What Is IRS Form 945 and Who Must File It?
Clarify your tax duties for nonpayroll income. This guide covers Form 945, explaining how to report and deposit withheld federal income tax.
IRS Form 945, the Annual Return of Withheld Federal Income Tax, is used for reporting federal income taxes withheld from nonpayroll payments. This form reconciles the nonpayroll tax withheld from payees with the deposits made by the withholding agent throughout the calendar year.
Determining If You Need to File Form 945
A filing obligation for Form 945 arises if you have withheld federal income tax from certain nonpayroll payments. These payments include:
- Pensions, annuities, and distributions from retirement plans like 401(k)s or IRAs
- Military retirement pay
- Specific gambling winnings reported on Form W-2G and profits from Indian gaming
- Payments subject to backup withholding rules, which can be triggered when a recipient fails to provide a correct taxpayer identification number
Form 945 should be distinguished from Form 941, the Employer’s QUARTERLY Federal Tax Return, which is used for reporting taxes withheld from employee wages. Form 945 is filed annually and deals only with income tax withheld from nonpayroll sources. An entity may be required to file both forms if it has employees and also makes nonpayroll distributions with tax withholding.
You are only required to file Form 945 for years in which you withhold tax from nonpayroll payments. If you make no such payments during a calendar year, a Form 945 is not necessary for that year.
Information and Calculations for Form 945
Before beginning Form 945, you must gather your business’s legal name, address, and Employer Identification Number (EIN). You must also have the total amount of all nonpayroll payments made, the total federal income tax you withheld, and a complete record of all tax deposits made for the year.
On Line 1, you will enter the total federal income tax withheld from all relevant nonpayroll payments. Line 2 is for reporting any backup withholding. Line 3 is the sum of Line 1 and Line 2, representing your total tax liability for the year.
After determining your total taxes, you will report your deposits on Line 4. This figure is then compared to your total tax liability from Line 3. If your total taxes are greater than your deposits, the difference is your balance due on Line 5. If your deposits exceed your taxes, you have an overpayment on Line 6, which can be applied to your next return or refunded.
Depositing Withheld Federal Income Tax
The obligation to file Form 945 annually is separate from the requirement to deposit the withheld taxes throughout the year. Your deposit schedule, either monthly or semi-weekly, is based on the tax liability reported during a “lookback period,” which is the second preceding calendar year. For example, to determine your 2025 schedule, you would look at the total taxes on your 2023 Form 945.
If you reported $50,000 or less in taxes during the lookback period, you are a monthly schedule depositor. This means you must deposit the taxes withheld during a calendar month by the 15th day of the following month. If you reported more than $50,000, you are a semi-weekly schedule depositor. A rule also applies if you accumulate a tax liability of $100,000 or more on any single day; you must deposit the tax by the next business day.
All federal tax deposits must be made using the Electronic Federal Tax Payment System (EFTPS). You cannot make these deposits by mailing a check with your Form 945.
Submitting and Amending Your Form 945
The annual deadline for filing Form 945 is January 31st of the year following the calendar year for which you are reporting. If you have made all your tax deposits on time and in full, the filing deadline is extended to February 10th. If a deadline falls on a weekend or a legal holiday, the due date shifts to the next business day.
You can submit the form by mail or through electronic filing. The IRS encourages electronic filing, which can lead to faster processing of your return.
If you discover an error on a Form 945 that you have already filed, you must use Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund, to make the correction. You should file a separate Form 945-X for each tax year you need to correct. The IRS supports electronic filing for this form.