Am I Required to Withhold Income Taxes on Other Types of Payments?

Question: Am I Required to Withhold Income Taxes on Other Types of Payments?

Answer:

The IRS requires that you withhold income taxes from employee earnings, but there are also some other types of payments your business might make that require you to withhold income taxes and report and pay those taxes to the IRS. The IRS calls these "non-payroll income tax withholding."

The types of payments requiring withholding include:

• Pensions
  
• Gambling winnings and Indian gaming profits, and
  
• Payments subject to backup withholding.

• Report the amounts withheld, on Form 945, Annual Return of Withheld Nonpayroll Federal Income Tax
  
• Submit federal withholding amounts to the IRS using the Electronic Federal Tax Payment System (EFTPS); state withholding is sent to your state department of revenue.

You must keep payroll and non-payroll deposits and reports separate.

For details on depositing and reporting non-payroll income tax withholding, see the Instructions for Form 945.