IRS Responds to Taxpayer Concerns About Inadequate Notification on Whether to File Form 941 or Form 944

Employers whose estimated annual employment tax liability is $1,000 or less are eligible to file Form 944, Employer's Annual Federal Tax Return, rather than quarterly Forms 941. An employer who received notification from the IRS to file Form 944 must file the form to report its Social Security, Medicare, and federal income tax liability for the 2011 calendar year unless the employer: (1) calls the IRS by April 1, 2011 (March 15 if by letter), to request to file Form 941 quarterly instead; and (2) receives written confirmation from the IRS that it can file Forms 941 rather than Form 944.

A recent IRS notice notes that some employers have expressed concern that they are being switched to filing Forms 941 from Form 944 without being notified that the change was made until several quarters later. This is causing frustration and complications for employers. There are concerns both ways — either they are required to file Forms 941 and they file Form 944, or vice versa. The problem is that they are not notified of the change until after the fact and time and money are wasted to make all the corrections.

IRS response to taxpayer concerns. The IRS notes that it considers the timing of filing requirement changes when it issues notices to employers requiring them to file Forms 941 rather than Form 944. In some instances, the IRS has allowed the employer to file Form 944 for the current year, even if it is not technically correct to do so. The key factor in making the decision is the date on which the IRS discovered that the employer was no longer eligible to file Form 944. If that date is early enough in the current year (generally by the first week of March), the IRS will send Notice CP 250A to the employer to let the employer know that it must file Forms 941 for the current year instead of Form 944. However, if the IRS doesn't discover that an employer is ineligible to file Form 944 until past the CP 250A cut-off date, it will send Notice CP 250B to the employer to let the employer know that it should file Form 944 for the current year and Form 941 beginning in the next year [IRS Issue Management Resolution System (IMRS) 10-0001344, Form 944/941 Filing Requirement Notifications].