Form 944: A Small Business Owner's Guide

What is Form 944?

Form 944, also known as the Employer's Annual Federal Tax Return, is a tax form used by very small businesses to report and pay their annual federal income tax withholdings, social security, and Medicare taxes. Essentially, think of this as the IRS's way of keeping tabs on your employment taxes, but with a twist: it's tailored specifically for very small businesses. Instead of filing quarterly like larger companies who have to fill out Form 941, Form 944 is an alternative that only requires small businesses to fill it out once a year.

Who Needs to File Form 944?

The IRS will notify you if you need to file a Form 944. Form 944 is only used by businesses whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less.  According to the IRS, based on 2023 rates, businesses that pay $5,000 or less in W-2 wages are generally likely to pay $1,000 or less in subject taxes. If your business has been notified by the IRS to use Form 944, you should continue to use Form 944 until the IRS indicates you should file a quarterly Form 941 instead.

How to File Form 944

If you are required to file Form 944, here's how to do so correctly:

1. Obtain a copy of Form 944 from the IRS website or by calling 1-800-TAX-FORM (1-800-829-3676).

2. Fill out the form with your business information, including your employer identification number (EIN).

3. Calculate your tax liability using the instructions provided by the IRS.

4. File the form by the due date, which is January 31 of the following year, if you did not make timely deposits of your tax liabilities in real time. If the due date falls on a weekend or holiday, the form is due on the next business day.

It's important to note that if you are filing Form 944, you do not need to file Form 941 for the same tax period..

Common Mistakes to Avoid

Filing taxes can be complicated, and it's easy to make mistakes. Here are some common mistakes to avoid when filing Form 944:

• Incorrectly calculating tax liability: Make sure to carefully follow the instructions provided by the IRS to calculate your tax liability. Incorrect calculations can result in penalties and interest.

• Missing the deadline: Filing taxes by the deadline is crucial to avoid penalties and interest. Make sure to mark the due date on your calendar and file on time.

Benefits of Filing Form 944

Filing Form 944 has several benefits for small business owners, including:

Simplified Tax Filing

With Form 944, you're waving goodbye to the quarterly tax frenzy and saying hello to a single, streamlined filing process. No more juggling multiple deadlines or drowning in paperwork every few months. Instead, you get to breathe easy knowing that you only have to tackle this beast once a year. Talk about a weight off your shoulders! This can save you time and effort, allowing you to focus on other aspects of running your business.

Reduced Tax Liability

As a small business owner, navigating the murky waters of taxes can feel daunting. But fear not, because Form 944 is here to help lighten the load. By condensing your tax obligations into one annual report, you're not only simplifying the process, but you're also reducing the risk of errors and oversights along the way.

Moreover, if your annual tax liability is $1,000 or less, you may be eligible for a reduced tax liability by filing Form 944. This can save you money and make tax season a bit less stressful.

Easier Record-Keeping

Ah, record-keeping—the bane of every entrepreneur's existence. But fear not, because Form 944 is about to make your life a whole lot easier. By filing just once a year, you're cutting down on the mountain of paperwork that tends to accumulate with quarterly filings. 

Potential Penalties for Not Filing Form 944

Failing to timely make required tax deposits or timely file Form 944 can lead to penalties and other liabilities, such as failure-to-pay penalties, failure-to-file penalties, and interest. Keep meticulous records of your business's income, expenses, and employment taxes throughout the year to ensure compliance. If you're unable to file by the deadline, consider requesting an extension or reaching out to the IRS to discuss your options.

How Justworks Can Help

Justworks PEO and Justworks Payroll both handle payroll tax reporting on behalf of customers and provide ongoing support. Justworks can help your small business with payroll and taxes. Get started today.