Tax Preparation Help  
Instructions for Form 944 2006 Tax Year

Specific Instructions:

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Part 1:Answer these questions for 2006

1. Wages, tips, and other compensation

Enter amounts on line 1 that would also be included in box 1 of your employees' Forms W-2. See the Instructions for Forms W-2 and W-3 for details.

2. Total income tax withheld from wages, tips, and other compensation

Enter the federal income tax that you withheld (or were required to withhold) from your employees on this year's wages, tips, taxable fringe benefits, and supplemental unemployment compensation benefits.

3. If no wages, tips, and compensation are subject to social security or Medicare tax

If no wages, tips, and compensation are subject to social security or Medicare taxes, check the box on line 3 and go to line 5. If this question does not apply to you, leave the box blank. For more information about exempt wages, see section 15 of Pub. 15 (Circular E) and section 4 of Pub. 15-A, Employer's Supplemental Tax Guide.

4. Taxable social security and Medicare wages and tips

4a. Taxable social security wages.   Report the total wages, sick pay, or fringe benefits subject to social security taxes that you paid to your employees during the year.

  Enter the amount before deductions. Do not include tips on this line. For information on types of wages subject to social security taxes, see section 5 of Pub. 15 (Circular E).

  The rate of social security tax on taxable wages is 6.2% (.062) each for the employer and employee or 12.4% (.124) for both. Stop paying social security tax on and reporting an employee's wages on line 4a when the employee's taxable wages (including tips) reach $94,200 during 2006. However, continue to withhold income and Medicare taxes for the whole year on wages and tips even when the social security wage base of $94,200 has been reached.

  
line 4a (column 1)
x.124  
line 4a (column 2)

4b. Taxable social security tips.   Enter all tips your employees reported to you during the year until the total of the tips and wages for an employee reach $94,200 in 2006. Do this even if you were unable to withhold the 6.2% employee's share of social security tax.

  An employee must report cash tips to you, including tips you paid the employee for charge customers, totaling $20 or more in a month by the 10th of the next month. Employees may use Form 4070, Employee's Report of Tips to Employer, or submit a written statement or electronic tip record.

  
line 4b (column 1)
x .124  
line 4b (column 2)

4c. Taxable Medicare wages and tips.   Report all wages, tips, sick pay, and taxable fringe benefits that are subject to Medicare tax. Unlike social security wages, there is no limit on the amount of wages subject to Medicare tax.

  Include all tips your employees reported during the year, even if you were unable to withhold the employee tax of 1.45%.

  
line 4c (column 1)
x .029  
line 4c (column 2)

  For more information, see section 6 of Pub. 15
(Circular E).

4d. Total social security and Medicare taxes.   Add social security tax, social security tips tax, and Medicare tax.

  
line 4a (column 2)
line 4b (column 2)
+line 4c (column 2)
line 4d  

5. Total taxes before adjustments

Add the total federal income tax withheld from wages, tips, and other compensation and total social security and Medicare taxes before adjustments.

line 2  
+line 4d  
line 5  

6.TAX ADJUSTMENTS

Enter tax amounts on lines 6a-6e that result from current or prior period adjustments. Use parentheses (if possible) to show an adjustment that decreases the total taxes shown on line 5. Otherwise, use a minus sign. Do not enter an amount on line 6d or line 6e unless the IRS has sent you a notice instructing you to do so.

6a. Current year's adjustments.   In certain cases, you must adjust the amounts you reported as social security and Medicare taxes in column 2 of lines 4a, 4b, and 4c to figure your correct tax liability for this year's Form 944. See section 13 of Pub. 15 (Circular E). Do not attach Form 941c or an equivalent statement for current year adjustments.

Fractions of cents.   Enter adjustments for fractions of cents (due to rounding) relating to the employee share of social security and Medicare taxes withheld. The employee share (one-half) of amounts shown in column 2 of lines 4a-4c may differ slightly from amounts actually withheld from employees' paychecks due to rounding social security and Medicare taxes based on statutory rates.

Sick pay.   Enter the adjustment for the employee share of social security and Medicare taxes that were withheld by your third-party sick pay payer.

Adjustments for tips and group-term life insurance.   Enter adjustments for both the following items.

  
  • Any uncollected employee share of social security and
    Medicare taxes on tips.

  • The uncollected employee share of social security and
    Medicare taxes on group-term life insurance premiums
    paid for former employees.

6b.Prior years' income tax withholding adjustments.    Generally, you cannot adjust amounts reported as federal income tax withheld in a prior calendar year unless it is to correct an administrative error. An administrative error happened if the amount you entered on a prior year Form 941 was not the same amount you actually withheld. For example, when the total amount of federal income tax actually withheld was not reported correctly on Form 941 because of a mathematical or transposition error, the difference is an administrative error. The administrative error adjustment corrects the amounts reported on a prior return to agree with the amount actually withheld from the employee. Remember to attach Form 941c to explain the adjustment.

6c. Prior years' social security and Medicare tax adjustments.   Use line 6c to adjust amounts reported on previous returns. If you need to report both an increase and a decrease for the same line, show only the difference.

  Adjustments you report here change your tax liability and your tax deposits. You will have to take these adjustments into account on lines 13a to 13l. Fill in your tax liability amounts for each month. You must explain any adjustments that you make on Form 941c, Supporting Statement to Correct Information, or in an equivalent statement.

  Form 941c is not an amended return but is a statement providing the necessary information and certifications for adjustments shown on lines 6c through 6e. Do not file Form 941c separately from Form 944. See also section 13 of Pub. 15 (Circular E).

Tip
If you are adjusting an employee's social security wages, social security tips, or Medicare wages and tips for a prior year, you must also file Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statements.

6d. Special additions to federal income tax.   This line is reserved for employers with special circumstances. Use this line only if the IRS has sent you a notice instructing you to do so. You must attach Form 941c explaining the tax increase.

6e. Special additions to social security and Medicare taxes.   This line is reserved for employers with special circumstances. Use this line only if the IRS has sent you a notice instructing you to do so. You must attach Form 941c explaining the tax increase.

6f. TOTAL ADJUSTMENTS.   Combine all adjustments shown on lines 6a through 6e and enter the result on line 6f.

7. Total taxes after adjustments

Combine the amounts shown on lines 5 and 6f and enter the result on line 7.

8. Advance earned income credit (EIC) payments made to employees

Enter the amount of the advance earned income credit (EIC) payments that you made to your employees. Eligible employees may choose to receive part of the EIC as an advance payment. Those who expect to have a qualifying child must give you a completed Form W-5 stating they expect to qualify for the EIC. Once the employee gives you a signed and completed Form W-5, you must make the advance EIC payments starting with the employee's next wage payment. Advance EIC payments are generally made from withheld federal income tax and employee and employer social security and Medicare taxes. See section 10 of Pub. 15 (Circular E) and Pub. 596, Earned Income Credit.

If line 8 is more than line 7, you may claim a refund of the overpayment or elect to have the credit applied to your return for the next year. Attach a statement to your Form 944 identifying the amount of excess payment and the pay periods in which you paid it.

9. Total taxes after adjustment for advance EIC

Calculate your total taxes as shown below.

line 7  
-line 8  
line 9  

  • If line 9 is less than $2,500, you may pay the full
    amount with a timely filed return because you were
    not required to deposit. See section 11 of Pub. 15
    (Circular E) for information and rules about federal tax
    deposits.

  • If line 9 is $2,500 or more, you generally must deposit
    your tax liabilities by using the Electronic Federal Tax
    Payment System (EFTPS) or deposit at an authorized
    financial institution with Form 8109. However, if you
    deposited all taxes accumulated in the first three quarters
    of the year and your fourth quarter liability is less than
    $2,500, you may pay taxes accumulated during the fourth
    quarter with a timely filed Form 944. The amount shown
    on line 9 must equal line 13m, Total liability for year.

10. Total deposits for this year, including overpayments applied from a prior year

Enter your deposits for this year, including any deposits that you were required to make to cover prior period liabilities resulting from adjustments shown on lines 6a-6e. Also include in the amount shown any overpayment from a previous period that you applied to this return.

11. Balance due

If line 9 is more than line 10, write the difference on line 11. Otherwise, see Overpayment below.

You do not have to pay if line 11 is less than $1. Generally, you should have a balance due only if your total taxes after adjustment for advance EIC (line 9) are less than $2,500. See If line 9 is $2,500 or more above for an exception.

If line 11 is:

  • Less than $1, you do not have to pay it,

  • Between $1 and $2,500, you can pay the amount owed
    with your return. Make your check payable to the United
    States Treasury
    and write your EIN, Form 944,
    and 2006 on the check,

  • $2,500 or more, you must deposit your tax. See Must You
    Deposit Your Taxes?
    on page 3.

You may pay the amount shown on line 11 using EFTPS or credit card. Do not use a credit card to pay taxes that were required to be deposited. For more information on paying your taxes with a credit card, visit the IRS website at www.irs.gov and type “e-pay” in the Search box.

If you pay by EFTPS or credit card, file your return using the “Without a payment” address on page 4 under Where Should You File? and do not file Form 944-V, Payment Voucher.

Caution
If you are required to make deposits and, instead, pay the taxes with Form 944, you may be subject to a penalty.

12.Overpayment

If line 10 is more than line 9, write the amount in line 12. Never make an entry in both lines 11 and 12.

If you deposited more than the correct amount for a year, you can choose to have us either refund the overpayment or apply it to your next return. Check the appropriate box in line 12. If you do not check either box, we will automatically refund the overpayment. We may apply your overpayment to any past due tax account that is shown in our records under your EIN.

If line 12 is less than $1, we will send a refund or apply it to your next return only if you ask us in writing to do so.

Fill out both pages.

You must fill out both pages of Form 944 and sign it on the second page. Failure to do so may delay processing of your return.

Part 2:Tell us about your tax liability for 2006

13. Check one:

  • If line 9 is less than $2,500, check the first box in
    line 13 and go to line 15;

  • If line 9 is $2,500 or more, check the second box
    on line 13 and fill out your tax liability for each month
    and figure the total liability for the year. If you do not fill
    out your tax liability for each month, the IRS will not know
    when you should have made deposits and may assess an
    averaged” failure-to-deposit penalty. See section 11
    of Pub. 15 (Circular E). If your tax liability for any month
    is negative (for example, if you are adjusting an
    overreported liability in a prior month), do not enter a
    negative amount for the month. Instead, enter zero for
    the month and subtract that negative amount from your
    tax liability for the next month.

    Note. Your total tax liability for the year (line 13m) must
    equal your total taxes on line 9.

If you accumulate $100,000 or more in tax liability at any time during the year, you must complete Form 945-A, Annual Record of Federal Tax Liability, and file it with your Form 944. See the Next Day Deposit Rule in section 11 of Pub. 15 (Circular E).

14.State abbreviation

If you made deposits of taxes reported on Form 944, in the spaces provided, write the two-letter United States Postal Service abbreviation for the state where you deposit your taxes using Form 8109 or initiate EFTPS transfers. IRS uses the state shown to determine banking days for purposes of deposit due dates. Official state holidays for the state shown are not counted as banking days. If you deposit in multiple states, enter “MU” in the spaces provided.

When you deposit in multiple states, IRS cannot determine what portion of your liability was affected by a state holiday and may propose a deposit penalty for one or more of the states where you made deposits. If you receive a notice and your deposit due date was extended because of a state bank holiday, respond to the notice citing the state holiday and applicable deposit amount.

Part 3:Tell us about your business

In Part 3, answer question 15 only if it applies to your business. If it does not apply, leave it blank and go to Part 4.

15.If your business has closed or you stopped paying wages...

If you go out of business or stop paying wages, you must file a final return. To tell IRS that a particular Form 944 is your final return, check the box on line 15 and enter the date you last paid wages in the space provided.

Part 4:May we speak with your third-party designee?

If you want to allow an employee, a paid tax preparer, or another person to discuss your Form 944 with the IRS, check the “Yes” box in Part 4. Then tell us the name and the 5-digit personal identification number (PIN) of the specific person to contact—not the name of the firm who prepared your tax return. The designee may choose any numbers as his or her PIN.

By checking “Yes,” you authorize the IRS to talk to the person you named (your designee) about any questions we may have while we process your return. You also authorize your designee to do all the following.

  • Give us any information that is missing from your return.

  • Call us for information about processing your return.

  • Respond to certain IRS notices that you have shared with
    your designee about math errors and return preparation.
    IRS will not send notices to your designee.

You are not authorizing your designee to bind you to anything (including additional tax liability) or to otherwise represent you before the IRS. If you want to expand your designee's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

The authorization will automatically expire 1 year after the due date (without regard to extensions) for filing your Form 944. If you or your designee want to terminate the authorization, write to the IRS office for your locality using the “Without a payment” address under Where Should You File? on page 4.

Part 5:Sign here

You must fill out both pages of Form 944 and sign it. In Part 5, sign your name and print your name and title. Then enter the date signed and the best daytime telephone number where the IRS can reach you, including area code.

Who Must Sign the Form 944?

Form 944 must be signed as follows.

•Sole proprietorship—   The individual who owns the
business.

•Corporation (including an LLC treated as a corporation)—   The president, vice president, or other
principal officer.

•Partnership (including an LLC treated as a partnership) or unincorporated organization—   A
responsible and duly authorized member or officer having
knowledge of its affairs.

•Single member limited liability company (LLC) treated as a disregarded entity—   The owner of the limited
liability company (LLC).

•Trust or estate—   The fiduciary.

If you have filed a valid power of attorney, your duly authorized agent may also sign your Form 944.

Part 6:For paid preparers only (optional)

You may complete Part 6 if you were paid to prepare Form 944 and are not an employee of the business that is filing this return.

Sign in the space provided. Give the employer the return to file with IRS and include a copy of the return for the employer's records.

If you are a paid preparer, write your Social Security Number (SSN) or your Preparer Tax Identification Number (PTIN) in the space provided. Include your complete address. If you work for a firm, write the firm's name and the EIN of your firm.

Do not fill out Part 6 if you are filing the return as a reporting agent and have a valid Form 8655, Reporting Agent Authorization, on file with the IRS.

How to Order Forms and Publications from the IRS

Phone number
Call 1-800-829-3676.

Access by computer
Visit the IRS website at www.irs.gov.

Other IRS Products You May Need

Form SS-4, Application for Employer Identification Number
Form W-2, Wage and Tax Statement
Form W-2c, Corrected Wage and Tax Statement
Form W-3, Transmittal of Wage and Tax Statements
Form W-3c, Transmittal of Corrected Wage and Tax Statements
Form W-4, Employee's Withholding Allowance Certificate
Form W-5, Earned Income Credit Advance Payment Certificate
Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
Form 941c, Supporting Statement to Correct Information
Form 943, Employer's Annual Federal Tax Return for Agricultural Employees
Form 945, Annual Return of Withheld Federal Income Tax
Form 4070, Employee's Report of Tips to Employer
Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips
Instructions for Forms W-2 and W-3
Instructions for Form 941
Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC)
Pub. 15 (Circular E), Employer's Tax Guide
Pub. 15-A, Employer's Supplemental Tax Guide
Pub. 15-B, Employer's Tax Guide to Fringe Benefits
Pub. 51 (Circular A), Agricultural Employer's Tax Guide
Pub. 596, Earned Income Credit
Pub. 926, Household Employer's Tax Guide
Pub. 947, Practice Before the IRS and Power of Attorney
Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors
Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations
Schedule H (Form 1040), Household Employment Taxes

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