Do I Need to File a Form 944 if I Have No Employees?

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Form 944 was specifically designed by the Internal Revenue Service to relieve small businesses of the need to file their employee withholding tax returns every quarter via Form 941. Both of these forms are used to report federal income tax, Medicare and Social Security deductions that are withheld from the checks of employees. The employer is also obligated to report his contributions to Medicare and Social Security. Once you register yourself as an employer with the IRS, it’s pretty difficult for you to qualify not to file Form 944, even if you don’t have a single employee.

The idea is that the small business owner also needs to file their tax but, since they are filing such small amounts, it does not make practical sense to file their taxes more than once a year. It would be convenient if they could get it over with in just one annual filing.

Form 944 vs. 941

Both Form 941 and Form 944 are used by employers to report their employees’ employment taxes. So how does the situation look for Form 944 vs. 941?

The main difference between the two is that Form 944 is filed annually, rather than quarterly like the 941. As an employer, you are not allowed to use both forms within the same year for the same period. You can use either one or the other, which depends on your specific circumstances. The majority of employers prefer to file Form 941, which means they do their filing quarterly. It is only when an employer meets the qualifications that they are allowed to file Form 944.

Who Uses Form 944?

Form 944 is for a specific purpose, and that is to help the smallest employers to file their employment taxes annually, rather than quarterly. The IRS considers an employer small when their tax payments for employment tax are no more than $1,000 in a year. However, there are a few other requirements you must meet to qualify to file Form 944.

Notification From the IRS

There are situations where the IRS will notify an employer that they should use Form 944 to file their employment taxes. When that happens, the employer is obligated to file Form 944 for their employment taxes on an annual basis. This applies even if the employer would rather use Form 941 to file their employment taxes.

Sometimes, a new employer foresees that they reasonably won’t pay more than $1,000 in employment taxes in their initial year of business. If that's the case, they can file Form 944 and indicate their expectations in line 13 and 14 of Form SS-4 or SS-4PR at the same time they are applying for their EIN or employer identification number.

If the employer does not provide this information when they are applying for their EIN, they are expected to use Form 941 to file their employment taxes on a quarterly basis.

Who Files Form 944?

It doesn’t matter if you had a single employee or if you had 10; as long as you had employees in the year, you should file Form 944. It also doesn’t matter if the employees earned very little money or a lot of money that year.

Your filing requirements will be based on the wages you paid your employees during the calendar year. This is important to remember since there are situations where your employees may have earned wages in the previous year, but you paid them in the current year. Consequently, your filing requirements will be based on the wages you paid, no matter what period they were earned.

For instance, say your employees worked in a certain week but got paid a week later. It just so happens that this was the week that saw the transition from December to January. In January, you issued the payroll for the hours that were worked in December. You will report all the wages you pay your employees to the IRS based on the calendar year. That means you should file Form 944 for all the wages for December that were paid in January.

Employers With No Employees

It is reasonable to wonder what happens when you have no employees. Should you still file Form 944? Should you file Form 941? Is there some other kind of form you should file? There are five situations to consider: closed business; no employees; change in business structure; sold the business or merged the business. Each scenario has different rules for filing.

Closed Business or No Employees

If you have no employees at all, and you don’t think you’re going to hire anyone in the future, you’re expected to file Form 944 one last time.

If you decide that you want to close down your business, you should also file a final Form 944.

On page two, part three of Form 944, you’re expected to mark the box and enter the date of your final payroll. You should also include a note that advises the IRS where they will get payroll records and who will retain them. This is important as the IRS needs to know they can track your records at any time, even after you close your business. Therefore, you should not neglect to file Form 944.

Changed Your Legal Business Structure

Let’s say your business started as a partnership and now you want to convert it into a sole proprietorship. In this instance, you will have to apply for a new employer identification number. And then, you can file Form 944. You will, however, have to include a statement in the form that indicates the nature of the change to the structure of your business, such as the change from a partnership to a sole proprietorship. You will also have to mention when the change happened and the name and address of the person who retains your payroll records.

You Have Sold Your Business

If you sell your business, the situation is similar to what happens when you’re closing down your business. You should file one last Form 944 and report all the wages you paid to your employees before the sale of the business. Any wages that are paid by the new employer to the employees after the sale will be the responsibility of that employer to report.

You Have Merged Your Business

The same rule as selling your business applies if you merge your business with another. What you are effectively doing is ending one business and beginning another. It can also be considered a change in the structure of your business, such as when you convert it from a sole proprietorship to a partnership. You should file one last Form 944 and report all the wages you paid to your employees before the merger occurred.

Under all circumstances, you should remember that the purpose of Form 944 is to enable the small business owner to file their taxes conveniently. If you pay more than $1,000 in taxes in a given year and have several employees, it not only makes more sense to file Form 941, but it's also mandatory.

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About the Author

Olivia is a business writer with nearly two decades of hands-on and publishing experience. She's been published in several business publications, including The Employment Times and Business Idea Factory. She also studied business in college.