Reporting FICA Wages

There are specific payment and reporting rules for federal income tax withholding, and the employee and employer’s portions of Social Security and Medicare or FICA taxes.

As a general rule, the IRS requires employers to report their taxable wage payments and corresponding federal income tax withholding and FICA tax liabilities on a quarterly basis by filing Federal Form 941. Employers must file Form 941 four times per year, once for each calendar quarter unless they qualify as seasonal employers. When they do not pay taxable wages in a particular quarter, employers who are not seasonal employers should file a zero dollar return on which they show no wages paid and no taxes due.

Form 941 is due on the last day of the month following the close of each calendar quarter. For example, Form 941 for the first quarter, which ends on March 31st and covers wage payments and tax liabilities for the months of January, February and March, is due on April 30. Most employers are required to file quarterly using Form 941.

However, the IRS at its discretion allows certain employers to report their taxable wage payments and corresponding federal payroll tax liabilities on an annual basis by filing Federal Form 944, the Employer’s Annual Federal Tax Return. Form 944 is due on January 31st, following the close of the calendar year. Employers whose expected annual liability for federal income tax withholding and FICA taxes will be $1,000 or less are eligible to file Form 944. However, they may only file annually using Form 944 if they have been notified to do so by the IRS.

Taxable wage payments of approximately $4,000 per year will result in $1,000 in federal payroll tax liabilities, so very few employers will qualify to use Form 944. Once they have employees and start paying wages, employers are required to continue filing Form 941, or Form 944 if qualified, until they stop paying wages, such as when they close their businesses. When employers stop paying wages and/or close their businesses, they must notify the IRS that they are no longer required to file Form 941 or Form 944. This is done by checking the Final Return box on their last return.