Small businesses should make sure to use the right form when filing employment tax returns

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IRS Tax Tip 2020-173, December 17, 2020

Some small businesses pay employment tax quarterly while others may pay it just once a year.

The IRS advises small business owners to review the rules for filing two commonly used employment tax returns. The two forms are:

These two forms are not interchangeable. A small business files one or the other. The employer should never flip-flop between the two forms on their own and should always file according to their designated filing requirement.

Here are some more details about these two forms.

Form 941, Employer's Quarterly Federal Tax Return

  • Employers use Form 941 to:
    • Report income taxes, Social Security tax, Medicare tax and additional Medicare tax withheld from employee's wages, tips and other compensation.
    • Claim employment tax credits and adjustments
    • Report the amount of employment taxes owed or claim an overpayment of employment taxes.
  • If the IRS advises the employer to file Form 941 quarterly, they must do so.

Form 944, Employer's Annual Federal Tax Return

  • This form is for employers who owe $1,000 or less. It allows them to report employment tax liabilities only once a year, instead of quarterly.
  • This form can't be used unless an employer receives official IRS notification that they are eligilble to use this form.
  • Once the employer receives notice they can file Form 944, they must file this form every year.
  • They must continue to file Form 944, regardless of the tax they owe, unless the IRS notifies them differently.

If a taxpayer is not sure which form they should file, they can call the IRS at 800-829-4933 or 267-941-1000.

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