Instructions for Form 944-SS (2006)

General Instructions: Understanding Form 944-SS

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Federal law requires you, as an employer, to withhold taxes from your employees' paychecks. Each time you pay wages, you must withhold — or take out of your employees' paychecks — certain amounts for social security tax and Medicare tax. Under the withholding system, taxes withheld from your employees are credited to your employees in payment of their tax liabilities.

Federal law also requires employers to pay any liability for the employer's portion of social security and Medicare taxes. This portion of social security and Medicare taxes is not withheld from employees.

What Is the Purpose of Form 944-SS?

Form 944-SS, Employer's ANNUAL Federal Tax Return, is designed so the smallest employers (those whose annual liability for social security and Medicare taxes is $1,000 or less) will have to file and pay these taxes only once a year instead of every quarter. These instructions give you some background information about Form 944-SS. They tell you who must file the form, how to fill it out line by line, and when and where to file it. If you want more in-depth information about payroll tax topics, see Pub. 80 (Circular SS), Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. Or visit the IRS website at www.irs.gov and type “Employment Tax” in the Search box.

Use Form 944-SS to report all the following items.

Payroll taxes (both employee and employer
shares of social security and Medicare taxes)
for the year.
Current year's adjustments to social security and
Medicare taxes for fractions of cents, sick pay, tips,
and group-term life insurance.
Prior years' adjustments to payroll taxes (attach
Form 941c).

Who Must File Form 944-SS?

In general, if the IRS has notified you to file Form 944-SS, then you must file Form 944-SS to report all the following amounts.

Wages you have paid.
Tips your employees have received.
Both the employer's and the employee's share of social
security and Medicare taxes.

You must file a Form 944-SS for each year even if you have no taxes to report unless the IRS notifies you that your filing requirement has been changed to Form 941-SS (or you filed a final return — See If your business has closed... below). See also What if you don't want to file Form 944-SS? below.

In February 2006, the IRS will mail eligible employers a notice to file Form 944-SS for 2006 if their expected annual liability for social security and Medicare taxes will be $1,000 or less.

If you believe you are eligible to file Form 944-SS for 2006 but the IRS did not notify you, call the IRS at 1-800-829-0115 (U.S. Virgin Islands only), or 215-516-2000 (toll call) to determine if you can file Form 944-SS. If you contact the IRS and the IRS determines you are eligible to file Form 944-SS, we will send you a notice that your filing requirement has been changed. To determine if you can file Form 944-SS to report your 2006 employment tax liability, you must contact the IRS by April 1, 2006.

New employers are also eligible to file Form 944-SS if they will meet the eligibility requirements. New employers filing Form SS-4, Application for Employer Identification Number, must complete line 13 of Form SS-4 indicating the highest number of employees expected in the next 12 months and must check the “yes” box or the “no” box to indicate whether they expect to have $1,000 or less in employment tax liability for the calendar year. Generally, if you pay $4,000 or less in wages subject to social security and Medicare taxes, you are likely to pay $1,000 or less in employment taxes. If a new employer indicates on line 13 of Form SS-4 it expects to have $1,000 or less in employment tax liability for the calendar year, the IRS will notify the new employer to file Form 944-SS to report social security and Medicare taxes. The IRS's determination may be made after April 1, 2006, so long as it is made before the employer's first Form 941-SS would have been due.

What if you don't want to file Form 944-SS?

You must file Form 944-SS if you have been notified to do so, unless you meet certain exceptions. If the IRS has notified you to file Form 944-SS and the exception noted in the paragraph below applies to you, you can contact the IRS by telephone at 1-800-829-0115 (U.S. Virgin Islands only), or 215-516-2000 (toll call) about what form to file. To determine if you can file Form 941-SS quarterly to report your social security and Medicare taxes, you must contact the IRS by April 1, 2006 for the 2006 calendar year unless you are a new employer. See New employers... above.

You may be eligible to file Form 941-SS quarterly, instead of Form 944-SS annually, if you expect your 2006 liability for social security and Medicare taxes to be more than $1,000.

If you contact the IRS and the IRS determines you can file Forms 941-SS instead of Form 944-SS, the IRS will send you a written notice that your filing requirement has been changed.

Who cannot file Form 944-SS?

The following employers cannot file Form 944-SS.

Employers who are not notified. If the IRS does
not notify you to file Form 944-SS, do not file
Form 944-SS. However, as explained above,
you can call the IRS at 1-800-829-0115
(U.S. Virgin Islands only) or 215-516-2000
(toll call) by April 1, 2006, to determine
if you can file Form 944-SS.
Household employers. If you employ only household
employees, do not file Form 944-SS. For more infor-
mation, see Pub. 926, Household Employer's Tax
Guide, and Schedule H (Form 1040), Household
Employment Taxes.
Agricultural employers. If you employ only agricultural
employees, do not file Form 944-SS. For more
information, see Pub. 51 (Circular A),
Agricultural Employer's Tax Guide,
and Form 943, Employer's Annual Federal Tax Return for
Agricultural Employees.

What if you close your business?

If your business has closed...

If you go out of business or stop paying wages to your employees, you must file a final return. To tell the IRS that the form for a particular year is your final return, check the box in Part 3 on page 2 of Form 944-SS and enter the final date you paid wages. Also attach a statement to your return showing the name of the person keeping the payroll records and the address where those records will be kept.

When Must You File?

File Form 944-SS by January 31, 2007, after the end of the 2006 calendar year. File your initial Form 944-SS for the year in which you paid wages that are subject to social security and Medicare taxes if the IRS has notified you that you are to file Form 944-SS for that year. If you made deposits in full payment of your taxes for the year by January 31, 2007, you have 10 more calendar days after that date to file your Form 944-SS.

After you file your first Form 944-SS, you must file Form 944-SS for every year after that, even if you have no taxes to report (unless you file a final return — see If your business has closed... above) or until the IRS notifies you to file Form 941-SS.

If IRS notified you to file Form 944-SS for 2006, file Form 944-SS (and not Forms 941-SS) even if your tax liability for 2006 exceeds $1,000.

We consider your form filed on time if it is properly addressed and mailed First-Class or if it is sent by an IRS-designated private delivery service on or before the due date. See Pub. 80 (Circular SS) for more information on IRS-designated private delivery services.

If any due date for filing falls on a Saturday, Sunday, or legal holiday, you may file your return on the next
business day.

How Should You Complete Form 944-SS?

Review Your Business Information at the Top of the Form

If you are using a copy of Form 944-SS that has your business name and address preprinted at the top of the form, check to make sure the information is correct. If you pay a tax preparer to fill out Form 944-SS, make sure the preparer uses your business name and EIN exactly as they appear on the preprinted form. Carefully review your EIN to make sure that it exactly matches the EIN assigned to your business by the IRS. If any information is incorrect, cross it out and type or print the correct information. See also If you change your name or address... below.

If you are not using a preprinted Form 944-SS, type or print your EIN, name, and address in the spaces provided. You must enter your name and EIN here and on the top of the second page. Do not use your social security number (SSN) or individual taxpayer identification number (ITIN). Generally, enter the business (legal) name that you used when you applied for your EIN on Form SS-4, Application for Employer Identification Number. For example, if you are a sole proprietor, enter “Ronald Smith” on the “Name” line and “Ron's Cycles” on the “Trade name” line. Leave the “Trade name” line blank if it is the same as your “Name.”

Employer identification number (EIN). To make sure that businesses comply with federal tax laws, the IRS monitors tax filings and payments by using a numerical system to identify taxpayers. A unique 9-digit employer identification number (EIN) is assigned to all corporations, partnerships, and some sole proprietors. Businesses needing an EIN must apply for a number and use it throughout the life of the business on all tax returns, payments, and reports.

Your business should have only one EIN. If you have more than one and are not sure which one to use, write to the IRS office where you file your returns (using the “without payment” address on page 4) or call the IRS Business & Specialty Tax Line at 1-800-829-4933 (U.S. Virgin Islands only) or 215-516-6999 (toll call). TTY/TDD users in the U.S. Virgin Islands can call 1-800-829-4059.

If you do not have an EIN, apply for one from the IRS by mail, by telephone, by fax, or by visiting the IRS website at www.irs.gov/smallbiz. Request Form SS-4, Application for Employer Identification Number. If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied in the space shown for the number.

Always be sure the EIN on the form you file exactly matches the EIN that IRS assigned to your business. Do not use your social security number on forms that ask for an EIN. Filing a Form 944-SS with an incorrect EIN or using another business's EIN may result in penalties and delays in processing your return.

If you change your name or address... Notify the IRS immediately if you change your business name or address.

Name change. Write to the IRS office where you would
file your return “without payment” on page 4 to notify the
IRS of any name change. (Get Pub. 1635, Understanding
Your EIN, to see if you need to also apply for a new EIN.)
Address change. Complete and mail Form 8822,
Change of Address, for any address change.

Completing and Filing Form 944-SS

Make entries on Form 944-SS as follows to enable accurate processing.

Use 12-point Courier font (if possible) for all entries if
you are using a typewriter or computer to fill out your
form.
Omit dollar signs and decimal points. Commas are
optional. (Report dollars to the left of the preprinted
decimal point and cents to the right of it.)
Leave blank any data field with a value of zero (except
line 7).
Enter negative amounts in parentheses (if possible).
Otherwise, use a minus sign.
Enter your name and EIN on all pages and attachments.
(Filers using the IRS-preaddressed Form 944-SS are not
required to enter their name and EIN on page 2.)

Reconciling Forms 944-SS and Form W-3SS

The IRS matches amounts reported on your Form 944-SS with Form W-2AS, W-2GU, W-2CM, or W-2VI amounts totaled on your Form W-3SS, Transmittal of Wage and Tax Statements. If the amounts do not agree, the IRS or SSA may contact you. The reconciled amounts are for all the following items.

Social security wages.
Social security tips.
Medicare wages and tips.

Must You Deposit Your Taxes?

If your liability for social security and Medicare taxes is less than $2,500 for the year, you can pay the taxes with your return if you file on time. You do not have to deposit the taxes. However, you may choose to make deposits of these taxes even if your liability is less than $2,500. If your liability for these taxes is $2,500 or more, see the Federal Tax Deposit Requirements for Form 944-SS Filers chart on
page 4.

The $2,500 threshold at which federal tax deposits must be made is different from the amount of annual tax liability ($1,000 or less) that makes an employer eligible to participate in the Employer's Annual Federal Tax Program and file Form 944-SS, Employer's ANNUAL Federal Tax Return. Designated Form 944-SS filers whose businesses grow during the year may be required to make federal tax deposits (see chart below), but they will still file Form 944-SS for the year. If your total tax liability for calendar year 2006 is more than $1,000, the IRS will notify you when to begin filing quarterly Forms 941-SS.

Federal Tax Deposit Requirements for Form 944-SS Filers
If Your Tax Liability is:	Your Deposit Requirement is:
Less than $2,500 for the year	No deposit required. You may pay the tax with your return. (Ifyou are unsure that your taxliability for the year will be lessthan $2,500, deposit under therules below)
$2,500 or more for the year, but less than $2,500 for the quarter	You can deposit by the last day of the month after the end of a quarter. However, if yourfourth quarter tax liability is less than $2,500, you may pay the fourth quarter's tax liability with your timely filed Form 944-SS.
$2,500 or more for the quarter	You must deposit monthly, or semiweekly, depending onyour deposit schedule. But, ifyou accumulate $100,000 or more of taxes on any day,you must deposit the tax bythe next banking day. See section 8 of Pub. 80.

What About Penalties and Interest?

Avoiding penalties and interest

You can avoid paying penalties and interest if you do all the following.

Pay your taxes when they are due.
File your fully completed Form 944-SS on time.
Report your tax liability accurately on Part 2 of the
Form 944-SS.
Submit valid checks for tax payments.
Give accurate Forms W-2 to employees.
File Copies A of Form W-2 with the Social Security
Administration (SSA) on time and accurately.

Penalties and interest are charged on taxes paid late and returns filed late at a rate set by law. See section 8 of
Pub. 80 (Circular SS) for details.

Use Form 843, Claim for Refund and Request for Abatement, to request abatement of assessed penalties or interest. Do not request abatement of assessed penalties or interest on Form 944-SS or Form 941c, Supporting Statement To Correct Information.

A trust fund recovery penalty may apply if social security and Medicare taxes that must be withheld are not withheld or paid. The penalty is the full amount of the unpaid trust fund tax. This penalty may apply when these unpaid taxes cannot be collected from the employer. The trust fund recovery penalty may be imposed on all people the IRS determines to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. For details, see section 8 of Pub. 80 (Circular SS).

Where Should You File?

Form 944-SS with payment	Internal Revenue Service P.O. Box 105273 Atlanta, GA 30348-5273
Form 944-SS without payment	Internal Revenue Service P.O. Box 409101 Ogden, UT 84409

Your filing or payment address may have changed from that used to file your employment tax return in prior years. If you are using an IRS-provided envelope, use only the labels and envelope provided with this tax package. Do not send Form 944-SS or any payments to the Social Security Administration (SSA). Private delivery services cannot deliver to P.O. boxes.

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