As announced by the IRS in “e-News for Tax Professionals” (Issue 2009-43), Revenue Procedure 2009-51 outlines the process for employers now eligible to file the “Employer’s Annual Federal Tax Return” (Form 944), instead of the “Employer’s Quarterly Federal Tax Return” (Form 941). These changes took effect for January 1, 2010.

The purpose of Form 944 is to ease the reporting burden of small businesses by allowing them to file a single Employment Tax Return reporting their social security, Medicare and Federal Income Tax Withholding (their “Employment Tax Liability”) for an entire tax year, rather than four quarterly returns.

Previously, employers could only opt out of filing Form 944 if their employment tax liabilities would exceed $1,000 or if they chose to file quarterly reports (Form 941). Under the new rules, they can opt out of filing Form 944 for any reason. Employers filing either Form 941 or 944 must properly deposit their employment tax liability or be subject to penalties for failure to remit the funds.

The same general deposit rules are applicable regardless of which form the employer files, though the minimum deposit amounts may vary. Additional information is available in the “Employer’s Tax Guide” (Publication 15, Circular E), plus in the Form 941 and Form 944 instructions.

Qualified employers are those with estimated annual employment tax liabilities of $1,000 or less for the tax year. There are exceptions for “Employer’s Annual Federal Tax Return for Agricultural Employees” (Form 943) or “Household Employment Taxes” (Form 1040, Schedule H).

Employers can formally request to opt in to filing Form 944, then the IRS will notify them in writing if their request was approved. Such written requests must be filed March 15 (April 1 if the request is made by telephone) of the tax year in which the employer wants to opt in. Employers cannot file Form 944 until they have received IRS approval and must continue to file Form 944, unless the employer opts out or is notified by the IRS that they no longer qualify to do so.

Employers can opt out of filing Form 944 (i.e. request to file Form 941) by making a formal written request to the IRS on or before March 15 of the current tax year (April 1 if the request is made by telephone). As with the “opt in” process, the IRS will notify the employer in writing if their request was approved. The employer cannot change the form type filed until they receive written approval from the IRS.

New employers that recently received an Employer Identification Number (EIN) or already have an EIN, but were not required to file Form 941 or 944, can formally request to opt-in or opt-out of filing Form 944. Telephone requests must be made on or before the first day of the month that the Form 941 must be submitted (i.e. April 1, July 1, October 1, January 1), while formal written requests must be made by the 15^th of the month prior to the due date of the Form 941 (i.e. March 15, June 15, September 15, December 15).

Note: The IS phone numbers and mailing address can be found in the Form 944 instructions.

Bookmark this page