As a business owner, you’re going to have to deal with a seemingly endless number of payroll obligations. Managing payroll for a small business isn’t easy, especially when it comes to dealing with payroll taxes.
Between calculating payroll taxes and filling out numerous forms, approximately 40% of small businesses spend more than 80 hours per year managing the payroll tax process. That’s a lot of time, especially when it’s not always clear whether an employer should use Form 941 or 944 to report their payroll taxes. Keep reading to learn the difference between these forms and which is right for your business.
What Is Form 944?
Form 944 is the annual federal tax return that certain small businesses use to report employment taxes. Employers use Form 944 to report:
- Wages you have paid
- Tips your employees reported to you
- Federal income tax withheld
- Both the employer and the employee share of social security and Medicare taxes
- Additional Medicare Tax withheld from employees
- Current year’s adjustments to social security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance
- Qualified small business payroll tax credit for increasing research activities
Note: While the Federal Unemployment Tax Act (FUTA) is also considered a payroll tax, employers should use Form 940 to report their federal unemployment tax contributions.
However, the following employers can’t file Form 944:
- Household employers
- Agricultural employers
- Employers who are notified by the Internal Revenue Service (IRS) to file quarterly Forms 941
- Employers who aren’t notified to File form 944
This form is generally used by small business employers with an estimated annual payroll tax liability of $1,000 or less.
New employers can request to file 944 tax forms when they apply for an employer identification number (EIN). If a business has previously filed 941 forms, they can submit a request to the IRS to file Form 944 instead. For more info, check out IRS.gov for instructions on how to request a 944 form.
What Is Form 941?
Form 941 is a quarterly federal tax return used by most employers to report the same employment taxes. Most businesses file Form 941 unless the IRS has notified them that they qualify for the annual filing option via Form 944.
Key Differences Between Form 941 And Form 944
Below is a summary table outlining the key distinctions:
Who should file?
- Form 941: Employers with an estimated annual tax liability of more than $1,000
- Form 944: Small business employers with an annual tax liability of $1,000 or less
When to file:
Form 941: Due quarterly on:
- April 30
- July 31
- October 31
- January 31
Form 944: Due annually by January 31.
Tax Deposit Requirements:
Form 941:
- If total taxes are less than $2,500 per quarter, deposit taxes when you file the form
- If the tax liability is $50,000 or less, deposits are made monthly (due by the 15th of the following month)
- If more than $50,000, deposits are made semiweekly based on your payday schedule
Form 944:
- If annual tax liability is less than $2,500, payment is made filing Form 944.
- If annual liability exceeds $2,500 but each quarter remains under that threshold, payment is due by the last day of the month following the end of the quarter
- If a quarter’s liability is $2,500 or more, deposits follow the monthly or semiweekly guidelines
Note: Regardless of the deposit schedule, the IRS recommends using the Electronic Federal Tax Payment System (EFTPS).
Should You Switch Your Filing Requirement?
New guidance from the IRS provides flexibility for businesses whose estimated tax liability does not match their current filing requirement. Consider the following:
- If you currently file Form 944 but estimate your annual tax liability will be more than $1,000, you may be eligible to switch to filing Form 941
- If you currently file Form 941 but expect your annual tax liability to be $1,000 or less, you may be eligible to switch to Form 944
To request a change:
- Send a written request postmarked by March 15
- Call the IRS at 800-829-0115 by April 1
For more detailed instructions or to initiate a change, visit IRS.gov.
What Information Do You Need To File Forms 941 And 944?
Although the total tax thresholds are different, both 944 and 941 tax forms require businesses to provide the same types of information. Any business filing these tax forms must report the following information to the IRS.
- Employer information (e.g., EIN, name, and address)
- Total number of employees that were paid
- Employee compensation (wages, tips, and anything else paid to employees)
- The amount of federal income tax, Social Security tax, and Medicare tax paid by the business and withheld from employees
- Total amount of tax liability
- Paid sick or family leave wages, if applicable
- Consolidated Omnibus Budget Reconciliation Act (COBRA) information, if applicable
- Any necessary adjustments
How To File Forms 941 And 944
The IRS gives businesses two ways to file Forms 941 and 944:
- By mail
- E-filing
There are different mailing addresses for businesses depending on their location, special exemptions, and whether the business is deciding to file and pay their payroll taxes at the same time. Fortunately, the IRS lists out every possible scenario on their website:
Businesses that want to e-file payroll tax forms can also choose to do so online. This process is not only quicker, but also more secure. Employers can choose to e-file Forms 941 or 944 on their own or have a tax professional submit these forms on their behalf. The IRS provides guidelines for how to e-file Forms 941 and 944 on their website.
Correcting Mistakes On Your Payroll Tax Forms
At some point, you might discover an error on a filed Form 941 or Form 944. The IRS allows you to correct errors by filing:
- Form 941-X: To correct mistakes on a previously filed Form 941
- Form 944-X: To correct mistakes on a previously filed Form 944
The deadlines for corrections depend on whether you underreported or overreported your taxes. Consult the IRS guidelines for detailed deadlines and procedures.
Streamline Your Payroll Process
Managing payroll taxes, and choosing the right form, can be complex and time-consuming. At Group Management Services (GMS), we help you navigate these complexities by:
- Ensuring you use the correct form based on your tax liability
- Keeping you up-to-date on IRS deadlines and filing requirements
- Assisting with electronic filing and tax deposit scheduling
By streamlining your payroll processes, you can save valuable time and reduce the risk of IRS penalties, leaving you free to focus on growing your business.
How GMS Can Help
At GMS, we understand that payroll and tax compliance can be overwhelming. Our comprehensive solutions include:
- Payroll & tax compliance: We handle all of your payroll processing and tax filing needs accurately and on time
- Expert human resources (HR) support: Our team stays current on federal requirements so that your business is always compliant
- Customized service: We work with businesses of all sizes nationwide, ensuring you have the support you need to simplify your operations
Contact GMS here and let us help you take control of your payroll and focus on what really matters, growing your business.