The United States requires employers to withhold income tax from pre-tax (dividend) payments to employees. However, the federal government has certain rules that allow you to pay some (non-qualified) employees (such as yourself) with an up-front payment instead of withholding income tax. Tax is still withheld, but not in the usual way, and income tax is paid on the amount of the payment at its scheduled tax rate, not on the amount withheld. This pre-tax (non-qualified) payment is called a “Form 945.”
Form 945 is a tax form that is filed with the IRS every year, and it’s designed to notify the IRS of any distributions (that is, distributions from retirement plans) that were made to the filer during the year. Form 945 may be filed by a U.S. citizen or permanent resident alien who has been a resident of the U.S. for at least one year and who is filing a return.
Who Must File Form 945?
The most common reason why plan sponsors fail to file Form 945 is that they fail to withhold federal income tax from non payroll payments. All plan sponsors must withhold federal income tax from all payments made to beneficiaries, including distribution payments, salary deferrals, and money borrowed by the plan sponsor. However, if the plan sponsor failed to withhold any federal income tax from non payroll payments, they must file Form 945 to correct this failure.
Form 945 is used to report withheld federal income tax of non-payroll returns. Non-payroll payments incorporate:
- Military retirement
- Pensions (along with distributions from tax-favored retirement plans, for instance, section 403(b), governmental section 457(b) plans, and section 401(k)), and annuities
- Gambling winnings
- Voluntary withholding on some government payments
- Indian gaming profits
- Backup withholding
When is Form 945 Due?
Form 945 is the primary method of reporting for federal employment taxes withheld on wages, and it must be filed on or before January 31st of each year. This date is known as the due date or Form 945 due date. However, if the withheld tax has been deposited on time to the IRS, the deadline is extended to February 10th.
Form 945 is a form that the tax filing entity must file with the IRS in order for the taxpayer to finalize his or her tax liability for the year. Form 945 is a statement of the amount of tax withheld from a taxpayer’s wages or other similar income during a given year.
Final Words
The IRS Form 945 is the annual return of withheld Federal income tax. The IRS Form 945 is a companion to Form 941, Employer’s Federal Tax Return. Form 945 is a summary of the Federal income tax withheld by the employer from the wages paid to employees during the calendar year.
To know more about Form 945, attend the Compliance Prime webinar.
