Nonpayroll Federal Income Tax Withholding

Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G, Certain Gambling Winnings) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Separate deposits are required for payroll (Form 941, Form 943, or Form 944) and nonpayroll (Form 945) withholding. Nonpayroll items include the following.

Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans), annuities, and IRA distributions.

Military retirement.

Gambling winnings.

Indian gaming profits.

Certain government payments on which the recipient elected voluntary federal income tax withholding.

Dividends and other distributions by an ANC on which the recipient elected voluntary federal income tax withholding.

Payments subject to backup withholding.

For details on depositing and reporting nonpayroll federal income tax withholding, see the Instructions for Form 945.

Distributions from nonqualified pension plans and deferred compensation plans. Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, federal income tax withheld must be reported on Form 941, Form 943, or Form 944, not on Form 945. However, distributions from such plans to a beneficiary or estate of a deceased employee aren’t wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.; federal income tax withheld must be reported on Form 945.

Backup withholding. You must generally withhold 24% of certain taxable payments if the payee fails to furnish you with their correct TIN. This withholding is referred to as “backup withholding.” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, payments made in settlement of payment card or third-party network transactions, and certain other payments you make in the course of your trade or business. In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding.You can use Form W-9 to request payees to furnish their TINs. Form W-9 must be used when payees must certify that the number furnished is correct, or when payees must certify that they’re not subject to backup withholding or are exempt from backup withholding. The Instructions for the Requester of Form W-9 include a list of types of payees who are exempt from backup withholding. For more information, see Pub. 1281, Backup Withholding for Missing and Incorrect Name/TIN(s).