Form 945 is the annual IRS return for federal income tax withheld from nonpayroll payments, such as backup withholding on contractor payments, pensions and annuities, and gambling winnings. For 2025 it was due February 2, 2026, or February 10, 2026 if every deposit was made on time, and as of October 2026 you only file it for a year in which you had a nonpayroll tax liability.
For a small business the usual reason to meet Form 945 is backup withholding. If a contractor won't give you a correct taxpayer identification number, you withhold at 24% from what you pay them, and that withholding is reported here, not on Form 941.
What goes on Form 945, and what doesn't
| Goes on Form 945 | Doesn't go on Form 945 |
|---|---|
| Backup withholding, for example on 1099-NEC or 1099-MISC payments | Income tax withheld from wages reported on Form W-2 (that's Form 941, 943 or 944) |
| Pensions, annuities and distributions from plans like 401(k) and 403(b) | Withholding on nonqualified deferred compensation paid to employees |
| Military retirement | Withholding reportable on Form 1042 for payments to foreign persons |
| Gambling winnings and Indian gaming profits | Anything where you had no nonpayroll liability that year |
| Voluntary withholding on certain government payments and Alaska Native Corporation distributions |
You file just one Form 945 for the whole calendar year, covering every type of nonpayroll withholding. The IRS says not to file more than one.
When backup withholding kicks in
Under the general information return instructions, reportable payments such as nonemployee compensation and payment card and third party network transactions may be subject to backup withholding at a 24% rate. One trigger the rules list is a payee who doesn't give you a TIN in the manner required. You withhold until they do. That's why collecting a Form W-9 before the first payment saves you from ever needing Form 945.
Deposit rules for Form 945
You deposit the withheld tax by electronic funds transfer: EFTPS, IRS Direct Pay or your IRS business tax account. The rules mirror Form 941, but you keep them separate. You don't combine Form 945 taxes with Form 941, 943, 944 or CT-1 taxes when you work out any threshold.
| Rule | What it means for 2026 |
|---|---|
| Under $2,500 for the year | If your total Form 945 tax for the year is less than $2,500, you don't have to make deposits during the year |
| Monthly schedule | You're a monthly depositor for 2026 if the tax on your 2024 Form 945 (line 3) was $50,000 or less |
| Semiweekly schedule | You're a semiweekly depositor if it was more than $50,000 |
| $100,000 next-day rule | A monthly depositor who builds up $100,000 or more on any day switches to semiweekly from the next day, for the rest of the year and the next |
If you file Form 945, you may also need Form 945-A, Annual Record of Federal Tax Liability. The line 7 instructions explain when.
How to file Form 945, step by step
- Check your EIN. The name and EIN on Form 945 must match the information returns where you reported the withholding, such as your 1099-NEC forms.
- Line 1: enter federal income tax withheld from pensions, annuities, gambling winnings and the other nonpayroll payments.
- Line 2: enter backup withholding.
- Line 3 is the total. Line 4 is the deposits you made, including any overpayment applied from the previous year.
- Pay any balance due, or choose on line 6 to apply an overpayment to next year or get a refund.
- Complete the deposit record on line 7 or attach Form 945-A if you're a semiweekly depositor, then sign and file. You can e-file Form 945 through the IRS employment tax e-file programme.
Going out of business
If you close the business, or you won't have to file Form 945 again, the instructions tell you to file a final return and tick the box on Line A. That stops the IRS expecting a return next February. If you outsource payroll or bookkeeping, remember you're still responsible for the return being filed and the tax deposited, so ask your provider whether they file Form 945 as well as Form 941, because many only handle wages. And if you use a paid preparer, they must complete and sign the preparer section of the form.
Common mistakes
- Putting backup withholding on Form 941. The IRS wants it on Form 945, line 2.
- Filing a Form 945 in a year with no nonpayroll liability. You don't have to.
- Using a different business name or EIN from the one on your 1099s, which the instructions say can cause penalties and delays.
- Adding Form 945 tax to your payroll tax when deciding whether you're a monthly or semiweekly depositor.
If you're also running payroll, Form 941 covers the wage side, and good 1099 software will flag a missing TIN before you pay.
The verdict
Most small businesses only need Form 945 because they paid someone without a valid TIN. The cheapest fix is upstream: no W-9, no payment. If you do end up withholding, keep the 24% in a separate pot, deposit it electronically, and diarise the start of February. And keep it apart from payroll in your head and your books, because the IRS keeps them apart too.
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Frequently asked questions
What is Form 945 used for?
It reports federal income tax withheld from nonpayroll payments, including backup withholding, pensions, annuities and gambling winnings.
Who has to file Form 945?
Anyone who withholds, or is required to withhold, federal income tax from nonpayroll payments. You don't file it for a year with no nonpayroll tax liability.
When is Form 945 due?
For 2025 it was due February 2, 2026, or February 10, 2026 if you deposited all the tax on time.
Is backup withholding reported on Form 941 or Form 945?
On Form 945, line 2. Form 941 is only for withholding and employment taxes on wages.
What is the backup withholding rate?
The IRS general instructions give a 24% rate for payments subject to backup withholding.
Do I need to make deposits for Form 945?
Not if your total Form 945 tax for the year is less than $2,500. Otherwise you deposit by EFT on a monthly or semiweekly schedule.
Do I file Form 945 if I go out of business?
Yes, file a final return and check the box on Line A if you won't have to file Form 945 in the future.
