Instructions for Form 945 (2006)

IRS Resources

General Instructions

Table of Contents

- Depositing Withheld Taxes

Purpose of form. Use Form 945 to report withheld federal income tax from nonpayroll payments. Nonpayroll payments include:

Pensions (including governmental section 457(b) plan distributions), annuities, and IRA distributions;
Military retirement;
Gambling winnings;
Indian gaming profits;
Voluntary withholding on certain government
payments; and
Backup withholding.

Report all federal income tax withholding from nonpayroll payments or distributions annually on one Form 945. Do not file more than one Form 945 for any calendar year.

All federal income tax withholding reported on
Forms 1099 (for example, Form 1099-R or 1099-MISC) or Form W-2G must be reported on Form 945. Do not report federal income tax withholding from wages on Form 945.

All employment taxes and federal income tax withholding reported on Form W-2, Wage and Tax Statement, must be reported on Form 941 or Form 944 (Form 943 for agricultural employees), Schedule H (Form 1040) for household employees, or Form CT-1 for railroad employees.

Do not report on Form 945 federal income tax withheld on distributions to participants from nonqualified pension plans (including nongovernmental section 457(b) plans) and some other deferred compensation arrangements that are treated as wages and are reported on Form W-2. Report such withholding on Form 941 or Form 944. See Pub. 15 (Circular E) for more information.

Who must file. If you withhold federal income tax (including backup withholding) from nonpayroll payments, you must file Form 945. See Purpose of form above. You are not required to file Form 945 for those years in which you do not have a nonpayroll tax liability. Do not report on Form 945 withholding that is required to be reported on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

Where to file. In the list on page 2, find the location of your legal residence, principal place of business, office, or agency. Send your return to the Internal Revenue Service at the address listed for your location. No street address is needed.

Where you file depends on whether or not you are including a payment with the return.

If you are in . . .		Without a payment . . .	With a payment . . .
Connecticut Delaware District of Columbia Illinois Indiana Kentucky Maine Maryland Massachusetts Michigan New Hampshire	New Jersey New York North Carolina Ohio Pennsylvania Rhode Island South Carolina Vermont Virginia West Virginia Wisconsin	Internal Revenue Service Cincinnati, OH 45999-0042	Internal Revenue Service P.O. Box 1213 Charlotte, NC 28201-1213
Alabama Alaska Arizona Arkansas California Colorado Florida Georgia Hawaii Idaho Iowa Kansas Louisiana Minnesota Mississippi	Missouri Montana Nebraska Nevada New Mexico North Dakota Oklahoma Oregon South Dakota Tennessee Texas Utah Washington Wyoming	Internal Revenue Service Ogden, UT 84201-0042	Internal Revenue Service P.O. Box 105153 Atlanta, GA 30348-5153
No legal residence or principal place of business in any state:		Internal Revenue Service P.O. Box 409101 Ogden, UT 84409	Internal Revenue Service P.O. Box 105288 Atlanta, GA 30348-5288

Exception for exempt organizations and government entities. If you are filing Form 945 for an exempt organization or government entity (federal, state, local, or Indian tribal government), use the following addresses, regardless of your location:

Return without payment: Ogden, UT 84201-0042.

Return with payment: P.O. Box 105153, Atlanta, GA 30348-5153.

When to file. For 2006, file Form 945 by January 31, 2007. However, if you made deposits on time in full payment of the taxes for the year, you may file the return by February 12, 2007. Your return will be considered timely filed if it is properly addressed and mailed First-Class or sent by an IRS-designated private delivery service on or before the due date. See Pub. 15 (Circular E) for more information on IRS-designated private delivery services.

Employer identification number (EIN). If you do not have an EIN, you may apply for one online. Go to the IRS website at www.irs.gov/businesses/small and click on the “Employer ID Numbers (EINs)” link. You may also apply for an EIN by calling 1-800-829-4933. Or, you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS.

Note.

If you are reporting withholding on pension distributions, be sure to be consistent in using the same name and EIN for all reporting and depositing of taxes (for example, on Forms 945, 1099-R, and 8109/EFTPS). Filing Form 945 with an incorrect name and EIN or failure to use the same name and EIN in all reporting and depositing of taxes may result in penalties and delays in processing your return.

Penalties and interest. There are penalties for filing
Form 945 late and for paying or depositing taxes late, unless there is reasonable cause. See section 11 of Pub. 15 (Circular E) for more information on deposit penalties. There are also penalties for failure to furnish information returns (for example, Forms 1099-MISC, 1099-R, or W-2G) to payees and failure to file copies with the IRS.

If amounts that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. The penalty is the full amount of any unpaid trust fund tax. This penalty may apply when these unpaid taxes cannot be immediately collected from the employer or business. The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. “Willfully” in this case means voluntarily, consciously, and intentionally. A responsible person acts willfully if the person knows that the required actions are not taking place.

Voluntary income tax withholding. States must allow unemployment compensation recipients to elect to have federal income tax withheld at a 10% rate in 2007. Recipients paid under the Railroad Unemployment Insurance Act may also elect withholding at a 10% rate in 2007.

Recipients of any of the following federal payments may request federal income tax withholding in 2007 at a rate of 7%, 10%, 15%, or 25% on:

Social security and Tier 1 railroad retirement benefits,
Certain crop disaster payments, and
Commodity Credit Corporation loans.

The payee may request withholding on Form W-4V, Voluntary Withholding Request, or you may develop your own substitute form. Any voluntary withholding on these payments must be reported on Form 945 (and on the required information return—Form 1099-G, Form SSA-1099, or Form RRB-1099) and is subject to the deposit rules.

Depositing Withheld Taxes

Deposit all nonpayroll (Form 945) withheld federal income tax, including backup withholding, by using the Electronic Federal Tax Payment System (EFTPS) or by depositing at an authorized institution using Form 8109, Federal Tax Deposit Coupon. Some taxpayers are required to use EFTPS to deposit their taxes (see Electronic deposit requirement on page 3). Combine all Form 945 taxes for deposit purposes. Do not combine deposits for Forms 941, 943, 944, or Form CT-1 with deposits for Form 945. If you deposit using Form 8109, be sure to darken the space for Form “945” on Form 8109.

Generally, the deposit rules that apply to Form 941 also apply to Form 945. However, because Form 945 is an annual return, the rules for determining your deposit schedule (discussed below) are different from those for Form 941. See section 11 of Pub. 15 (Circular E) for a detailed discussion of the deposit rules.

Determining your deposit schedule. There are two deposit schedules—monthly or semiweekly—for determining when you must deposit withheld federal income tax. These schedules tell you when a deposit is due after a tax liability arises (that is, you make a payment subject to federal income tax withholding, including backup withholding). Before the beginning of each calendar year, you must determine which of the two deposit schedules you must use.

For 2007, you are a monthly schedule depositor for
Form 945 if the total tax reported on your 2005 Form 945 (line 4) was $50,000 or less. If the total tax reported for 2005 exceeded $50,000, you are a semiweekly schedule depositor.

If you are a monthly schedule depositor and accumulate a $100,000 liability or more on any day during a calendar month, your deposit schedule changes on the next day to semiweekly for the remainder of the year and for the following year. For more information, see the $100,000 Next-Day Deposit Rule in section 11 of Pub. 15 (Circular E).

Electronic deposit requirement. You must make electronic deposits of all depository taxes (such as employment tax, withheld income tax, excise tax, and corporate income tax) using the Electronic Federal Tax Payment System (EFTPS) in 2007 if:

The total deposits of such taxes in 2005 were more than $200,000 or
You were required to use EFTPS in 2006.

If you are required to use EFTPS and use Form 8109 instead, you may be subject to a 10% penalty. If you are not required to use EFTPS, you may participate voluntarily. To get more information or to enroll in EFTPS, visit the EFTPS website at www.eftps.gov or call 1-800-555-4477.

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