Form 945

Form 945, the “Annual Return of Withheld Federal Income Tax,” is the once-a-year return a payer files to report federal income tax it withheld from nonpayroll payments. The IRS describes the form on its About Form 945 page as the return used “to report withheld federal income tax from nonpayroll payments.” The most common reason a business files it is backup withholding, the 24 percent federal income tax a payer must withhold when a payee fails to furnish a correct TIN or when the IRS flags the payee. If a company has backed up withholding on a contractor payment during the year, that money is reported and reconciled on Form 945.

What Counts as Nonpayroll Withholding

Nonpayroll withholding is federal income tax taken out of payments that are not employee wages. Per the IRS instructions, Form 945 covers backup withholding along with withholding on pensions and retirement plan distributions, military retirement, gambling winnings, Indian gaming profits, and certain government payments where the recipient elected voluntary withholding. The instructions direct the filer to “enter any backup withholding that you withheld (or were required to withhold), including backup withholding on gambling winnings.”

For most US businesses paying contractors, the only line that ever has a number is backup withholding. A correctly documented contractor with a valid TIN produces no backup withholding and, in many years, no Form 945 at all.

Separate From Payroll (Form 941)

Form 945 is not a payroll return. Wage withholding, Social Security, and Medicare are reported quarterly on Form 941. Form 945 sits beside it and handles only nonpayroll items, once a year. The two never overlap. Wages go on Form 941, and backup withholding goes on Form 945. Mixing them is a common filing error.

Separate From NRA Withholding (Form 1042)

Form 945 is also distinct from the return for NRA withholding on foreign persons. Withholding on US-source income paid to a nonresident alien or foreign entity under chapter 3 is reported on Form 1042 and Form 1042-S, not on Form 945. Form 945 is for withholding on payments to US persons. So a payment to a US contractor that triggers backup withholding lands on Form 945, while a payment to a foreign contractor that triggers chapter 3 withholding lands on Form 1042.

How It Connects to a B-Notice

Backup withholding most often begins after a B-notice, the IRS CP2100 or CP2100A letter telling a payer that a TIN on an information return does not match IRS records. If the payee does not correct the TIN, the payer starts withholding 24 percent, deposits it through EFTPS, and reports the total on Form 945 at year-end. The withheld amount is also reported in box 4 of the payee’s Form 1099, so the payee can claim it as tax already paid.

Filing and Deadline

Form 945 is filed annually for the prior calendar year. The IRS instructions state to file the 2025 return by February 2, 2026, and allow filing by February 10, 2026 if all deposits were made on time in full payment of the taxes due for the year. Deposits during the year follow the same monthly or semiweekly schedules used for employment taxes, kept separate from payroll deposits.

Related Terms

• Backup Withholding: the 24 percent withholding that is the main item reported on Form 945.
• B-Notice: the IRS letter that commonly triggers backup withholding before it reaches Form 945.

Omnivoo Contract Management collects and matches each US contractor’s TIN before payment, so backup withholding and the Form 945 filing it creates rarely come up. Pricing is a flat $49 per finalized contract, with payment fees passed through at cost and no FX markup.