The important distinction is that Form 945 reports federal income tax withheld from certain nonpayroll payments, not the regular income tax withheld from employee wages. The IRS includes certain retirement distributions, pensions, gambling winnings, and backup withholding among the payments reported on this form.

From AIM Financial — Tax Preparation Services in Grand Rapids, Kentwood, Wyoming, and West Michigan

Businesses and financial institutions sometimes have to withhold federal income tax from payments that are not regular employee wages. When this happens, they may have a separate tax reporting responsibility: IRS Form 945, Annual Return of Withheld Federal Income Tax.

Understanding Form 945 is important for businesses, retirement plan administrators, financial organizations, and other entities that handle certain nonpayroll payments. Filing the correct forms helps ensure withheld taxes are reported accurately and deposited on time.

AIM Financial helps individuals and businesses understand tax reporting requirements and prepare for their federal tax filing responsibilities. This guide explains IRS Form 945 in plain English, including who files it, which payments it covers, how to complete it, and what deadlines to know.

What Is IRS Form 945?

IRS Form 945 is an annual return used to report federal income tax withheld, or required to be withheld, from certain nonpayroll payments.

Unlike Form 941, which generally reports federal income tax withheld from employee wages along with Social Security and Medicare taxes, Form 945 focuses on withholding from specific payments that are not regular wages. <Cite refs={[“turn909439search7″,”turn909439search0”]}/>

Examples of payments that may be reported on Form 945 include:

• Certain pension and retirement plan distributions.
• Individual Retirement Account (IRA) distributions.
• Annuity payments.
• Military retirement payments.
• Certain gambling winnings.
• Certain government payments when the recipient elects voluntary federal income tax withholding.
• Certain dividends and distributions by an Alaska Native Corporation when voluntary withholding is elected.
• Payments subject to federal backup withholding.

The exact reporting requirements depend on the payment type and the applicable tax rules.

Who Must File Form 945?

A business or other payer generally must file Form 945 if it withheld, or was required to withhold, federal income tax from nonpayroll payments covered by the form.

For example, a financial institution or retirement plan administrator that withholds federal income tax from eligible retirement distributions may have to report that withholding on Form 945.

A business that makes payments subject to backup withholding may also have a Form 945 filing obligation.

Backup withholding is a federal tax withholding requirement that can apply to certain payments when the recipient has not provided a correct taxpayer identification number or another applicable reporting condition has been triggered. The payer generally withholds tax and sends it to the IRS according to the applicable rules. <Cite refs={[“turn909439search0″,”turn909439search12”]}/>

Not every business needs to file Form 945. If a business has no nonpayroll withholding liability for the year, it generally does not need to file this return for that year.

Also, withholding from payments to foreign persons that must be reported on Form 1042 generally does not belong on Form 945.

Form 945 vs. Form 941: What Is the Difference?

Although both forms report federal income tax withholding, they serve different purposes.

Form	What it generally reports	Filing frequency
Form 941	Employee wage withholding, Social Security tax, and Medicare tax	Quarterly
Form 944	Similar employment taxes for certain employers authorized to file annually	Annual
Form 945	Federal income tax withheld from certain nonpayroll payments, including backup withholding	Annual
Form 1042	Certain withholding on U.S.-source income paid to foreign persons	Generally annual

Choosing the correct form matters. Reporting the same withholding on the wrong return can create discrepancies between the payer’s records and the IRS’s records.

How to Complete IRS Form 945 in Plain English

The current IRS form includes identifying information and several lines used to report withholding and calculate the amount due or overpaid.

Step 1: Enter the Payer’s Business Information

At the top of Form 945, enter the employer identification number (EIN), legal business name, and mailing address.

Use the EIN associated with the entity responsible for the withholding. If the business has changed its address, review the form’s instructions for indicating the change.

Step 2: Report Federal Income Tax Withheld From Nonpayroll Payments

The first main tax line reports federal income tax withheld from specified payments, such as pensions, annuities, IRAs, military retirement, and certain gambling winnings.

Use the payment records and withholding statements maintained during the year to determine the correct total.

Do not include ordinary employee wage withholding that belongs on Form 941, Form 944, Form 943, or Schedule H, as applicable. <Cite refs={[“turn909439search0”]}/>

Step 3: Report Backup Withholding

A separate line reports federal backup withholding.

Payers should maintain records showing the payments subject to backup withholding, the recipients involved, and the amounts withheld. These records can help reconcile Form 945 with the payer’s information returns.

Step 4: Calculate Total Withholding

Combine the applicable withholding amounts to calculate the total federal income tax reported on the return.

Check the total against the payer’s accounting records, payment reports, and federal tax deposits.

Step 5: Account for Deposits and Any Balance Due

Compare the tax reported on Form 945 with the deposits made during the year.

If the tax liability is greater than the deposits, the payer may owe additional tax. If deposits exceed the reported liability, the return may show an overpayment.

The 2025 Form 945 instructions explain that overpayments can generally be requested as a refund or applied to the next return, subject to the applicable rules. For Form 945 refunds, the IRS now uses direct deposit. <Cite refs={[“turn909439search0”]}/>

Step 6: Review the Return and Sign It

Before filing, verify the business identification details, withholding totals, deposits, and any balance due. Complete the required signature section.

If the payer is no longer required to file future Form 945 returns, review the instructions for indicating that the return is final.

When Is Form 945 Due?

Form 945 is an annual return covering the calendar year.

For the 2025 tax year, the regular filing deadline was February 2, 2026. Payers that deposited all taxes due on time and in full generally had until February 10, 2026, to file. <Cite refs={[“turn909439search0”]}/>

For the 2026 tax year, the regular deadline is generally February 1, 2027, because January 31 falls on a Sunday. Payers who qualify for the additional filing time after making all required deposits on time and in full generally have until February 10, 2027. Confirm the applicable deadline in the IRS instructions.

Do You Have to Deposit the Withheld Tax During the Year?

Yes, depending on the amount and the applicable deposit rules.

For the 2025 tax year, the IRS instructions state that if total Form 945 tax for the year is less than $2,500, deposits generally are not required during the year. Different deposit requirements apply when the tax liability reaches the applicable threshold.

Form 945 withholding is subject to federal deposit rules, and the annual filing deadline does not necessarily allow a payer to wait until year-end to pay all tax. Federal tax deposits generally must be made electronically. Form 945 deposits must also be kept separate from deposits for payroll forms such as Forms 941, 943, and 944 when determining deposit requirements. <Cite refs={[“turn909439search0”]}/>

What Is Form 945-A?

Some payers who file Form 945 must also file Form 945-A, Annual Record of Federal Tax Liability.

Form 945-A records the tax liability by month or day, as applicable, rather than simply reporting the annual total. For example, certain semiweekly depositors must report their tax liabilities on Form 945-A. The form helps the IRS match the payer’s tax liability to the timing of its deposits.

Whether Form 945-A is required depends on the payer’s deposit schedule and circumstances. Review the current instructions rather than assuming every Form 945 filer must submit it. <Cite refs={[“turn909439search0″,”turn909439search5”]}/>

Common Form 945 Mistakes to Avoid

Payers should watch for these common errors:

• Reporting employee wage withholding on Form 945 instead of the appropriate employment tax return.
• Omitting backup withholding.
• Reporting incorrect totals from retirement or other nonpayroll distributions.
• Failing to make required federal tax deposits during the year.
• Confusing Form 945 with Form 945-A.
• Using the wrong tax year’s form or instructions.
• Failing to reconcile withholding reported on Form 945 with applicable information returns.
• Forgetting to correct an error on a previously filed return.

If an error is discovered on a filed Form 945, Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund, may be used to correct certain errors. The proper correction depends on the type of mistake and the applicable rules. <Cite refs={[“turn909439search12″,”turn909439search0”]}/>

How AIM Financial Can Help With Tax Preparation

Federal tax reporting can become complicated when a business handles employee payroll, retirement distributions, backup withholding, or other nonpayroll payments. Using the correct forms and maintaining complete records can help reduce reporting errors and prevent unnecessary correspondence with the IRS.

AIM Financial helps individuals and businesses with tax preparation needs in Grand Rapids, Kentwood, Wyoming, and throughout West Michigan. Whether you are organizing business tax records, reviewing withholding information, or preparing your annual federal income tax return, professional assistance can help you identify questions that need attention.

If your business has questions about Form 945, backup withholding, annual tax reporting, or related tax forms, contact AIM Financial to discuss your tax preparation needs.

Contact AIM Financial for tax preparation assistance and help organizing your federal tax reporting records. Taking time to review withholding and deposit records before filing can help make tax season more manageable.

This article provides general educational information and is not individualized tax or legal advice. Form 945 requirements depend on the payments made and the payer’s circumstances. Consult the current IRS Form 945 and instructions or a qualified tax professional for guidance specific to your situation.