Use Employer Payroll Form 944 to Save Time and Paperwork

Treating workers who help the care for children as employees is one of the hardest jobs a family child care provider can face. Being an employer means you must withhold taxes and file a series of federal and state payroll tax forms. Meeting all of the requirements and deadlines can be overwhelming for many child care providers.

There is some bit of good news.

Normally, if you hire an employee you must withhold Social Security/Medicare taxes from each paycheck and pay in these taxes quarterly, using IRS Form 941 Employer's Quarterly Federal Tax Return. But, if you will owe less than $1,000 in employer payroll taxes for the year, you can avoid filing Form 941 and instead can file IRS Form 944 Employer's Annual Federal Tax Return once on January 31st.

You will owe less than $1,000 in federal payroll taxes if pay out less than about $4,000 in wages to all employees in a year.

If you have paid less than $1,000 in federal payroll taxes in the year, the IRS will likely notify you that you are eligible to use Form 944. If you aren't notified by the IRS, you must get their permission to be able to use Form 944 instead of Form 941. Call the IRS at 800-829-4933 before April 1st or send a written request postmarked by March 15th. See the instructions to Form 944 for the mailing address.

If you don't already have an Employer Identification Number (EIN), you will need one when you hire an employee. If you are a new employer, you can indicate that you want to file Form 944 when you apply for your EIN online at www.irs.gov.

Background

For many years I have watched child care providers struggle with filing all the payroll tax forms. I talked with IRS agents and told them that the problem for providers was not the amount of tax that was due as an employer, but rather it was the burdensome paperwork requirements.

In 2006 I recommended that the IRS reduce the paperwork burden by allowing providers to file an annual tax form, rather than a quarterly tax form for Social Security/Medicare taxes. They came up with Form 944 and introduced it in 2007 as a pilot program. All small businesses can use the form and it was well received by taxpayers. I did try to convince the IRS to also combine the federal unemployment tax form (Form 940) with Form 944, but wasn't successful.

Tom Copeland - tomcopelandblog.com

Image credit: https://www.payrollpartners.com/irs-issues-employers-tax-guide-for-2021/

For information and examples on how to fill out Form 944 and other federal payroll tax forms, see my Family Child Care Tax Workbook and Organizer.