How To Complete Form 945

Learn how to fill out Form 945 for backup withholding

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Paying independent contractors and other non-employees is simpler than paying employees because you don’t usually have to withhold federal income taxes. But there are times when small businesses must withhold payments to non-employees for backup withholding and other purposes. This is when you may need to file form 945 with the Internal Revenue Service (IRS). Here's how to use it to report backup withholding or other withholding amounts each year.

Key Takeaways

  • IRS Form 945 is an annual report of federal income tax withholding for non-employees.
  • This form is commonly used to report backup withholding, which is required if a payee’s tax identification number (TIN) is missing or incorrect.
  • Form 945 is due on Jan. 31 for the previous year’s taxes.
  • You may pay amounts withheld from all payees when you file Form 945 if the total is $2,500 or less for the year.

What Is Form 945?

IRS Form 945, the “Annual Return of Withheld Federal Income Tax,” is used to report federal income tax held out of several different kinds of payments. A small business may need to use Form 945 to report backup withholding from non-employees. A non-employee could be a freelance writer you hired to write articles for your website or it could be an assistant who you hired to help you out for a flat rate every month. These independent contractors are usually paid via invoice, after filling out a W-9 form.

Form 945 may also be used for tax withholding from:

  • Pensions
  • Annuities
  • Individual retirement accounts (IRAs)
  • Voluntary withholding on certain government payments

When Do You Need To File Form 945?

Form 945 is due by Jan. 31 for the previous year's taxes. You would file form 945 to report the total tax withholding amount for all payees. Throughout the tax year, you should also be making periodic payments of amounts withheld to the IRS.

If you have made deposits on time and in full for the year, you have until Feb. 10 to file Form 945. The filing deadline is extended to the next business day if the due date for a year falls on a weekend or holiday.

The postmark date determines whether the form has been filed on time if it has enough postage and is postmarked by the U.S. Postal Service. You may also use an IRS-designated private delivery service.

When the Amount of Tax Withheld Is Less Than $2,500

If the total amount of federal income tax you withheld from all payees during the year is $2,500 or less, you may pay the amount due when you file Form 945.

When the Amount of Tax Withheld Is More Than $2,500

If the total is over $2,500 for the year, you must make either monthly or twice-weekly deposits depending on the total withholding amount for the year. You may make monthly deposits if your total withholding for all payees is $50,000 or less. If the total is more than $50,000, you must make payments twice a week.


If you are mailing your payment along with Form 945, you must use the payment voucher on page 2 of the form to be sure the IRS records your payment correctly.

When To Take Backup Withholding

Small businesses don’t normally need to withhold federal income taxes from non-employees, but there are some cases when this is necessary. Backup withholding is normally required when the taxpayer ID number of a payee is missing or incorrect on the W-9 form used to report taxpayer IDs of non-employees.

You must take backup withholding from payments at the rate of 24% of the amount paid. For example, if you paid a freelance web designer $1,000 for work creating your website, you must withhold $240 in federal income taxes from the payment. This applies to payments to an independent contractor that are reported on Form 1099-NEC for non-employee compensation and other payments reported on other 1099 forms.


If backup withholding is required, you will receive a notice from the IRS. You must immediately begin withholding federal income taxes from payments to this payee and continue until the payee gives you a validation letter from the IRS or shows you a current Social Security card.

How To Complete Form 945

Before you complete this form, you will need to gather some information.

Add all the federal income taxes you withheld from all payees for Form 945 and separate the backup withholding from other types of withholding.

Gather information about any payments you made to the IRS during the year for Form 945 withholding.


Don’t include withholding amounts and payments for federal income tax withholding on Form 941 and Form 944. These forms are used for reporting withholding and deposits for employees.

Filling Out Form 945

There are seven important lines to fill out on Form 945:

  • Line 1: Enter the federal income tax withheld for all payees except for backup withholding
  • Line 2: Enter the total backup withholding for the year
  • Line 3: Total of Lines 1 and 2
  • Line 4: Enter the total deposits you made for the year
  • Line 5: If Line 3 is more than Line 4, enter the difference on Line 5
  • Line 6: If Line 4 is more than Line 3, enter the difference on Line 6, then select the appropriate box: "Apply to Next Return" or "Send a Refund"
  • Line 7: This amount is the total of federal income taxes you owe, not deposits you made—it must equal the amount on Line 3

Monthly depositors must use Line 7 (a box) to detail their tax liability for each month. Twice-weekly depositors must complete Form 945-A to detail all deposits for the year.

How To File Form 945

You may file Form 945 electronically, using the IRS e-filing service, or by using the services of an IRS-authorized tax professional.

You may also mail your form to the IRS. The filing address depends on where your business is located and whether you are making a payment with the form. The mailing addresses are on page 3 of the Instructions for Form 945.

Frequently Asked Questions (FAQs)

How do I deposit taxes for Form 945?

You can use the IRS Electronic Federal Tax Payment System (EFTPS) or a bank wire transfer. You may also use a payment voucher, but only if your total taxes for the year on Form 945 Line 3 are less than $2,500 and you are paying in full with your return by the due date, or you make payroll tax deposits using the monthly deposit schedule. If so, you can pay with the voucher for any amount due.

When is Form 945 due?

Form 945 is an annual withholding report due on Jan. 31 following the previous tax year. If the due date falls on a weekend or holiday, the form is due the next business day. If you have made all your deposits on time and in full, the due date is Feb. 10. To avoid late-filing penalties, make sure your form has the required amount of postage and that it is postmarked on or before the due date.

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  1. IRS. "About Form 945, Annual Return of Withheld Federal Income Tax."

  2. IRS. "Instructions for Form 945."

  3. IRS. "Form 945 Annual Return of Withheld Federal Income Tax," Page 2.

  4. IRS. "Publication 505 Tax Withholding and Estimated Tax."

  5. IRS Video Portal. "Backup Withholding."

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