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Instructions for Form 945-A

(Rev. December 2024)
Annual Record of Federal Tax Liability

Section references are to the Internal Revenue Code credit reduces the employer share of Medicare tax for the
unless otherwise noted. quarter. Any remaining credit, after reducing the employer
share of social security tax and the employer share of
Future Developments Medicare tax, is then carried forward to the next quarter.
Form 8974 is used to determine the amount of the credit
For the latest information about developments related to that can be used in the current year. The amount from
Form 945-A and its instructions, such as legislation Form 8974, line 12 or, if applicable, line 17, is reported on
enacted after they were published, go to IRS.gov/ Form 944, line 8. For more information about the payroll
Form945A. tax credit, see the Instructions for Form 8974 and go to
IRS.gov/ResearchPayrollTC. Also see Adjusting Tax
Liability for the Qualified Small Business Payroll Tax Credit
What’s New
for Increasing Research Activities (Form 944, Line 8),
The COVID-19 related credit for qualified sick and later.
family leave wages/compensation is limited to leave Reporting prior period adjustments. Prior period
taken after March 31, 2020, and before October 1, adjustments are reported on Form 945-X, Adjusted
2021, and may no longer be claimed on Form 944 or Annual Return of Withheld Federal Income Tax or Claim
Form CT-1. Effective for tax periods beginning after for Refund; Form CT-1 X, Adjusted Employer's Annual
December 31, 2023, the lines used to claim the credit for Railroad Retirement Tax Return or Claim for Refund; or
qualified sick and family leave wages/compensation have Form 944-X, Adjusted Employer's ANNUAL Federal Tax
been removed from Form 944 and Form CT-1 because it Return or Claim for Refund, and aren't taken into account
would be extremely rare for an employer to pay wages/ when figuring the tax liability for the current year.
compensation in 2024 for qualified sick and family leave
taken after March 31, 2020, and before October 1, 2021. When you file Form 945-A with your Form 945, CT-1, or
Therefore, the instructions on adjusting your tax liability for 944, don't change your current year tax liability by
the nonrefundable portion of this credit have been adjustments reported on any Form 945-X, CT-1 X, or
removed from these instructions. See the Instructions for 944-X.
Form 944 or, if applicable, the Instructions for Form CT-1, Amended Form 945-A. If you have been assessed a
if you're eligible to claim the credit for qualified sick and failure-to-deposit (FTD) penalty, you may be able to file an
family leave wages/compensation because you paid the amended Form 945-A. See Correcting Previously
wages/compensation in 2024 for an earlier applicable Reported Tax Liability, later.
leave period.
General Instructions
Reminders
Qualified small business payroll tax credit for in- Purpose of Form 945-A
creasing research activities (Form 944 only). For tax These instructions tell you about Form 945-A. Use Form
years beginning before January 1, 2023, a qualified small 945-A to report your federal tax liability (based on the
business may elect to claim up to $250,000 of its credit for dates payments were made or wages were paid) for the
increasing research activities as a payroll tax credit. The following tax returns.
Inflation Reduction Act of 2022 (the IRA) increases the Forms 945 and 945-X for federal income tax
•
election amount to $500,000 for tax years beginning after withholding on nonpayroll payments. Nonpayroll
December 31, 2022. The payroll tax credit election must withholding includes backup withholding and federal
be made on or before the due date of the originally filed income tax withholding on pensions, annuities, IRAs,
income tax return (including extensions). The portion of Indian gaming profits, gambling winnings, military
the credit used against payroll taxes is allowed in the first retirement, certain government payments on which the
calendar quarter beginning after the date that the qualified recipient elected voluntary income tax withholding, and
small business filed its income tax return. The election dividends and other distributions by an Alaska Native
and determination of the credit amount that will be used Corporation on which the recipient elected voluntary
against the employer’s payroll taxes are made on Form income tax withholding.
6765, Credit for Increasing Research Activities. The Forms CT-1 and CT-1 X for both the employee share
•
amount from Form 6765 must then be reported on Form and the employer share of Tier 1 and Tier 2 taxes.
8974, Qualified Small Business Payroll Tax Credit for Forms 944 and 944-X for federal income tax withheld
•
Increasing Research Activities. plus both the employee share and the employer share of
Starting in the first quarter of 2023, the payroll tax credit social security and Medicare taxes.
is first used to reduce the employer share of social
security tax up to $250,000 per quarter and any remaining
Instructions for Form 945-A (Rev. 12-2024) Catalog Number 74488U
Jun 25, 2024 Department of the Treasury Internal Revenue Service www.irs.gov

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Don't use Form 945-A to show federal tax deposits. The Form CT-1 Filers
IRS gets deposit data from electronic funds transfers. Don't complete the Monthly Summary of Railroad
The IRS uses Form 945-A to match the tax liability Retirement Tax Liability (Part II of Form CT-1).

! you reported on the returns indicated earlier with Form 944 Filers
CAUTION your deposits. The IRS also uses Form 945-A to
determine if you’ve deposited your tax liabilities on time. On Form 944, check the box for “Line 9 is $2,500 or more”
Unless your Form 945-A is properly completed and filed (if on line 13, and leave lines 13a through 13m blank.
applicable) with your tax return, the IRS may propose an
“averaged” FTD penalty. See Deposit Penalties in section Enter Your Tax Liability by Month
11 of Pub. 15, Employer’s Tax Guide, for more information. Enter your tax liabilities in the spaces that correspond to
the dates you paid wages/compensation to your
Who Must File? employees or made nonpayroll payments, not the date
File Form 945-A if you’re a semiweekly schedule payroll liabilities were accrued or deposits were made.
depositor. Monthly schedule depositors who accumulate The total tax liability for the year (line M) must equal net
$100,000 or more of tax liability on any day of a calendar taxes on Form 945, line 3; Form CT-1, line 15 (line 19 for
month become semiweekly schedule depositors on the tax years 2020 through 2023); or Form 944, line 9. Enter
next day and remain so for at least the remainder of the the monthly totals on lines A, B, C, D, E, F, G, H, I, J, K,
year and for the next year, and must also complete and file and L. Enter the total for the year on line M.
Form 945-A for the entire year. The $100,000 tax liability For example, if you're a Form 945 filer, and you became
threshold requiring a next-day deposit is determined liable for a pension distribution on December 31, 2023,
before you consider any reduction of your liability for but didn't make the distribution until January 6, 2024, you
nonrefundable credits. would:
• Go to January on Form 945-A filed with your 2024
The deposit rules, including the $100,000 Next-Day return, and
Deposit Rule, are explained in section 11 of Pub. 15 and in • Enter your tax liability on line 6 because line 6
the instructions for your tax return. represents the sixth day of the month.
Don't complete Form 945-A if your net tax liability Example 1. Cedar Co., which has a semiweekly
deposit schedule, makes periodic payments on gambling
CAUTION this form if you're a monthly schedule depositor
! for the return period is less than $2,500. Don't file winnings on the 15th day of each month. On December
unless you accumulated a tax liability of $100,000 during 24, 2024, in addition to its periodic payments, it withheld
any month of the year. from a payment on gambling winnings under the backup
withholding rules. Since Cedar Co. is a semiweekly
schedule depositor, it must record these nonpayroll
When Must You File?
withholding liabilities on Form 945-A. It must report tax
File Form 945-A with your Form 945, CT-1, or 944 every liabilities on line 15 for each month and line 24 for
year when Form 945, CT-1, or 944 is due. See the December.
instructions for these forms for their due dates.
Cedar Co. enters the monthly totals on lines A through
L. It adds these monthly subtotals and enters the total tax
Specific Instructions liability for the year on line M. The amount on line M
should equal Form 945, line 3.
Completing Form 945-A Example 2. Fir Co. is a semiweekly schedule
depositor. During January, it withheld federal income tax
Enter Your Business Information on pension distributions as follows: $52,000 on January 6
Carefully enter your employer identification number (EIN) and $35,000 on January 20. Since Fir Co. is a semiweekly
and name at the top of the form. Make sure that they schedule depositor, it must record its federal income tax
exactly match the name of your business and the EIN that withholding liabilities on Form 945-A. It must record
the IRS assigned to your business and also agree with the $52,000 on line 6 and $35,000 on line 20 for January.
name and EIN shown on the attached Form 945, 945-X, Example 3. Elm Co. is a new business and monthly
CT-1, CT-1 X, 944, or 944-X. schedule depositor for 2024. During January, it withheld
federal income tax on nonpayroll payments as follows:
Calendar Year $2,000 on January 6 and $99,000 on January 20. The
Enter the calendar year of the Form 945, 945-X, CT-1, deposit rules require that a monthly schedule depositor
CT-1 X, 944, or 944-X to which Form 945-A is attached. begin depositing on a semiweekly deposit schedule when
a $100,000 or more tax liability is accumulated on any day
Form 945 Filers within a month (see section 11 of Pub. 15 for details).
Don't complete entries A through M of the Monthly Because Elm Co. accumulated $101,000 ($2,000 +
Summary of Federal Tax Liability (Form 945, line 7). Be $99,000) on January 20, 2024, it became a semiweekly
sure to mark the semiweekly schedule depositor schedule depositor on January 21, 2024. Elm Co. must
checkbox above line 7 on Form 945. complete Form 945-A and file it with Form 945. It must
record $2,000 on line 6 and $99,000 on line 20 for
January. No entries should be made on Form 945, line 7,

2 Instructions for Form 945-A (Rev. 12-2024)

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even though Elm Co. was a monthly schedule depositor information about the payroll tax credit, go to IRS.gov/
until January 21. ResearchPayrollTC.
Example. Rose Co. is an employer with a calendar tax
Adjusting Tax Liability for the Qualified Small year that filed its timely 2023 income tax return on April
Business Payroll Tax Credit for Increasing 15, 2024. Rose Co. elected to take the qualified small
Research Activities (Form 944, Line 8) business payroll tax credit for increasing research
activities on Form 6765. The third quarter of 2024 is the
The qualified small business payroll tax credit for
first quarter that begins after Rose Co. filed the income tax
TIP increasing research activities is available only on return making the payroll tax credit election. Therefore, the
Form 944.
payroll tax credit applies against Rose Co.'s share of
Semiweekly schedule depositors must account for the social security tax (up to $250,000) and Medicare tax on
qualified small business payroll tax credit for increasing wages paid to employees in the third quarter of 2024.
research activities claimed on Form 944, line 8, when Rose Co. completes Form 945-A by reducing the amount
reporting their tax liabilities on Form 945-A. The total tax of liability entered for the first payroll payment in the third
liability for the year must equal the amount reported on quarter of 2024 that includes wages subject to social
Form 944, line 9. Failure to account for the qualified small security tax by the lesser of (1) its share of social security
business payroll tax credit for increasing research tax (up to $250,000) on the wages, or (2) the available
activities on Form 945-A may cause Form 945-A to report payroll tax credit. If the payroll tax credit elected is more
more than the total tax liability reported on Form 944, than Rose Co.'s share of social security tax on the first
line 9. Don't reduce your daily tax liability reported on payroll payment of the quarter, the excess payroll tax
Form 945-A below zero. credit would be carried forward to succeeding payroll
Beginning with the first quarter of 2023, the qualified payments in the third quarter until it is used against up to
small business payroll tax credit for increasing research $250,000 of Rose Co.'s share of social security tax for the
activities is first used to reduce the employer share of quarter. If the amount of the payroll tax credit exceeds
social security tax (up to $250,000) for the quarter and any Rose Co.'s share of social security tax (up to $250,000) on
remaining credit is then used to reduce the employer wages paid to its employees in the third quarter, any
share of Medicare tax for the quarter until it reaches zero. remaining credit is used against Rose Co.'s share of
In completing Form 945-A, you take into account the Medicare tax on the first payroll payment of the quarter
payroll tax credit against the liability for the employer and then the excess payroll tax credit would be carried
share of social security tax starting with the first payroll forward to succeeding payroll payments in the third
payment of the quarter that includes payments of wages quarter until it is used against Rose Co.'s share of
subject to social security tax to your employees until you Medicare tax for the quarter. If Rose Co. still has credit
use up to $250,000 of credit against the employer share of remaining after reducing its share of social security tax (up
social security tax and you then take into account any to $250,000) and Medicare tax for the third quarter, the
remaining payroll tax credit against the liability for the remainder would be treated as a payroll tax credit against
employer share of Medicare tax starting with the first its share of social security tax (up to $250,000) and
payroll payment of the quarter that includes payments of Medicare tax on wages paid in the fourth quarter. If the
wages subject to Medicare tax to employees. Consistent amount of the payroll tax credit remaining exceeded Rose
with the entries on Form 945-A, the payroll tax credit Co.'s share of social security tax (up to $250,000) and
should be taken into account in making deposits of Medicare tax on wages paid in the fourth quarter, it could
employment tax. If any payroll tax credit is remaining at be carried forward and treated as a payroll tax credit for
the end of the quarter that hasn’t been completely used the first quarter of 2025.
because it exceeds $250,000 of the employer share of
Correcting Previously Reported Tax Liability
social security tax and the employer share of Medicare tax
for the quarter, the excess credit may be carried forward to Semiweekly schedule depositors. If you have been
the succeeding quarter and allowed as a payroll tax credit assessed an FTD penalty and you made an error on Form
for the succeeding quarter. The payroll tax credit may not 945-A and the correction won't change the total liability
be taken as a credit against income tax withholding, the you reported on Form 945-A, you may be able to reduce
employee share of social security tax, or the employee your penalty by filing an amended Form 945-A.
share of Medicare tax. Example. You reported a tax liability of $3,000 on
Also, the remaining payroll tax credit may not be carried January 1. However, the liability was actually for March.
back and taken as a credit against wages paid from Prepare an amended Form 945-A showing the $3,000
preceding quarters that are reported on the same Form liability on March 1. Also, you must enter the liabilities
944 or on Forms 944 for preceding years. If an amount of previously reported for the year that didn't change. Write
payroll tax credit is unused at the end of the calendar year “Amended” at the top of Form 945-A. The IRS will refigure
because it is in excess of the applicable employer share of the penalty and notify you of any change in the penalty.
social security tax and employer share of Medicare tax on Monthly schedule depositors. You can file Form 945-A
wages paid during the applicable quarters in the calendar if you have been assessed an FTD penalty and you made
year, the remaining payroll tax credit may be carried an error on the monthly tax liability section of Form 945,
forward to the first quarter of the succeeding calendar CT-1, or 944. When completing Form 945-A for this
year as a payroll tax credit against the applicable situation, only enter the monthly totals. The daily entries
employer share of social security tax and employer share aren't required.
of Medicare tax on wages paid in that quarter. For more

Instructions for Form 945-A (Rev. 12-2024) 3

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Where to file. File your amended Form 945-A, or, for the error, you must file the form with an amended Form
monthly schedule depositors, your original Form 945-A, at 945-A. Otherwise, the IRS may assess an “averaged” FTD
the address provided in the penalty notice you received. If penalty.
you're filing an amended Form 945-A, you don't have to The total tax reported on line M of Form 945-A must
submit your original Form 945-A. match the corrected tax (Form 945, line 3; Form 944,
line 9; Form CT-1, line 15 (line 19 for tax years 2020
Forms 945-X, CT-1 X, and 944-X through 2023)), combined with any correction reported on
You may need to file an amended Form 945-A with Form Form 945-X, line 5; Form 944-X, line 22; or Form CT-1 X,
945-X, CT-1 X, or 944-X to avoid or reduce an FTD line 21, for the year, less any previous abatements and
penalty. interest-free tax assessments.

Tax decrease. If you're filing Form 945-X, CT-1 X, or Paperwork Reduction Act Notice. We ask for the
944-X, you can file an amended Form 945-A with the form information on Form 945-A to carry out the Internal
if both of the following apply. Revenue laws of the United States. You're required to give
1. You have a tax decrease. us the information. We need it to ensure that you're
2. You were assessed an FTD penalty. complying with these laws and to allow us to figure and
collect the right amount of tax.
File your amended Form 945-A with Form 945-X, CT-1
X, or 944-X. The total liability reported on your amended You're not required to provide the information requested
Form 945-A must equal the corrected amount of tax on a form that is subject to the Paperwork Reduction Act
reported on Form 945-X, CT-1 X, or 944-X. If your penalty unless the form displays a valid OMB control number.
is decreased, the IRS will include the penalty decrease Books or records relating to a form or its instructions must
with your tax decrease. be retained as long as their contents may become
Tax increase—Form 945-X, CT-1 X, or 944-X filed material in the administration of any Internal Revenue law.
timely. If you're filing a timely Form 945-X, CT-1 X, or Generally, tax returns and return information are
944-X showing a tax increase, don't file an amended Form confidential, as required by Code section 6103.
945-A, unless you were assessed an FTD penalty caused The time needed to complete and file Form 945-A will
by an incorrect, incomplete, or missing Form 945-A. Don't vary depending on individual circumstances. The
include the tax increase reported on Form 945-X, CT-1 X, estimated burden for employers filing Form 945-A is
or 944-X on an amended Form 945-A you file. approved under OMB control number 1545-0029 and is
Tax increase—Form 945-X, CT-1 X, or 944-X filed late. included in the estimates shown in the Instructions for
If you owe tax and are filing late, that is, after the due date Form 941 and the Instructions for Form 944.
of the return for the filing period in which you discovered

4 Instructions for Form 945-A (Rev. 12-2024)

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