Form 944 Employers Annual Federal Tax Return

New Form 944, Employer’s Annual Federal Tax Return, is available for 2006 for certain employers. This Form is filed annually instead of the quarterly Forms 941. The idea is to reduce the burden on small employers by reducing their filing requirement to annual instead of quarterly.

Eligible employers are those with annual employment tax liability of $1,000 or less for the testing period, which is the calendar year two years prior to the applicable year. For example, the testing period for the 2006 calendar year is the 2004 calendar year.

IRS will send notification letters to eligible employers in early February. Employers who do not receive an eligibility letter and feel they may be eligible to file the new Form 944 can call IRS at 1-800-829-0115 to find out if they qualify. This contact should take place by April 1, 2006.

New employers who expect to owe $1,000 or less in total annual employment tax, which equates to approximately $4,000 or less in annual wages, also are eligible to file Form 944. When the Form SS-4 is completed requesting an Employer’s Identification Number (EIN), the estimated annual employment tax is entered. IRS will notify new employers which form to file (Form 941 or Form 944) in the same letter that contains the businesses EIN.

An employer who is notified of its eligibility to file Form 944 will continue to be eligible for that year even if the employment taxes exceed the $1,000 threshold. If the employment taxes for the year exceed $2,500, the employer should make deposits for each quarter by the end of the following month (Jan-Mar employment taxes should deposited by April 30, etc.). Employers which expect to have more than $2,500 in any quarter should make the monthly deposits currently required by other employers. Those with employment taxes exceeding the $100,000 threshold are required to the next day deposits currently required by other employers.

An eligible employer can still file Form 941 instead of Form 944 if: 1) The employer believes the payroll taxes will exceed $1,000 for the year, 2) The employer prefers to electronically file Form 941 quarterly instead of filing Form 944 annually, or 3) The employer contacts the IRS, pursuant to the instructions in the IRS’ written notification, to request to file Form 941 and the IRS sends the employer a written notification that the employer’s filing requirement has been changed to Form 941.

News Release 2006-002, TD 9239, and Proposed Regulation 148568-04

A pdf copy of the News Release can be found at www.irs.gov/pub/news by clicking on ir-06-002. A pdf copy of the regulations can be found at www.irs.gov/pub/irs-regs by clicking on TD 9239 near the end of the listing or 14856804. We can also send you a pdf copy upon request. This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111) [email protected], [email protected], [email protected], and [email protected].

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