IRS Instruction 944 – IRS Forms, Instructions, Pubs 2026 – As a small business owner, managing payroll taxes can feel overwhelming, but the IRS has simplified the process for certain employers with Form 944, the Employer’s Annual Federal Tax Return. This form allows eligible businesses to report and pay federal employment taxes annually rather than quarterly. In this comprehensive guide, we’ll break down the IRS Form 944 instructions for the 2025 tax year, including who needs to file, step-by-step filling instructions, deadlines, and key changes. Whether you’re new to payroll taxes or need a refresher, this article will help you navigate the process efficiently.
What Is IRS Form 944?
Form 944 is specifically designed for the smallest employers whose annual liability for social security taxes, Medicare taxes, and withheld federal income taxes totals $1,000 or less. Instead of filing quarterly returns using Form 941, eligible employers can consolidate their reporting into one annual filing. This reduces paperwork and simplifies compliance for low-volume payroll operations.
The form reports wages paid, tips reported by employees, federal income tax withheld, and both employer and employee shares of social security and Medicare taxes. It also accounts for adjustments like fractions of cents, sick pay, and qualified small business payroll tax credits. For employers in U.S. territories such as American Samoa, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), the U.S. Virgin Islands, and Puerto Rico, references to federal income tax withholding may not apply unless employees are subject to U.S. income tax.
Key benefits include less frequent filing and the option to pay taxes with the return if your liability is under certain thresholds. However, not all employers qualify—eligibility is determined by the IRS based on your tax liability.
Who Must File Form 944?
You must file Form 944 if the IRS has notified you in writing to do so. This typically applies to employers with an estimated annual employment tax liability of $1,000 or less. If you haven’t been notified but believe you qualify, you can request permission by calling the IRS at 800-829-4933 or submitting a written request between January 1, 2026, and March 16, 2026.
Exceptions include:
- Household employers, who should use Schedule H (Form 1040) and refer to Publication 926.
- Agricultural employers, who file Form 943 and consult Publication 51.
- Employers already notified to file quarterly Forms 941.
- Businesses that have closed or undergone reorganization, which may need to file a final return or report changes.
If your business closes during the year, check the box on line 14 of Form 944 and provide details about the final wage payment date. Attach a statement with information on the new owner (if applicable) and payroll record location.
For 2025, this also covers household workers paid $2,800 or more and election workers paid $2,400 or more in cash or equivalents.
What’s New in Form 944 Instructions for 2025?
The IRS updates Form 944 instructions annually to reflect changes in tax laws and rates. For the 2025 tax year, key updates include:
- Social Security Wage Base: Increased to $176,100 (up from previous years).
- Tax Rates: Social security remains at 6.2% for both employer and employee shares. Medicare is 1.45% each, with no wage limit. Additional Medicare Tax is 0.9% on wages over $200,000.
- Qualified Small Business Payroll Tax Credit: Increased to $500,000 (from $250,000) for research activities starting after 2022. Use Form 8974 to calculate and attach it.
- Withholding on Tips and Overtime: Deductions up to $25,000 for tips and $12,500 for overtime ($25,000 joint filing) for 2025–2028. Transition relief applies for 2025 reporting per Notice 2025-62.
- Discontinued Forms and Publications: Forms 941-SS and 941-PR are no longer used after 2023; switch to Form 941. Publications 51, 80, and 179 are discontinued—use Publication 15 instead.
- Electronic Options: Direct deposit for refunds is now available, and balance due payments must be made electronically per Executive Order 14247. Form 944 return transcripts for 2023 and later are accessible via your IRS business tax account.
- COVID-19 Credits: Expired, but prior qualified leave wages paid in 2025 can be claimed via Form 944-X.
Spanish versions (Form 944 (sp) and instructions) are available for filers who prefer them.
Always check IRS.gov/Form944 for the latest developments, as legislation can impact these rules.
Step-by-Step Guide: How to Fill Out Form 944?
Form 944 has five parts. Complete it using your Employer Identification Number (EIN), not a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Report amounts in dollars without signs or commas, and leave zero lines blank except where specified.
Part 1: Answer These Questions
- Line 1: Total wages, tips, and other compensation (matches Box 1 on Forms W-2).
- Line 2: Federal income tax withheld (exclude third-party sick pay if not on W-2).
- Line 3: Check if no wages are subject to social security or Medicare tax, then skip to Line 5.
- Lines 4a–4e: Taxable wages and tips for social security (4a at 6.2% each, base $176,100), social security tips (4b), Medicare (4c at 1.45% each, no limit), and Additional Medicare Tax (4d at 0.9%).
- Line 5: Total taxes before adjustments (add Line 2 and 4e).
- Line 6: Adjustments (e.g., fractions of cents, sick pay; use negative signs).
- Line 7: Total after adjustments (Line 5 + 6).
- Line 8: Qualified small business payroll tax credit (attach Form 8974).
- Line 9: Total after credits (Line 7 – 8; not below zero).
- Line 10: Total deposits for the year.
- Line 11: Balance due (Line 9 – 10).
- Line 12a–12e: Overpayment details, including refund options and direct deposit info.
Part 2: Deposit Schedule and Tax Liability
- Line 13: If liability < $2,500, check the box. Otherwise, report monthly liabilities (must equal Line 9, adjusted for credits).
Part 3: Tell Us About Your Business
- Line 14: Check if this is your final return and enter the last wage payment date.
Part 4: Third-Party Designee
- Authorize someone to discuss the return if needed.
Part 5: Sign Here
- Sign as an authorized person (e.g., owner for sole proprietorship). Paid preparers must include their Preparer Tax Identification Number (PTIN).
Attach any required statements and ensure both pages are completed.
Depositing and Paying Taxes with Form 944
Deposits must be made electronically via the Electronic Federal Tax Payment System (EFTPS) or your IRS business tax account. If your liability is under $2,500 for the year, you can pay with the return—no deposit required. For liabilities of $2,500 or more, follow a monthly or semiweekly schedule as outlined in Publication 15.
The $100,000 next-day deposit rule applies if taxes accumulate to that amount in a deposit period. Use electronic funds withdrawal (EFW), credit/debit cards, or same-day wire transfers for payments. If you can’t pay in full, consider an installment agreement via IRS.gov.
Form 944 Filing Deadlines for 2025
For the 2025 tax year, Form 944 is due by February 2, 2026. If you’ve made timely deposits covering your full liability, the deadline extends to February 10, 2026. Electronic filing is encouraged for faster processing and to avoid penalties.
Penalties for Non-Compliance
To avoid penalties, ensure timely deposits, accurate reporting, and valid Forms W-2/W-3. Late payments incur interest and penalties based on legal rates (see Publication 15). The trust fund recovery penalty (100% of unpaid taxes) may apply to responsible persons if withheld taxes aren’t paid. Request abatements using Form 843 if applicable.
Common Mistakes to Avoid When Filing Form 944
- Using SSN instead of EIN.
- Forgetting to attach Form 8974 for credits.
- Miscalculating the social security wage base.
- Not reporting adjustments correctly.
- Failing to switch to Form 941 if your liability exceeds $1,000.
Double-check calculations and consult Publication 15 for guidance.
FAQs About IRS Form 944 Instructions
1. Can I file Form 944 if I wasn’t notified by the IRS?
Yes, if you qualify, but you must request permission by the specified deadline.
2. What if my tax liability exceeds $1,000 during the year?
Contact the IRS to switch to quarterly Form 941 filings.
3. How do I correct errors on a previouslyIRS Instruction 944 filed Form 944?
Use Form 944-X to adjust or claim refunds.
4. Is electronic filing required?
It’s not mandatory but highly recommended for accuracy and speed.
For more details, visit IRS.gov or consult a tax professional.
In summary, Form 944 streamlines tax reporting for small employers, but accuracy is key to avoiding issues. Stay updated with IRS resources and file on time to maintain compliance in 2025. If your business grows, reassess your filing requirements annually.