What Is IRS Form 945?

Definition

IRS Form 945 reports federal income taxes that have been withheld from non-employees. Employers must let the IRS know about backup withholding if they deduct this tax from these individuals' pay.

Woman working on paperwork at a desk in front of a white laptop
Photo:

 

elenaleonova / E+ / Getty Images

Key Takeaways

  • Form 945 is used to report to the IRS taxes withheld from non-payroll payments made for a variety of reasons.
  • One source of these withheld taxes is backup withholding, but some gambling winnings and military retirement benefits must have taxes withheld and these would be reported on this form as well.
  • You might be required to take backup withholding from payments to independent contractors if they fail to give you a correct tax identification or Social Security number.
  • The form is available online and can be e-filed. 

How Does Form 945 Work?

IRS Form 945 is an annual return that summarizes all the federal income taxes you withheld under backup withholding requirements from non-employees.

Form 945 pertains only to what the IRS calls "nonpayroll payments." This form is commonly used for payments to certain independent contractors, as well as for qualified pensions, gambling profits, and military retirement, and pay. Form 945 is a summary form, showing all the different nonpayroll payments you've made.

Note

Payments to non-employees must be reported to the payee and the IRS on Form 1099-NEC (for non-employee compensation. Form 1099-MISC is used for other types of payments, like prizes, rents, and royalties.

Generally speaking, you only have to withhold on payments to independent contractors if the contractor doesn't give you a taxpayer identification number (TIN), the TIN they give you is incorrect, or you get a notice from the IRS saying you have to withhold taxes.

IRS Form 945 2021

Who Uses Form 945?

Employers use Form 945. The form isn't reserved just for payments to independent contractors, though. There are also some other types of payments that your business might make that are subject to backup withholding and would require you to withhold income taxes and report those taxes to the IRS on Form 945. The IRS calls this "non-payroll income tax withholding." You would use Form 945 if you made payments for:

  • Pensions
  • Gambling winnings that aren't subject to regular gambling withholding
  • Indian gaming profits
  • Military retirement
  • Voluntary withholding on some government payments

Note

Other payments that may be subject to withholding include rents and commissions, gross payments reported on Form 1099-K, and certain Form 1099-G payments.

Form 945 basically corresponds with any payments that are made and reported on one of the various 1099 forms, including 1099-MISC, 1099-NEC, or on Form W-2G.

Where To Get Form 945

Form 945 is available on the IRS website. It's interactive, so you can complete it online and print it out.

How To Fill Out Form 945

Information you must report on Form 945 includes:

  • All federal income tax withheld from all individuals subject to backup withholding
  • Backup withholding
  • Total deposits made during the year
  • Balance due or overpayment

Note

You must break down the total to show monthly tax liability if you pay more than $2,500 in backup withholding during the year (total amounts paid times 24%). 

Can Form 945 Be E-Filed?

You can file Form 945 using the IRS e-file system, and you can make backup withholding payments to the IRS electronically using the EFTPS system.

Where To Mail Form 945

Addresses for sending the form by regular mail depend on your state, whether you're an exempt organization, and whether you're also making a payment. The IRS publishes a list of the addresses on its website broken down by state and these other factors.

Requirements for Form 945

You would be required to file Form 945 if, for example, you had a freelance web designer working for you last year that you paid as an independent contractor. The contractor did not give you a TIN or the TIN they gave you was incorrect. Now the IRS has sent you a notice that backup withholding payments must be made.

Note

You generally don't have to start taking backup withholding from payments from independent contractors until you're notified to do so by the IRS.

Generally speaking, you'll want to notify your employee you'll collect backup withholding, report the withholding to the IRS, and then deposit the withholding to the IRS on a monthly or semiweekly schedule. At the end of the year, you'll submit Form 945. Typically, you can stop backup withholdings if the contractor gives you their correct TIN or the IRS tells you that you can stop.

Form 945 is filed with the IRS at the same time you would file W-2 forms and 1099 forms. Filing Form 1099-NEC or 1099-MISC doesn't relieve you of the responsibility to file Form 945 in addition to the other form. Form 945 doesn't go to the payee.

Backup withholding payments are made the same as withholding from employees, using the rules for determining whether to make deposits semi-weekly or monthly.

Frequently Asked Questions (FAQs)

What is a Form 945?

Form 945 is an IRS document employers file if they've made backup withholdings related to certain non-employee payments throughout the year.

Who must file Form 945?

Employers that withhold taxes from certain payments must file a Form 945. For example, you'd have to file Form 945 if the IRS required you to make backup withholdings on an independent contractor's pay.

Was this page helpful?
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "Instructions for form 945 Annual Return of Withheld Federal Income Tax," Page 2.

  2. IRS. "How to Report Nonemployee Compensation and Backup Withholding."

  3. IRS Video Portral. "Businesses—Lesson 5: Federal Taxes When Hiring Employees or Independent Contractors."

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

  5. IRS. "Backup Withholding for Missing and Incorrect Name/TIN(S)," Page 4.

  6. IRS. "Topic No. 307 Backup Withholding."

  7. IRS. "2019 Instructions for Form 945," Pages 4-6.

  8. IRS. "Instructions for Form 945 (2021)," Click "Where to File" in left sidebar.

  9. Patriot Software. "What Is Backup Withholding?"

Related Articles