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Form 944 Rule |
Providers who owe less than $1,000 in payroll taxes (or about $4,000 in total annual wages) can pay and file these taxes once at the end of the year using a Form 944 (Employer’s Annual Federal Tax Return). As a result of this rule (IRS temporary regulations #148568-04), eligible providers will not have to pay payroll taxes quarterly using Form 941.
Providers who have hired temporary employees in past years and paid less than $4,000 in wages will begin receiving notification letters from the IRS, telling them that they are eligible to file Form 944. If you believe you are eligible for this new form and do not receive a letter from the IRS, you can call the IRS at 1-800-829-0115 to find out if you qualify.
If you currently do not have employees but hire someone, you will need to obtain an EIN number. You can obtain an EIN online from the IRS website at http://www.irs.gov. When you do so you will be asked how much you estimate you will owe in employment taxes. How you answer this question will determine whether or not you will be eligible to file Form 944.
Another option: Providers who owe very little in Social Security and Medicare taxes do have the option of not withholding these taxes and paying them all out of their own pocket. For example, a provider could pay her employee $150 for the year and pay the IRS $22.98 out of her pocket (representing the full amount of Social Security and Medicare taxes owed). Doing this, results in the provider paying slightly higher income taxes (about 5% of payroll).
This handout was produced by Think Small (www.thinksmall.org).
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