IRS Simplifies Filing Requirements For Small Business Owners

by Leroy Baker, Tax-News.com, New York

05 January 2006

The Internal Revenue Service has proposed new regulations that will significantly reduce the tax filing burden for nearly 950,000 small business owners.

Beginning January 1, 2006, certain employment tax filers will be able to file the new Form 944 (Employer’s Annual Federal Tax Return) once a year rather than filing Form 941 (Employer’s Quarterly Federal Tax Return) four times a year.

The new Form 944 will reduce burden on eligible small employers who file quarterly returns with little or no employment tax due. Most employers who file Form 944 will be able to make a single payment with their annual return.

Eligible employers are those with estimated annual employment tax liability of $1,000 or less.

New employers who expect to owe $1,000 or less in total annual employment tax (approximately $4,000 or less in annual wages) also are eligible to file Form 944. These employers can indicate their estimated tax amount when applying for their EIN (Employer’s Identification Number) on Form SS-4. The IRS will notify the employer to file either Form 944 or Form 941 in the same notice indicating the taxpayer’s new EIN.

”This is just one more burden reduction step the IRS is taking to make it easier for small business employers to comply with the tax laws," noted IRS Small Business/Self Employee Commissioner Kevin M. Brown.

"Replacing four quarterly forms with one annual form is a significant benefit for small business taxpayers," he added.

The proposed regulations are open to public comment for 90 days after publication. A public hearing on the regulations has been scheduled for April 26, 2006.

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