Tax Preparation Help  
Instructions for Form 945 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.

Table of Contents

    State code.   If you made your deposits using Form 8109 or by using an EFTPS bank account in a state other than that shown in your address on Form 945, enter the state code for the state where you made deposits or initiated EFTPS transfers in the box provided in the upper left corner of
    Form 945. Use the Postal Service two-letter state abbreviation as the state code. Enter the code “MU” in the state code box if you deposit in more than one state. If you deposit in the same state as shown in your address, do not make an entry in this box.

    Line A—Final return.   If you go out of business or end operations and you will not be required to file Form 945 in the future, file a final return. Be sure to check the box in
    line A and enter the date that final nonpayroll payments were made.

    Line 1—Federal income tax withheld.   Enter the federal income tax that you withheld (or were required to withhold) from pensions (including distributions from governmental section 457(b) plans), annuities, IRA distributions, military retirement, Indian gaming profits, and gambling winnings (regular gambling withholding only). Also enter any voluntary amount that you withheld on certain government payments. If you are required to report federal income tax withholding on Forms 1099 (for example, Form 1099-R or Form W-2G), you must report the federal income tax withheld on
    Form 945.

    Note.   Federal income tax withholding reported on
    Form W-2 must be reported on Form 941, Form 943, Form 944, or Schedule H (Form 1040), as appropriate.

    Line 2—Backup withholding.   Enter any backup withholding, including backup withholding on gambling winnings.

      Regulated investment companies (RICs) and real estate investment trusts (REITs) must report any backup withholding on Form 945 in the year that the dividends are actually paid. This includes January payments of dividends declared during October, November, and December of the prior year. See the Instructions for Form 1099-DIV for special reporting requirements.

    Line 3—Adjustment to correct administrative errors.   You cannot make an adjustment on Form 945 to correct federal income tax withholding or backup withholding reported in a prior calendar year unless it is to correct an administrative error. An administrative error occurs if the amount you entered on Form 945 is not the amount that you actually withheld. For example, if the total federal income tax actually withheld was incorrectly reported on Form 945 due to a math or transposition error, this is an administrative error. The administrative error adjustment corrects the amount reported on Form 945 to agree with the amount actually withheld from nonpayroll payments.

      You must report an adjustment to correct an administrative error on Form 945 in the year in which you discover the error. Indicate negative adjustments with a minus sign (if possible). Otherwise, use parentheses.

      You will not be allowed a refund or credit for any prior year's overpayment of federal income tax that you withheld from a payee. This is because the payees use the amount of withholding shown on the information return (for example, Form 1099-R) as a credit when filing their income tax returns.

      If you are making an adjustment to correct a prior year administrative error, report the net adjustment (including an adjustment to federal income tax withholding and backup withholding) on line 3. Complete Form 941c, Supporting Statement To Correct Information, or an equivalent statement, and file it with Form 945 to provide the required information on the adjustment. Be sure to identify the adjustment in the Explanation of Adjustments (Part V of Form 941c) as correcting an administrative error and provide a description of the error(s). Do not file Form 941c separately from Form 945.

    Reporting the adjustment on line 8 or on Form 945-A.   The amount of the adjustment also must be taken into account in the Monthly Summary of Federal Tax Liability (line 8) or on Form 945-A, Annual Record of Federal Tax Liability. If the adjustment increases your tax liability, include the adjustment with any other amount on the entry space for the date that you discovered the error and increase any required deposit by the adjustment amount. If the adjustment decreases your tax liability, use the adjustment amount as a credit to offset subsequent liabilities on line 8 or Form 945-A until it is used up. For more information, see section 13 of Pub. 15 (Circular E). The Pub. 15 (Circular E) instructions for making adjustments refer to Form 941 but also apply to Form 945 adjustments.

      
    Tip
    If you are not required to complete line 8 or Form 945-A because your total taxes are less than $2,500, do not show the adjustment on line 8 or on Form 945-A.

    Line 4—Total taxes.   Add lines 1 and 2 and add or subtract any net adjustment on line 3. If total taxes are $2,500 or more, the amount reported on line 4 must equal the total liability for the year reported on line 8M of the Monthly Summary of Federal Tax Liability, or line M of Form 945-A.

    Line 5—Total deposits.   Enter your total Form 945 deposits for the year, including any overpayment applied from your 2005 return.

    Line 6—Balance due.   You do not have to pay if line 6 is under $1. Generally, you should have a balance due only if your total taxes for the year (line 4) are less than $2,500. If you made payments under the accuracy of deposits rule, see section 11 of Pub. 15 (Circular E). Enter your EIN, “Form 945,” and “2006” on your check or money order and make it payable to the “United States Treasury.” If line 4 is $2,500 or more and you deposited all taxes when due, the amount on line 6 should be zero.

    Caution
    If you fail to make required deposits (using EFTPS or Form 8109, as required) and instead pay these amounts with your return, you may be subject to a penalty.

    Line 7—Overpayment.   If you deposited more than the correct amount for the year, you can have the overpayment refunded or applied to your next return by checking the appropriate box. The IRS may apply your overpayment to any past due tax account under your EIN. If line 7 is under $1, we will send a refund or apply it to your next return only on written request.

    Line 8—Monthly Summary of Federal Tax Liability.   
    Caution
    This is a summary of your monthly tax liability, not a summary of deposits made. If line 4 is less than $2,500, do not complete line 8 or Form 945-A.

      Complete line 8 only if you were a monthly schedule depositor for the entire year and line 4 is $2,500 or more. See Determining your deposit schedule on page 2.

      
    Caution
    The amount entered on line 8M must equal the amount reported on line 4.

      Report your liabilities on Form 945-A instead of on
    line 8 if:
    • You were a semiweekly schedule depositor
      during 2006. Do not complete entries A through M of
      line 8. Instead, complete and file Form 945-A with
      Form 945.

    • You were a monthly schedule depositor for 2006 and during any month you accumulated nonpayroll taxes of $100,000 or more. Because this converted you to a semiweekly schedule depositor for the remainder of 2006 (and for 2007), you must report your liabilities on
      Form 945-A for the entire year. Do not complete entries A through M of line 8. For more information, see the $100,000 Next-Day Deposit Rule in section 11 of Pub. 15 (Circular E).

    Third-Party Designee.   If you want to allow any individual, corporation, firm, organization, or partnership to discuss your 2006 Form 945 with the IRS, check the “Yes” box in the Third-Party Designee section of Form 945. Also, enter the name, phone number, and any five numbers that the designee chooses as his or her personal identification number (PIN). The authorization applies only to the tax form upon which it appears.

      By checking the “Yes” box, you are authorizing the IRS to speak with the designee to answer any questions relating to the information reported on your tax return. You are also authorizing the designee to:
    • Exchange information concerning your tax return with the IRS and

    • Request and receive written tax return information relating to your tax return including copies of specific notices, correspondence, and account transcripts.

      You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authorization or desire automatic issuances of copies of notices, see Pub. 947, Practice Before the IRS and Power of Attorney.

      The Third-Party Designee authorization is substantially equivalent to Form 8821, Tax Information Authorization, but automatically expires one year from the due date (without regard to extensions) for filing your 2006 Form 945. If you or your designee desire to terminate the authorization, a written statement conveying your wish to revoke the authorization should be submitted to the IRS service center where the return was processed (see Where to file (without a payment) on pages 1-2).

    Who must sign.   Form 945 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.

      Form 945 may also be signed by a duly authorized agent of the taxpayer if a valid power of attorney has been filed.

    Alternative signature method.   Corporate officers or duly authorized agents may sign Form 945 by rubber stamp, mechanical device, or computer software program. For details and required documentation, see Rev. Proc. 2005-39. You can find Rev. Proc. 2005-39 on page 82 of Internal Revenue Bulletin 2005-28 at http://www.unclefed.com/Tax-Bulls/2005/irb05-28.html

    Previous | Index | Next

    2006 Instructions Main | 2006 Tax Help Archives | Tax Help Archives Main | Home