What Is Federal Form 945 and Who Needs to File It?
Understand the annual IRS return for federal tax withheld from nonpayroll payments. This guide clarifies a key compliance duty separate from employee wages.
Federal Form 945, the Annual Return of Withheld Federal Income Tax, is used to report nonpayroll-related federal income tax withholdings to the Internal Revenue Service (IRS). This form accounts for taxes withheld from various payments that are not wages, salaries, or tips, consolidating them into a single annual filing. It is distinct from other payroll tax forms, such as Form 941, which is used by employers to report taxes withheld from employee paychecks.
Who Must File Form 945
Any person or entity that has withheld federal income tax from nonpayroll payments must file Form 945. This includes payments made to independent contractors, beneficiaries, and other non-employees. The obligation to file is triggered by the act of withholding, regardless of the amount withheld.
The types of payments that require filing Form 945 include distributions from pensions, annuities, Individual Retirement Arrangements (IRAs), and military retirement. If a recipient of these funds elects to have federal income tax withheld, or if withholding is mandatory, the paying entity must report it on this form. Another category is gambling winnings from lotteries, sweepstakes, or wagering pools where tax withholding is required.
Payments subject to backup withholding also fall under this requirement. Backup withholding can apply to nonpayroll payments like interest or dividends when a recipient fails to provide a correct taxpayer identification number (TIN). The backup withholding rate is 24%, and these amounts are reported on Form 945.
Information Required to Complete Form 945
To complete Form 945, you will need the payer’s legal name, trade name, mailing address, and nine-digit Employer Identification Number (EIN).
The form’s calculations are based on three financial figures. Line 1 requires the total federal income tax withheld from all applicable nonpayroll payments during the calendar year. You must sum up all such withholdings from all Forms 1099 or W-2G that you issued.
Line 2 is for reporting any backup withholding. This is the tax withheld from payments when a TIN was not provided or was incorrect. The sum of Line 1 and Line 2 is then entered on Line 3, which represents your total tax liability for the year.
Finally, you will need the records of all tax deposits made throughout the year, which is entered on Line 4. Comparing Line 3 (total taxes) with Line 4 (total deposits) determines the final calculation. If your total taxes are more than your deposits, the difference is your balance due, entered on Line 5. If your deposits exceed your taxes, you have an overpayment, which is entered on Line 6.
Step-by-Step Guide to Filing Form 945
Form 945 is an annual return due by January 31 of the year following the tax year. For example, the form for the 2024 tax year is due by January 31, 2025. If you have made all required tax deposits on time and in full, the filing deadline is extended to February 10.
The IRS provides specific mailing addresses for paper filing based on your principal place of business. The instructions for Form 945 contain a chart that directs filers on where to send their completed return.
The IRS encourages electronic filing for Form 945 through an authorized e-file provider or approved software. The form must be signed and dated by an authorized individual, such as the business owner or a designated officer.
Depositing Withheld Taxes
Depositing withheld taxes is a separate responsibility from filing the annual Form 945. All federal tax deposits for Form 945 must be made electronically through the Electronic Federal Tax Payment System (EFTPS). EFTPS is a free service provided by the Department of the Treasury that allows for secure online tax payments.
Your deposit schedule, either monthly or semi-weekly, is determined by the total tax liability reported on Form 945 in a prior lookback period. For any given tax year, the lookback period is the second preceding calendar year; for tax year 2025, the lookback period is 2023. If your total tax liability on Form 945 during the lookback period was $50,000 or less, you are a monthly depositor, while a liability over $50,000 makes you a semi-weekly depositor.
Monthly depositors must deposit taxes withheld during a calendar month by the 15th day of the following month. Semi-weekly depositors have different deadlines: for payments made on Wednesday, Thursday, or Friday, the deposit is due by the following Wednesday. For payments made on Saturday, Sunday, Monday, or Tuesday, the deposit is due by the following Friday. New payers without a lookback period are considered monthly depositors.