported on Schedule H, while agricultural employees are reported on Form 943. Only agricultural and household employees are excluded from filing Form 944, even if the employer has a low annual tax liability. Instead, these employers must follow different IRS forms and deposit schedules explicitly designed for their type of employment tax liability.

What role does the employer’s annual federal tax return play in reporting payroll taxes?

The employer’s annual federal tax return through Form 944 summarizes tax obligations such as income taxes, social security and Medicare taxes, and the employee share of payroll taxes. Employers must accurately report total wages paid, taxable wages, and Medicare tax adjustments. By reconciling annual income with withheld wages and tax deposits, the Internal Revenue Service ensures that the employer and the federal government receive correct records of employment tax liability for the tax year.