Form 945: Getting familiar with this IRS document and instructions on completing it

Who needs to file Form 945?

If you withheld federal income taxes from non-payroll payments during the year, then you’ll likely need to file Form 945. However, you only need to make a payment with Form 945 if the total amount due is $2,500 or less. If your amount due is higher, you’ll need to make semiweekly or monthly deposits throughout the year.

Businesses are exempt from filing Form 945 each year if they only withhold income taxes from payroll payments, such as wages and salaries, and not non-payroll payments, during the year.

Now that we better understand who needs to be familiar with this form, let’s find out when it’s due.

Key deadlines for submitting Form 945

In general, Form 945 is due by January 31st following the end of each tax year. However, the form can be filed by February 10th following the end of the year for businesses that have made their semiweekly or monthly deposits in a timely manner and have paid their taxes in full.

How do you complete Form 945?

Next, let’s explore how to fill out Form 945. You can either type in your information using a PDF editor, handwrite your information after printing out the form, or use a Form 945 preparation software. Here are the steps to fill out Form 945:

Step 1 – Gather your business and withholding information

Collect both your business information (name, address, etc) and records of all income taxes withheld from non-payroll payments during the year.

Step 2 – Input your business information

In the first section, input your business information, including your business name, employer identification number (EIN), trade name (if you have one), and business address.

Step 3 – Input your non-payroll tax withholding information

In the next section, input the requested information into each line. If the requested information does not apply to you, leave the line blank and move to the next line. Let’s go through each line step-by-step below:

• Line 1, Federal income tax withheld: Enter federal income taxes you withheld from worker’s non-payroll payments such as pensions, annuities, IRAs, gambling winnings, military retirement payments, and Indian gaming profits.
• Line 2, Backup withholding: Enter any backup withholding that banks or financial institutions withheld from non-payroll payments.

• Line 3, Total taxes: Add up the total taxes entered so far.
• Line 4, Total deposits: If you’re a semiweekly or monthly depositor, enter all deposits made so far during the year, plus any overpayments applied from prior years.

• Line 5, Balance due: If line 3 is greater than line 4, enter the difference here. This is the amount you’ll need to pay, either along with Form 945 (if less than $2,500) or in semiweekly or monthly deposits (if greater than $2,500).
• Line 6, Overpayment: If line 4 is greater than line 3, enter the difference here. You can either apply this overpayment to next year’s Form 945 or receive the amount as a refund.

• Line 7, Monthly summary of federal tax liability: In this section, a balance due of more than $2,500 would be broken down into 12 equal monthly payments and listed in this schedule.

• Signature section: in the final sections, fill out either your own information, a third-party designee’s information, or if you’re being paid to prepare this form on behalf of someone else, your own information.

With those instructions under our belts, let’s cover how to make sure this form gets from point a to point b.

Filing options for Form 945

Form 945 can be filed either electronically or by paper, whichever is more convenient for you. Here’s how it works:

• Electronic filing: e-filing is available either through the IRS website or an authorized e-filing provider.

• Paper filing: if you’d prefer to paper file the form, you can download it, print it out, and mail it to the IRS address listed in the form’s instructions (which will change based on where you live).

Are there penalties if Form 945 is filed late?

As with many returns, the IRS charges penalties for late filing or late payment (or both). Penalties are charged as a percentage of unpaid taxes due, and they are calculated as follows:

However, keep in mind that if late filing/payment is due to reasonable cause and is not due to willful neglect, you should notify the IRS of the cause, and they may waive penalties.