IRS Instruction 945 – IRS Forms, Instructions, Pubs 2026 – Understanding IRS Form 945 is essential for businesses and individuals who withhold federal income taxes from nonpayroll payments. This form ensures compliance with tax regulations and helps avoid costly penalties. In this comprehensive guide, we’ll cover everything you need to know about Form 945, including its purpose, filing requirements, due dates, and step-by-step instructions. Whether you’re handling pensions, gambling winnings, or backup withholding, staying informed can simplify your tax obligations.
What Is IRS Form 945?
IRS Form 945, titled “Annual Return of Withheld Federal Income Tax,” is used to report federal income taxes withheld from nonpayroll payments. Nonpayroll payments include items like pensions, annuities, IRA distributions, military retirement, gambling winnings, Indian gaming profits, certain government payments with voluntary withholding, and dividends from Alaska Native Corporations (ANCs) where voluntary withholding is elected. Unlike payroll taxes reported on forms like Form 941 or Form 944, Form 945 focuses exclusively on these nonpayroll withholdings.
This form consolidates all federal income tax withholding from nonpayroll sources into one annual report. It’s important to note that withholding reported on Forms 1099 (such as 1099-R, 1099-MISC, or 1099-NEC) or Form W-2G must be included on Form 945. However, wages and certain deferred compensation treated as wages are not reported here.
Who Must File Form 945?
You must file Form 945 if you withheld or were required to withhold federal income tax, including backup withholding, from nonpayroll payments during the tax year. This applies to employers, payers, and entities handling such payments. If there’s no nonpayroll tax liability for the year, you don’t need to file. Additionally, if your total taxes for the year are less than $2,500, you may pay them directly with your Form 945 instead of making deposits throughout the year.
Common filers include:
- Pension plan administrators
- Gambling establishments
- Financial institutions handling IRA distributions
- Businesses engaging in backup withholding on payments to vendors or contractors
Do not use Form 945 for withholding reported on Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons). If you’re a semiweekly depositor, you may also need to file Form 945-A to record your federal tax liability.
What Taxes Are Reported on Form 945?
Form 945 reports two main categories of withheld taxes:
- Line 1: Federal income tax withheld from pensions, annuities, IRAs, gambling winnings, etc. This includes voluntary withholding on government payments (at rates of 7%, 10%, 12%, or 22%) and ANC dividends.
- Line 2: Backup withholding. This applies to payments like interest, dividends, or nonemployee compensation where the recipient didn’t provide a valid TIN, including on gambling winnings and payments to H-2A visa holders.
The total taxes (Line 3) are the sum of Lines 1 and 2. You also report total deposits (Line 4), any balance due (Line 5), or overpayment (Line 6). For monthly depositors, summarize liabilities on Line 7; semiweekly depositors use Form 945-A.
Form 945 Due Dates for 2025
For tax year 2025, Form 945 is due by February 2, 2026. If you’ve made all required deposits on time and in full, you have until February 10, 2026, to file. If the due date falls on a weekend or legal holiday, file by the next business day.
Timely filing is based on the postmark date if using U.S. Postal Service or the delivery date if using an IRS-designated private delivery service (PDS). Electronic filing is encouraged and can extend certain deadlines.
How to File Form 945?
Electronic Filing
The IRS recommends filing Form 945 electronically through the Modernized e-File (MeF) system. This is available at IRS.gov/EmploymentEfile and may involve a fee from authorized providers. Electronic filing ensures faster processing and reduces errors.
Paper Filing
If filing on paper:
- Without payment: Mail to the address based on your state or entity type (e.g., Kansas City, MO for eastern states; Ogden, UT for western states).
- With payment: Mail to P.O. Box 932300, Louisville, KY 40293-2300.
Use PDS for street addresses if needed, but P.O. boxes require USPS. Ensure your Employer Identification Number (EIN) matches across all related forms to avoid penalties.
Deposit Requirements for Form 945 Taxes
All nonpayroll withheld taxes must be deposited via electronic funds transfer (EFT) using EFTPS, IRS Direct Pay, or your IRS business tax account. Deposits cannot be combined with other tax types like Form 941 taxes.
- If total taxes < $2,500: No deposits required; pay with Form 945.
- Deposit Schedule: Monthly if your 2024 Form 945 Line 3 was $50,000 or less; semiweekly if more. Switch to semiweekly if you accumulate $100,000 in liability on any day (next-day deposit rule).
For missed EFTs, use same-day wire payments through your financial institution. Business days exclude weekends and federal holidays.
Penalties and Interest for Non-Compliance
Failure to file on time, pay, or deposit can result in penalties unless due to reasonable cause. Penalties include:
- Late filing: Up to 5% per month, max 25%.
- Late payment/deposits: 0.5% to 15% depending on delay.
- Failure to file information returns (e.g., 1099s): $50 to $630 per form.
- Trust fund recovery penalty: 100% of unpaid taxes for willful neglect.
Interest accrues on unpaid amounts. Request abatement using Form 843 if applicable.
Step-by-Step Instructions for Filling Out Form 945
- Enter Your Information: Provide EIN, name, trade name, and address. Check the box if address changed.
- Line A: Check if this is a final return and provide the date of final payments.
- Line 1: Enter federal income tax withheld from nonpayroll payments.
- Line 2: Enter backup withholding.
- Line 3: Add Lines 1 and 2.
- Line 4: Enter total deposits and overpayments applied.
- Line 5 or 6: Calculate balance due or overpayment. For overpayments, choose refund (with direct deposit details) or apply to next return.
- Line 7 or Form 945-A: Report monthly or semiweekly liabilities if taxes ≥ $2,500.
- Third-Party Designee and Signature: Authorize if desired, then sign based on entity type.
Common Mistakes to Avoid When Filing Form 945
- Mixing payroll and nonpayroll withholdings.
- Using an incorrect EIN or mismatched name.
- Failing to deposit on the correct schedule.
- Not filing electronically when possible.
- Forgetting to attach statements for final returns or business changes.
FAQs About IRS Form 945
1. What if I overpaid on Form 945?
You can request a refund (now with direct deposit option) or apply it to your next return.
2. Do I need to file Form 945 if I have no withholding?
No, only file if there was withholding or required withholding.
3. How do I correct errors on Form 945?
Use Form 945-X to adjust or claim a refund.
4. Can I pay the balance due with a credit card?
Yes, via IRS.gov/PayByCard, but fees apply.
For the latest updates, always refer to official IRS resources. Proper filing of Form 945 ensures compliance and peace of mind for your tax responsibilities.