Form 945 is used to report federal income tax withheld from nonpayroll payments, including distributions from Defined Benefit Plans.
In general, if you have withheld federal taxes from any nonpayroll payments, Form 945 would be required.
More specifically, if your business is the Plan Sponsor for a Defined Benefit Plan, you should review any distributions from the Plan in the prior year. If you have withheld federal income tax from any of those distributions, you are required to file the form for the prior year.
Note that you do not need to file Form 945 simply because you paid out funds from the Defined Benefit Plan. For example, single-sum distributions that the participant rolls over would not trigger the filing requirement, because you do not withhold federal taxes from rollovers.
If you sponsor a small Defined Benefit Plan, Form 945 may not be required for many of the years. That’s because, in small Plans, most participants receive a single-sum distribution. To the extent the participants rollover their distributions, no federal withholding or filing would be required.
However, if you filed Form 945 in prior years but have not filed the form in the most recent year, the IRS likely will send you a letter requesting that you file the form or provide an explanation of why the form was not filed. Don’t panic! This simply is the IRS “checking” to ensure you did not miss the filing. Assuming you did not miss the filing, you can call or write the IRS to let them know that you were not required to file the form.
Lastly, the instructions emphasize that wages should not be reported on Form 945. Additionally, you should not use the form to report withholding from nonqualified pension plans, including 457(b) Plans, and some other deferred compensation arrangements that are regarded as wages. The IRS requires that you file the appropriate form for these situations.
For 2023, the filing is due by January 31, 2024. However, in some cases, the IRS has provided an extended 2023 deadline of February 12, 2024.
To be considered timely, the envelope containing the form must be postmarked by the deadline with the correct address and postage. You also can send the form by a private delivery service. However, depending on your location and whether payment is required, the applicable address may be a P.O. box. In that instance, you could not use a private delivery service.
The IRS encourages electronic filing. You can visit their e-filing page for more information. If you mail a paper filing, the address depends on your location and whether you need to include payment. See page 3 of the Form 945 instructions for more detail.
If you have a Defined Benefit Plan, your CPA or Third Party Administrator likely will complete and file the form for you. However, if you are filing the form yourself, the IRS provides detailed instructions.
If you do not file Form 945 timely, the IRS will assess penalties unless the late filing is due to “reasonable cause” and not “willful neglect”. If you file the form late, you should not attach an explanation at that time. Rather, you should provide the explanation in response to the IRS informing you of any penalties. The IRS will determine at that time if you have met the reasonable cause criteria.
Late payroll taxes also are subject to penalty and interest unless you have reasonable cause.
Lastly, should you incur penalties or interest, you can file Form 843 to request abatement of penalties and interest for late filing and/or tax payments.