Employers Annual Federal Tax Return (Form 944)

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The future Employers Annual Federal Tax Return (Form 944)

The IRS is in the draft copy stage of the coming Employers Annual Federal Tax Return (Form 944). The Employers Annual Federal Tax Return (Form 944) is annualized version of the Employers Quarterly Federal Tax Return (Form 941). The Form 944 is intended to reduce the burden of filing quarterly for taxpayers with federal tax liabilities less than $1000. The current plan is that in February 2006 they will target eligible taxpayers and notify them (by mail) that they should not file 941s for 2006 and instead file a 944 by 1/31/2007.

The IRS is using the following tests to determine who qualifies for the Form 944. 1) For those with at least four quarters of activity the IRS looks back at the last 4 quarters to determine Taxpayer’s that have a $1000 or less per year of federal employment taxes. 2) For those taxpayers with less than 4 quarters of filing history, their average total tax liability must be $250 or less per quarter to file the Form 944. 3) New businesses that identify they expect to pay less than $1000 in tax (about $4000 per year in wages) can be set up in the IRS Master File as annual filers by contacting the Service. The IRS is working on changing the SS-4 form (both print and the on-line version) so that taxpayers can indicate their expected wage amounts to be paid and can be entered into the Master File as either a 941 or 944 filers, as appropriate.

Those that meet one of the tests for filing the Form 944 employers must file the Form 944 and pay their annualized employment tax liability by the following January 31st of each year. This return will cover the preceding calendar year’s Employment Tax period. These employers will not file any Form 941s. If they file 941s they will be contacted the IRS and told to file 944 instead.

Taxpayers who believe their business will grow and may owe more than $1000 in total employment taxes or who wish to continue electronically filing and paying Forms 941 quarterly should contact the Service to be changed back to a 941 filing requirement.

If the employer exceeds currently proposed threshold amount of $1,000 Employment Tax liability per year or Compliance determines the taxpayer must file on a quarterly basis (941), the filer will not be able to file 944 in the subsequent year. In both cases the taxpayer will be notified of the change. Expect a vendor-friendly Form 944, which conforms to commonly-accepted form development standards.

Corrections to the Form 944 will be done on the 941c and there will be no form 944c.

A 944 schema is being developed for e-file. 944 e-files will use the current 94x system and we can expect the 944 schema to be very similar to the 941. No date was given for the release of the schema. The TIGERS group has not been approached to review or maintain this schema.

18:03, 10 Jun 2005 (CDT)~Bruce L Wilkinson CPA

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