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From the Financial Hotline

By: Financial Hotline
Winter 2020 (Vol. 37, No. 4)

Q: I just started a small business. I just hired my first two employees. Should I use form 944 or Form 941 to report the income taxes I withhold?

A: A small business files one or the other; these two forms are not interchangeable, and you should never flip-flop between the two forms on your own. You will need to get instructions from the IRS on which one to use.

Form 944, Employer’s Annual Federal Tax Return is for the smallest employers to file and pay the above-mentioned taxes only once a year, instead of quarterly. While this form is intended for employers who owe $1,000 or less, employers can’t file Form 944 unless they receive official IRS notification that they are eligible to do so. Once the employer receives notice they can file Form 944, they must file this form every year. They must continue to file Form 944, regardless of the tax they owe, unless the IRS notifies them differently.

Form 941, Employer’s Quarterly Federal Tax Return is used to report income taxes withheld from employee’s paychecks and pay the employer’s portion of Social Security or Medicare tax. In addition, if the IRS advises the employer to file Form 941 quarterly return, they must do so.

Q: I got a phone message saying I have a problem with the IRS and I am criminally liable. I think it’s a scam but I can’t help but worry. Would the IRS just contact me that way?

A: No. If you have a problem with the IRS you would first be notified by mail. There are special circumstances in which the IRS will call or come to a home or business, but even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.

The IRS does not:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer.

  • Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe.

  • Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying.

  • The IRS also cannot revoke your driver’s license, business licenses, or immigration status.

If you owe taxes, the IRS will instruct you to make payments to the “United States Treasury.” The IRS provides specific guidelines on how you can make a tax payment at irs. gov/payments.

If an IRS representative does visit you, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. HSPD-12 is a government-wide standard for secure and reliable forms of identification for federal employees and contractors. If you would like to verify information on the representative’s HSPD-12 card, the representative will provide you with a dedicated IRS telephone number for verifying the information and confirming their identity.

IRS collection employees may call or come to a home or business unannounced to collect a tax debt or they can assign certain cases to private debt collectors but ONLY after giving the taxpayer and his or her representative, if one is appointed, written notice. Payments are sent directly to the IRS, not given to a private collection agency.

IRS criminal investigators may visit a taxpayer’s home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment.

If you think you may be the target of a scam, here’s what to do:

  • Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their “IRS Impersonation Scam Reporting” link at www.Treasury. gov - You can also call 800-366-4484.

  • Report phone scams to the Federal Trade Commission. Use the “FTC Complaint Assistant” on Please add “IRS Telephone Scam” in the notes.

  • Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at