What Is Form 945 Used For and When Must It Be Filed?

Form 945 is used to report federal income tax withheld from nonpayroll payments, including pensions, IRA and retirement plan distributions, military retirement pay, gambling winnings, Indian gaming profits, certain voluntary-withholding government and Alaska Native Corporation payments, and backup withholding. It’s an annual return, filed once for the whole calendar year, and it’s due January 31 of the following year.¹

The form’s job is reconciliation. Whatever federal income tax you withheld from those payments during the year has to match the deposits you sent the IRS, and it also has to match the totals on the information returns (Forms 1099-R, 1099-MISC, 1099-NEC, and W-2G) you sent to recipients.¹ If those figures don’t line up, expect a notice.

Who Has to File

You file Form 945 if you withheld, or were required to withhold, federal income tax from any nonpayroll payment during the year. If you had no nonpayroll withholding liability at all for the year, no return is required.¹

Two boundaries matter. Form 945 is not where payroll taxes go: Social Security, Medicare, and income tax withheld from wages belong on Form 941. And withholding on payments to nonresident aliens and other foreign persons is reported on Form 1042, not Form 945.¹ A business that pays wages, makes pension distributions, and pays foreign contractors will end up filing all three.

Backup Withholding

Backup withholding is the most common reason a business that doesn’t run pensions ends up filing Form 945. It applies at a flat 24% and gets reported on the same return as the rest of your nonpayroll withholding.² Two situations trigger it: a payee doesn’t give you a correct Taxpayer Identification Number for payments reported on a 1099 or W-2G, or the IRS notifies you that a specific payee has underreported interest or dividends.³

When Form 945 Is Due

The deadline is January 31 of the year after the withholding. For tax year 2025, that pushes to February 2, 2026, because January 31 falls on a Saturday.¹ Any time the due date lands on a weekend or federal holiday, it moves to the next business day.

You get an extra ten days if you deposited every dollar of withheld tax on time and in full during the year. For 2025, that on-time extension pushes the deadline to February 10, 2026.⁴

You can file electronically through an approved e-file provider or mail a paper return to the IRS service center for your state. The correct mailing address depends on your state and whether you’re enclosing a payment, so check the current instructions before sending anything.

Depositing the Tax During the Year

Nonpayroll withholding has to be deposited separately from payroll taxes. You can’t lump Form 945 money in with your Form 941 deposits, and all federal tax deposits must be made electronically, through EFTPS, your business tax account on IRS.gov, or Direct Pay for businesses.⁵

If your total tax for the year is under $2,500, you don’t have to deposit at all. Pay the balance with the return.¹ Above that threshold, you’re on one of two schedules, and which one you’re on for the current year depends on a lookback period: the tax you reported on Form 945 two years earlier.

If the lookback amount was $50,000 or less, you’re a monthly depositor. Each month’s accumulated withholding is due by the 15th of the following month, pushed to the next business day if the 15th is a weekend or holiday.⁶

If the lookback amount was more than $50,000, you’re a semiweekly depositor. Withholding on payments made Wednesday through Friday must be deposited by the following Wednesday; withholding on payments made Saturday through Tuesday must be deposited by the following Friday.⁴

One rule overrides both schedules. If your accumulated liability hits $100,000 or more on any day, the whole amount is due by the close of the next business day. Triggering that rule also makes you a semiweekly depositor for the rest of that calendar year and all of the next.⁶

The IRS won’t penalize a small deposit shortfall if it doesn’t exceed the greater of $100 or 2% of the required amount, as long as you make up the difference by the applicable shortfall makeup date.⁷

Working Through the Form

The return itself is short. Line 1 is total federal income tax withheld from nonpayroll payments other than backup withholding. Line 2 is backup withholding. Line 3 is the sum, which is your total tax liability for the year. Line 4 is total deposits, including any overpayment credit carried forward from the prior year. Line 5 shows a balance due if Line 3 is larger; Line 6 shows an overpayment if Line 4 is larger, and you can either request a refund or apply it to next year.⁸

You can only pay the balance with the return if your total tax on Line 3 is under $2,500. Above that, any balance due generally means a deposit shortfall.⁸

If your total tax is $2,500 or more, you also have to show how the liability accrued through the year. Monthly depositors fill in Line 7, entering each month’s liability. Semiweekly depositors skip Line 7 and attach Form 945-A, the Annual Record of Federal Tax Liability.¹ Under $2,500, skip both.

Penalties for Filing, Paying, or Depositing Late

Filing, paying, and depositing carry separate penalties that can run at the same time.

Filing late costs 5% of the unpaid tax for each month or partial month the return is late, capped at 25%.⁹¹⁰¹¹¹²

Missed deposits are graduated by how late they arrive:

1 to 5 days late: 2% of the unpaid deposit
6 to 15 days late: 5%
More than 15 days late: 10%
More than 10 days after the first IRS notice: 15%

The 10% rate also applies if you deposit to an unauthorized financial institution, pay the IRS directly instead of depositing, or fail to use electronic funds transfer when required.¹³ The penalty is calculated on the portion of the deposit that was late or missing, under 26 U.S.C. 6656.¹⁴

Trust Fund Recovery Penalty

Withheld federal income tax is trust fund money. If a responsible person willfully fails to deposit it, the IRS can assess a Trust Fund Recovery Penalty equal to 100% of the unpaid trust fund tax, plus interest, against that person individually. A responsible person can be a corporate officer, partner, sole proprietor, or any employee or trustee with authority over the business’s funds. “Willfully” here means voluntarily paying other business expenses instead of the withholding taxes.¹⁵

Correcting a Filed Return

If the withholding you reported on a filed Form 945 doesn’t match what was actually withheld, use Form 945-X to fix it. A transposed figure, for example, where you entered $15,300 instead of $13,500, is exactly what this form is for.¹⁶

For underreported tax, file Form 945-X within three years of the date you filed the original return, and to keep interest and penalties off, file by January 31 of the year after you find the error and pay the balance with the correction. For overreported tax, you can file an adjusted return or a claim for refund within three years of the original filing date or two years from the date the tax was paid, whichever is later.¹⁶

Filing a Final Return

When a business closes or stops making nonpayroll payments, file a final Form 945. Check the box on Line A and enter the date of the last nonpayroll payment. Attach a statement with the name and address of the person keeping the payment records.⁹

If the business is sold or transferred, both the old and new owners each file a Form 945 for the year of the transfer, each reporting only what they actually withheld. The attached statement should list the new owner’s name, the type of business entity, the type of change, and the date of the transfer.⁹

1
Internal Revenue Service. Instructions for Form 945 (2025)
2
Internal Revenue Service. Backup Withholding
3
Internal Revenue Service. Topic No. 307, Backup Withholding
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Internal Revenue Service. Employment Tax Due Dates
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Internal Revenue Service. Depositing and Reporting Employment Taxes
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Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements
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Internal Revenue Service. IRM 20.1.4, Failure to Deposit Penalty
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Internal Revenue Service. Form 945 (2025), Annual Return of Withheld Federal Income Tax
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Internal Revenue Service. Instructions for Form 945
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Internal Revenue Service. Failure to Pay Penalty
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Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
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Internal Revenue Service. Internal Revenue Bulletin 2026-8
13
Internal Revenue Service. Failure to Deposit Penalty
14
Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes
15
Internal Revenue Service. Trust Fund Recovery Penalty
16
Internal Revenue Service. Instructions for Form 945-X