To reduce burden on small employers many of whom do business in Los Angeles County, Ventura County, Santa Barbara County and Orange County California, the IRS has simplified the rules for filing employment tax returns to report social security, Medicare, and withheld federal income taxes. Certain employers must file Form 944, Employer’s ANNUAL Federal Tax Return, instead of Form 941, Employer’s QUARTERLY Federal Tax Return.
For taxable years beginning on or after January 1, 2009, employers who estimate that their annual employment tax liability will be $1,000 or less can contact the IRS to request filing Form 944 instead of Forms 941 for a taxable year. Instructions for filing Form 944 are here. Only upon request will the IRS send a notification letter to qualified employers confirming that they may file Form 944 for that taxable year. Once employers receive this notice they must file Form 944 and cannot file Forms 941 instead for a taxable year until they contact the IRS to change their filing requirement to Form 941 for that taxable year and receive confirmation that their filing requirement has been changed.
The IRS will issue guidance published in the Internal Revenue Bulletin informing employers how they can contact the IRS to participate in the Form 944 Program and how they can elect out if they later decide that they want to file Forms 941 instead of Form 944. Under the 2006 regulations, employers were only eligible to opt out if they estimated that their employment tax liability would exceed the $1,000 threshold or if they wanted to e-file Forms 941 quarterly instead. Because the program is being made voluntary, beginning in tax year 2010, employers will be able to opt out for any reason if they follow procedures to be provided in future guidance.
For payroll tax issues, call tax attorney Mitchell A. Port for further information and help.