IRS Released Draft Form 944: Key Updates You Need to Know

Let’s learn more about the new draft of Form 944 and what may affect your upcoming reporting.

Heads up! Small business owners must look over this update. The IRS has released a draft version of Form 944 (Employer’s Annual Federal Tax Return).

The latest draft, released on September 17, includes some noteworthy changes. These revisions, which include COVID-19-related tax credits, elimination of specific forms and publications, and alterations in Social Security wage base limits, will significantly impact future tax filings.

Let’s learn more about the draft Form 944 and what may affect your upcoming reporting.

Form 944 – An Overview

IRS Form 944 (Employer’s Annual Federal Tax Return) is used by small business owners whose annual liability of Social Security, Medicare and Federal income taxes is $1000 or less. Employers can file and pay the taxes annually instead of filing every quarter. Using Form 944, employers can report the following information.

Employee wages and tips
Federal Income tax withheld
Employers and employees share of Social Security and Medicare taxes

New changes to Form 944

The updates released on the draft Form 944 will be implemented later. Some of the notable changes made on draft Form 944 are discussed over here:

1) Social Security wage base limit:

The Social Security and Medicare tax rate is 6.2% for each employee and employer. However, the wage base limit for Social Security is $168,600. Medicare taxes remain unchanged, and there is no wage base limit for it.

These taxes apply to household workers who are paid $2,700 or more in wages and election workers who are paid $2,300 or more in wages.

2) A COVID-19-related tax credit cannot be claimed using Form 944:

COVID-19-related tax credits for qualified sick leave and family wages can no longer be claimed using Form 944. If you can claim the COVID-19-related credit because you paid the wages in 2024 for an earlier applicable leave period, you can still file Form 944-X to claim the credits paid in 2024.

Note: Filing Form 944-X before filing Form 944 may result in unwanted errors or delays in processing Form 944-X.

Removal of lines related to COVID-19 tax credit:

Certain Lines related to the COVID-19 tax credit have been removed from Form 944

Part 1:

Lines 4a(i) and 4a(ii) has been removed
Lines 8(a) to 8(g) have been replaced with “Qualified small business payroll tax credit for increasing research activities.” with Form 8974.
Lines 10(a) to 10(j) have been replaced with “Total deposits for this year, including overpayment applied from a prior year and overpayments applied from Form 944-X, 941-X, or 941-X (PR).”

Part 3:

Lines 15 to 26 have been removed.

Quick Reminders on Form 944

Here are some of the essential reminders, which include

Elimination of Forms and Publications: IRS Form 941-SS, Form 941-PR, and Publications 51, 80, and 179 will be discontinued after 2023.
You can claim the Qualified Small Business payroll tax credit for increasing research activities using Form 8974.

Bottom Line

In this blog, we have discussed the draft Form 944. However, the draft forms contain some major changes regarding the COVID-19 tax credit and removal lines related to it and more. All these changes are essential for filing taxes effectively. As this is an early draft form, there might be upcoming changes. We will let you know about further updates from the IRS.

TaxBandits supports the current version of Form 944. Once the revised Form 944 becomes available, TaxBandits will support the updated version of this form to ease your tax filing.

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