IRS form 945
What is IRS form 945? A plain-English definition for small business employers, why it matters, and how it applies to your business.
- Read time2 min read
- Filed underTaxes · 64 terms
- Written byHomebase Team
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SMALL BUSINESS INTEL, IN YOUR INBOX
Contents7 sections
What is IRS Form 945?
IRS Form 945 is used by businesses to report federal income tax withheld from non-payroll payments. Unlike Forms 941 and 944, which cover payroll tax withholdings, Form 945 is specifically for reporting withheld taxes from other types of payments, such as:
- Backup withholding on vendor or contractor payments
- Withholding on retirement distributions
- Federal tax withholdings on gambling winnings
Small businesses owners need to know about IRS Form 945 because filing this form ensures compliance with IRS rules and helps avoid penalties for underreporting or late payments. Keep in mind you’ll need to file Form 945 annually, even if you only withheld a small amount.
Who needs to file Form 945?
Your business must file Form 945 if you withhold federal income tax from any of the following:
- Non-employee compensation subject to backup withholding
- Dividends and interest payments
- Retirement plan distributions
- Certain gambling winnings
- Other reportable payments requiring tax withholding
Employers should review IRS guidelines to determine if they are responsible for filing.
When is IRS Form 945 due?
Form 945 is due annually by January 31 for the previous tax year.
If your total tax liability is $2,500 or more, deposits must be made following the IRS deposit schedule, either monthly or semi-weekly.
Steps to file Form 945
Filing Form 945 involves a few key steps:
- Gather records: Identify all non-payroll payments with federal tax withholdings.
- Complete Form 945: Report total withholdings for the year.
- Submit to the IRS: File electronically or mail a paper return.
- Deposit withheld taxes: Use the Electronic Federal Tax Payment System (EFTPS) if required.
How IRS Form 945 fits into your tax reporting
Even though Form 945 doesn’t replace payroll tax filings, businesses making both payroll and non-payroll payments must:
- File Form 941 for payroll tax withholdings
- File Form 945 for non-payroll tax withholdings
- Maintain detailed records for IRS compliance
To reduce the risk of tax penalties, you can use payroll software to track tax liabilities and file automatically.
How Homebase helps with Form 945 compliance
Tracking tax withholdings manually can be time-consuming and prone to errors. Homebase payroll helps businesses stay compliant by:
- Automating tax tracking for payroll and non-payroll payments
- Ensuring compliance with filing deadlines and deposit schedules
- Providing detailed payroll and tax reports for accurate record-keeping
- Reducing filing errors to prevent penalties
Sign up for Homebase today to streamline tax reporting and stay compliant with IRS regulations.
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