Filing an unfiled 2024 Form 945 may feel daunting, especially for businesses and organizations unfamiliar with IRS requirements. Form 945, the Annual Return of Withheld Federal Income Tax, reports that federal income tax is withheld from certain nonpayroll payments, such as pensions, annuities, gambling winnings, and backup withholding. Even though it is not a payroll tax form, it is vital to ensure that withheld federal income tax is reported and paid correctly to the Internal Revenue Service (IRS).

Leaving Form 945 unfiled can quickly lead to IRS notices, penalties, and interest charges. For example, missing the official due date can result in a failure-to-file penalty, while not paying the total tax owed may trigger additional fees and daily interest accruals. Sometimes, business owners and responsible parties may even face the Trust Fund Recovery Penalty if withheld taxes are not properly remitted. Understanding the rules and acting promptly reduces risk and helps businesses remain compliant.

This guide explains how to file Form 945, what deadlines apply for the 2024 tax year, and how to avoid common mistakes. You will also learn about penalties, resolution options if you cannot pay immediately, and how to correct errors with Form 945-X. Whether you are a small business, nonprofit, or another type of payer handling nonpayroll payments, this article offers the tools to stay compliant and confidently manage your tax liability.

What Is Form 945 and Who Needs to File It?

Form 945, Annual Return of Withheld Federal Income Tax, is an IRS form used to report federal income tax withheld from certain nonpayroll payments. While most employers are familiar with payroll tax filings through Form 941, Form 945 covers a different category of tax responsibility. It applies to situations where taxes are withheld from payments other than employee wages.

How Form 945 Differs from Form 941

• Form 941: These include reports of income tax, Social Security, and Medicare taxes withheld from employee wages and compensation.
• Form 945: These include reports of only federal income tax withheld from nonpayroll payments. It does not include Social Security or Medicare taxes.

This distinction matters because many businesses assume payroll and nonpayroll withholdings are handled similarly. In reality, they are reported separately, and failing to file Form 945 can create unexpected compliance issues with the Internal Revenue Service.

Types of Nonpayroll Payments That Require Form 945

You must file Form 945 if you withheld, or were required to withhold, federal income tax from the following:

• Pensions and annuities, including distributions from tax-favored retirement plans such as 401(k)s, 403(b)s, and IRAs.
• Military retirement pay is subject to federal income tax, and tax is withheld from those payments.
• Gambling winnings, which must be reported on Form W-2G. 
• Indian gaming profits when withholding rules apply.
• Certain government payments, if recipients elected to have federal income tax withheld.
• Backup withholding was required when payees failed to provide a correct taxpayer identification number on Forms 1099.

Who Is Responsible for Filing Form 945

The responsibility to file Form 945 falls on any business, nonprofit, or other payer withholding tax on nonpayroll payments. These include:

• Businesses that distribute retirement funds or issue payments are subject to backup withholding.
• Nonprofits that withhold federal income tax from specific grants or government-related payments.
• Casinos and gaming entities are responsible for withholding gambling winnings or tribal distributions.

In short, if your organization withheld any federal income tax from nonpayroll payments during the tax year, you must submit a Form 945 annual return. Even if you had no withholding, the IRS may still expect a filing if you are registered as a payer with an Employer Identification Number (EIN).

Step-by-Step Filing Instructions for the 2024 Form 945

Filing Form 945 may feel time-consuming, but breaking the process into steps makes it much easier. Below is a step-by-step guide to help you prepare, complete, and file Form 945 for the 2024 tax year.

Step 1 – Determine if You Must File

You must file Form 945 if you withheld, or were required to withhold, federal income tax from nonpayroll payments. These include pensions, annuities, military retirement pay, gambling winnings, Indian gaming profits, and backup withholding on certain government payments or Form 1099 distributions. Even if no tax was withheld, the IRS may still require a return if your Employer Identification Number (EIN) is active.

Step 2 – Gather Required Documentation

Before you begin, collect all records that show tax withheld during the year. Common documents include:

• Collect the Forms 1099 you issued for distributions, interest, or other reportable income.
• Gather Form W-2G records for gambling winnings.
• Keep documentation of any backup withholding where taxpayer identification numbers were missing or incorrect.
• Include records of voluntary withholding elections from payees.
• Have confirmation of deposits made through EFTPS or other authorized systems.
• Prepare your business information, including your EIN, legal name, and business address.

Having these documents ready ensures accurate reporting and reduces the risk of errors.

Step 3 – Obtain the Current IRS Form and Instructions

Always use the official IRS Form 945 for the year you are filing. For 2024 returns, download:

• Form 945 (2024)
• Instructions for Form 945 (2024)

Using an outdated version can cause processing delays.

Step 4 – Complete Form 945 Line by Line

Form 945 requires careful attention. Key sections include:

• Line 1 – Federal Income Tax Withheld: Report the total amount of income tax withheld from nonpayroll sources such as pensions, annuities, and tax-favored retirement plans.
• Line 2 – Backup Withholding: Enter withholding required when recipients did not provide valid taxpayer IDs.
• Line 3 – Total Tax: Add lines 1 and 2. This represents your total liability.
• Line 4 – Total Deposits: Enter payments already made.
• Line 5 – Balance Due: The balance is due if your deposits are less than your total tax.
• Line 6 – Overpayment: Report any overpayment and indicate whether you want a refund or credit.
• Line 7 – Monthly Summary: Complete this if you are a monthly depositor and your liability is $2,500 or more.

Take time to verify records before submitting. Inaccuracies can trigger IRS notices.

Step 5 – Review Deposit Requirements

Deposit schedules are based on prior year liability:

• Monthly depositors: If your 2023 liability was $50,000 or less
• Semiweekly depositors: If your 2023 liability exceeded $50,000
• Special rule: If you accumulate $100,000 or more in liability on any business day, you must deposit by the next business day

Step 6 – Make Deposits via EFTPS

All deposits must be made electronically using the Electronic Federal Tax Payment System (EFTPS). The IRS no longer accepts payment vouchers, checks, or cash for regular federal tax deposits. Failure to deposit electronically may result in penalties.

Step 7 – File Electronically or by Mail

You can file electronically through an IRS-approved provider, which is faster and includes an electronic receipt. Alternatively, you may choose paper filing by mailing the return to the correct IRS processing center based on your business address. Always check the most recent IRS list of addresses, as they may change.

By following these steps carefully, you can complete Form 945 accurately and on time, reducing the risk of penalties and ensuring compliance with the Internal Revenue Service.

Deadlines and Filing Requirements for 2024 Form 945

Meeting IRS deadlines is essential to avoid unnecessary penalties and interest. For the 2024 tax year, all businesses and organizations responsible for withholding federal income tax on nonpayroll payments must ensure their Form 945 annual return is filed on time.

Primary Filing Deadline

• The official due date for filing your 2024 Form 945 is January 31, 2025.
• This applies whether you file electronically or choose paper filing.
• If the deadline falls on a weekend or federal holiday, the return is considered timely if filed by the next business day.

Extended Filing Date Option

The IRS allows a limited extension if all deposits were made on time and in full. In this case:

• You may file by February 10, 2025.
• No separate request is required; the extension is automatic.
• This option applies only if you have no remaining balance due when the return is filed.

What Counts as On-Time Filing

The IRS considers your Form 945 filed on time if:

• Mailed Returns: The return is postmarked by the due date.
• Private Delivery Services: IRS-approved carriers can be used, but cannot deliver to P.O. boxes. Always check the updated IRS list of approved providers.
• Electronic Filing: Your filing date is the electronic timestamp from the IRS e-file system. Electronic submission also provides an instant confirmation or receipt.

Why Deadlines Matter

Late filing can create significant problems. A return submitted after the due date may trigger failure-to-file and failure-to-pay penalties if taxes remain unpaid. The IRS may also send follow-up notices to your business address, which can escalate collection efforts. Filing on time protects you from these risks and demonstrates compliance with the Internal Revenue Service.

IRS Penalties and Interest for Form 945

Failing to meet your Form 945 annual return obligations can lead to costly penalties and daily accruing interest. The Internal Revenue Service (IRS) enforces these rules to ensure that federal income tax withheld from nonpayroll payments is properly reported and paid. Understanding these consequences can help you avoid unnecessary financial strain.

Failure to File Penalty

The IRS may assess a failure-to-file penalty if you miss the filing due date. This charge equals 5% of the unpaid tax for each month or part of a month that the return is late, up to 25% of the total tax liability. If the return is more than 60 days late, the minimum penalty is the smaller of 100% of the tax owed or a flat dollar amount set by the IRS (currently $485).

Failure to Pay Penalty

The failure-to-pay penalty applies when the total taxes owed are not submitted on time.

• The standard penalty is 0.5% of the unpaid balance per month, up to a maximum of 25% of the liability.
• If you set up an approved installment agreement, the monthly rate may drop to 0.25%.

Failure to Deposit Penalty

The IRS requires deposits to be made electronically using EFTPS. Missing a deposit deadline can result in escalating penalties:

• 2% for deposits 1–5 days late
• 5% for deposits 6–15 days late
• 10% for deposits more than 15 days late
• 15% for amounts not deposited within 10 days of receiving the first IRS notice

These penalties apply to withheld federal income tax deposits on pensions, annuities, military retirement, gambling winnings, Indian gaming profits, and backup withholding.

Interest on Unpaid Taxes

In addition to penalties, the IRS charges daily compounding interest on any unpaid balance, including penalties. Interest rates change quarterly and are tied to federal short-term rates. Because of compounding, balances can proliferate if not addressed.

Trust Fund Recovery Penalty (TFRP)

One of the most severe enforcement tools is the Trust Fund Recovery Penalty. This applies when businesses collect taxes on behalf of others but fail to remit them. Key points include:

• Liability equals 100% of the tax withheld but not paid.
• Responsibility can fall on business owners, officers, or employees who have authority over financial decisions.
• The IRS may hold multiple individuals jointly and severally liable, meaning each person could be responsible for the entire balance.

The TFRP is especially relevant for organizations managing retirement plan distributions or other payments where income tax withheld must be transferred to the IRS.

Resolution Options If You Can’t Pay Immediately

Suppose your Form 945 annual return shows a balance due, and you cannot pay the total tax immediately. In that case, the IRS provides several programs to help businesses and organizations resolve their tax liability. These options can reduce penalties, prevent enforced collection, and keep your company compliant.

Installment Agreements (Guaranteed, Streamlined, IBTFE)

An installment agreement allows you to pay over time.

• Guaranteed Installment Agreement: Available if you owe $10,000 or less (excluding penalties and interest). The balance must be paid within three years, and you must remain current on all filings.
• Streamlined Installment Agreement: This agreement applies to balances up to $25,000. Payments can be spread over 72 months with minimal financial disclosure.
• In-Business Trust Fund Express (IBTFE): Designed for active businesses with employment or withholding tax debts. Payments must be made by direct debit, and compliance with future deposits is required.

You can apply online through the IRS Payment Plans and Installment Agreements page, submit Form 9465, Installment Agreement Request, or call the IRS directly. Choosing the right option helps spread payments, prevent enforced collection, and keep your business in good standing with the Internal Revenue Service.

Penalty Abatement (First Time Abatement, Reasonable Cause)

The IRS may remove specific penalties if you qualify for relief.

• First Time Abatement (FTA): Available if you have a clean compliance history for the past three years, filed all required returns, and arranged to pay any taxes owed.
• Reasonable Cause Relief: This may apply if circumstances beyond your control, such as natural disasters, illness, or reliance on professional advice, prevent timely filing or payment.

Requests can be made by phone, by written letter, or using Form 843, Claim for Refund and Request for Abatement.

Offer in Compromise (OIC)

An Offer in Compromise allows you to settle your tax liability for less than the full balance. However, the IRS is cautious about accepting offers for employment tax or withheld federal income tax debts.

• Types of OIC: Doubt as to Collectibility, Doubt as to Liability, and Effective Tax Administration.
• Special Considerations: The IRS usually requires businesses to be current on all deposits and filings before considering an OIC.

To apply, complete Form 656, Offer in Compromise, and submit financial documentation. A nonrefundable application fee and initial payment are generally required.

Currently Not Collectible (CNC) Status

If paying your tax debt would create significant financial hardship, you may request Currently Not Collectible status.

• The IRS will review your income, expenses, and assets using Form 433-F, Collection Information Statement.
• If approved, the IRS temporarily suspends collection activity.
• Penalties and interest continue to accrue, but you avoid immediate levies or liens.

CNC status is reviewed periodically, and collection may resume if your financial situation improves. Exploring these resolution programs allows you to manage your tax liability while maintaining compliance with the Internal Revenue Service. Choosing the right option depends on your business’s financial condition and long-term obligations.

Correcting Errors with Form 945-X

Even with careful preparation, mistakes can occur when filing the Form 945 annual return. The IRS provides Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax, to fix errors and ensure accurate reporting of withheld federal income tax. You can find official guidance directly on the IRS Form 945-X page.

• When and Why to File Form 945-X: You should use Form 945-X whenever you discover the original Form 945 contained errors. This may include underreporting or overreporting federal income tax withheld from nonpayroll payments such as pensions, annuities, or gambling winnings. Timely corrections help avoid additional penalties and demonstrate good-faith compliance with the Internal Revenue Service.
• How to Correct Underreported or Misreported Withholding: If you underreported, you must pay the difference plus any applicable interest. For overreported amounts, you can request a refund or apply the overpayment to your next tax year. Completing Form 945-X involves carefully adjusting the reported lines, explaining the reason for the correction, and attaching any supporting documentation.
• Recordkeeping Requirements: The IRS expects businesses to keep detailed records supporting changes made on Form 945-X. Maintain copies of original returns, corrected forms, withholding statements, and payment confirmations. These records should be retained for at least four years after the corrected return of withheld federal income tax is filed. Proper verification helps protect your business if the IRS requests additional information or conducts a compliance review.

Correcting errors with Form 945-X ensures your business information is accurate and prevents future complications. By addressing mistakes quickly, you minimize risk and show the IRS that you are committed to meeting your filing obligations.

Practical Case Examples of Form 945 Issues

Real-life scenarios can help make the rules for Form 945's annual return easier to understand. The following examples illustrate common mistakes with nonpayroll payments and federal income tax withheld, and how they can be resolved.

Small Business Missed Deposit Deadlines

A small financial planning firm withheld federal income tax from client IRA distributions but missed several deposit dates. As a result, the IRS assessed failure-to-deposit penalties. The owner requested First Time Abatement, which removed the penalties, and set up EFTPS to make automated deposits in the future. This case highlights how businesses can recover from errors and reduce the risk of repeat issues.

Casino Backup Withholding Errors

A regional casino failed to collect taxpayer identification numbers from large jackpot winners, requiring backup withholding. Because the casino missed deposit and filing deadlines, it faced penalties and interest. By filing Form 945 immediately and requesting reasonable cause relief, the casino reduced its penalties and set up a short-term payment plan to resolve the tax liability.

Pension Administrator Facing Trust Fund Recovery Penalty

A pension administrator withheld significant amounts from retirement distributions but failed to send the total tax to the IRS. The agency began pursuing the Trust Fund Recovery Penalty against corporate officers. To resolve the issue, the business arranged payment of the shortfall and cooperated fully with the IRS investigation. This example shows how severe consequences can arise when withheld taxes are not remitted.

Nonprofit Discovering Unreported Withholding

A nonprofit organization withheld taxes from certain government payments but accidentally failed to report them on its Form 945 annual return. After discovering the oversight, it filed Form 945-X to correct the error and requested penalty abatement based on good-faith compliance efforts. The IRS granted partial relief, and the nonprofit implemented stronger tracking systems to ensure accuracy in future filings.

These examples demonstrate that Form 945 errors are common across businesses, casinos, pension administrators, and nonprofits. What matters most is taking corrective action quickly—filing amended returns, setting up payment arrangements, or requesting relief from the Internal Revenue Service.

Best Practices for Staying Compliant with Form 945

Maintaining compliance with the Internal Revenue Service (IRS) is easier when you set up consistent systems. These best practices can help your business stay on top of Form 945 annual return obligations and avoid unnecessary penalties.

• Use EFTPS for Automated Deposits: Enroll in the Electronic Federal Tax Payment System (EFTPS) to schedule recurring withheld federal income tax deposits. Automated payments reduce the risk of missing due dates and ensure your tax liability is covered on time.
• Track Deadlines with Reminders: Mark the January filing due date and all deposit requirements on your business calendar. Setting electronic reminders for each business day deposit deadline helps prevent late filings and penalties.
• Maintain complete records.: Maintain at least four years of records related to nonpayroll payments, such as pensions, annuities, gambling winnings, and government payments. Proper documentation ensures accuracy and protects your organization if the IRS requests verification.
• Work with a Tax Professional: Filing and deposits can be time-consuming, especially if your business handles multiple types of distributions. A qualified tax professional can help prepare, complete, and file Form 945, verify compliance, and identify exceptions or relief programs if problems arise.
• Review Business Information Annually: Please update your Employer Identification Number (EIN), business address, and other details on all filings. Outdated information can cause processing delays or misdirect IRS correspondence.

By following these best practices, you reduce the chance of errors, avoid penalties, and ensure your Form 945 annual return of withheld federal income tax is handled smoothly year after year.

Frequently Asked Questions

What is the difference between Form 941 and Form 945?

Form 941 reports payroll taxes such as income tax, Social Security, and Medicare withheld from employee wages. Form 945, by contrast, is used for federal income tax withheld from nonpayroll payments like pensions, annuities, military retirement, gambling winnings, and backup withholding. Businesses required to withhold these payments must file a Form 945 annual return separately from payroll forms.

Can I get an extension to file Form 945?

The IRS does not allow formal extensions for Form 945. However, if you make all required deposits on time and in full, you receive an automatic grace period to file until February 10 of the following year. This only applies if your account shows no outstanding balance due. Filing beyond this date may result in penalties and interest.

How do I amend Form 945 with Form 945-X?

If you discover errors on your original return, you can correct them by filing Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax. Use it to fix overreported or underreported withholding, claim a refund, or apply an overpayment to a future tax year. Keep complete supporting records and explanations, as the IRS requires detailed documentation for amended filings.

Can penalties for Form 945 be reduced or removed?

Yes, the IRS offers penalty abatement under two main programs. First-time Abatement (FTA) applies if you have a clean compliance history. Reasonable cause relief may be granted if circumstances like illness, natural disasters, or reliance on professional advice prevented timely filing or payment. Requests can be made by phone, written letter, or Form 843.

How long should I keep Form 945 records?

The IRS requires that you keep Form 945 records and all related documentation for at least four years after the filing due date or payment date, whichever is later. This includes copies of Forms 1099, W-2G, deposit confirmations, and correspondence. Retaining complete and accurate records protects your business if the IRS conducts an audit or requests verification of reported tax withheld.