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Small Businesses: Apply Now to Elect to Pay Employment Taxes Annually

By Marcia Richards Suelzer, MA, JD | March 08, 2013

There is no doubt that complying with the various tax rules and regulations can be a real headache for the small business owner. However, some small businesses may be able ease the headache by reporting and paying their employment tax liability once a year, rather than every calendar quarter.

Normally, a business is required to file Form 941, Quarterly Federal Income Tax Return, to report employment tax liability. IRS introduced the Form 944, Employer' ANNUAL Federal Tax Return, program after it realized that many small employers were filing Forms 941 with little or no employment taxes due.

When instituted, the Form 944 program was not opt-in. Under the original program, the IRS determined which employers were eligible and notified those that qualified to use Form 944. If the IRS determined you were a Form 944 filer, you were required to file that form until the IRS notified you that you no longer qualified. The employer had little control over which employment tax return it was required to file.

Annual Filing Opt-in Is Now Permitted

Now, you don't have to wait for the IRS to invite you to participate. Instead, a small employer may request to participate in the Form 944 Program. 

Act Now

The application deadline for calendar year 2013 is March 15, 2013, for written requests. Or, you can make the request by calling the IRS at 1-800-829-4933 by April 1, 2013.  

You can request to opt-in to the Form 944 program if you:

  • have an estimated annual employment tax liability of $1,000 or less for the entire calendar year;
  • are not an agricultural employer who is required to file Form 943, Employer's Annual Federal Tax Return For Agricultural Employees and
  • are not a household employer who is required to File Form 1040, Schedule H, Household Employment Taxes.

If you request permission to participate in the Form 944 Program, you must receive written notice to file Form 944 before you can file the form. If you do not receive written permission, then you must continue to file Forms 941. 

Once you receive permission, you must file Form 944: You cannot file Forms 941 until you receive permission to switch to Form 941.

Opt-out Is Permitted for Any Reason

You not only have the ability to opt-in, you also can opt-out of the program for any reason.  You do not have to wait for the IRS to initiate the change in filing status. To request permission to opt-out for calendar year 2013, you should contact the IRS using the same methods and by the same dates provided above for an opt-in request. Until you receive written confirmation from the IRS that your request to change to filing Forms 941 is approved, then you must file Form 944, even if you have more than $1,000 in employment tax liability.

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