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Federal Tax Booklet

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Federal Tax Booklet

Federal tax booklet 1. Federal tax booklet   Tax Withholding for 2014 Table of Contents Introduction Useful Items - You may want to see: Salaries and WagesDetermining Amount of Tax Withheld Using Form W-4 Completing Form W-4 and Worksheets Getting the Right Amount of Tax Withheld Rules Your Employer Must Follow Exemption From Withholding Supplemental Wages Penalties Tips Taxable Fringe BenefitsSpecial rule. Federal tax booklet Exceptions. Federal tax booklet Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. Federal tax booklet Identical wagers. Federal tax booklet Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. Federal tax booklet Underreported interest or dividends. Federal tax booklet Introduction This chapter discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Federal tax booklet This chapter explains in detail the rules for withholding tax from each of these types of income. Federal tax booklet The discussion of salaries and wages includes an explanation of how to complete Form W-4. Federal tax booklet This chapter also covers backup withholding on interest, dividends, and other payments. Federal tax booklet Useful Items - You may want to see: Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request See chapter 5 of this publication for information about getting these publications and forms. Federal tax booklet Salaries and Wages Income tax is withheld from the pay of most employees. Federal tax booklet Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Federal tax booklet It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Federal tax booklet See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. Federal tax booklet If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Federal tax booklet This is explained under Exemption From Withholding , later. Federal tax booklet You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Federal tax booklet If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed in chapter 2. Federal tax booklet Military retirees. Federal tax booklet   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. Federal tax booklet Household workers. Federal tax booklet   If you are a household worker, you can ask your employer to withhold income tax from your pay. Federal tax booklet A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Federal tax booklet   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Federal tax booklet If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. Federal tax booklet Farmworkers. Federal tax booklet   Generally, income tax is withheld from your cash wages for work on a farm unless your employer both: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. Federal tax booklet Differential wage payments. Federal tax booklet   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Federal tax booklet Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. Federal tax booklet The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Federal tax booklet Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Federal tax booklet The amount you earn in each payroll period. Federal tax booklet The information you give your employer on Form W-4. Federal tax booklet Form W-4 includes four types of information that your employer will use to figure your withholding. Federal tax booklet Whether to withhold at the single rate or at the lower married rate. Federal tax booklet How many withholding allowances you claim (each allowance reduces the amount withheld). Federal tax booklet Whether you want an additional amount withheld. Federal tax booklet Whether you are claiming an exemption from withholding in 2014. Federal tax booklet See Exemption From Withholding , later. Federal tax booklet Note. Federal tax booklet You must specify a filing status and a number of withholding allowances on Form W-4. Federal tax booklet You cannot specify only a dollar amount of withholding. Federal tax booklet New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. Federal tax booklet Your employer should have copies of the form. Federal tax booklet If you need to change the information later, you must fill out a new form. Federal tax booklet If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. Federal tax booklet You may be able to avoid overwithholding if your employer agrees to use the part-year method. Federal tax booklet See Part-Year Method , later, for more information. Federal tax booklet Employee also receiving pension income. Federal tax booklet   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Federal tax booklet However, you can choose to split your withholding allowances between your pension and job in any manner. Federal tax booklet Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Federal tax booklet When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. Federal tax booklet If the changes reduce the number of allowances you are allowed to claim or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Federal tax booklet See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. Federal tax booklet Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. Federal tax booklet See Table 1-1 for examples of personal and financial changes you should consider. Federal tax booklet Table 1-1. Federal tax booklet Personal and Financial Changes Factor Examples Lifestyle change Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement Filing chapter 11 bankruptcy Wage income You or your spouse start or stop working, or start or stop a second job Change in the amount of taxable income not subject to withholding Interest income Dividends Capital gains Self-employment income IRA (including certain Roth  IRA) distributions Change in the amount of adjustments to income IRA deduction Student loan interest deduction Alimony expense Change in the amount of itemized deductions or tax credits Medical expenses Taxes Interest expense Gifts to charity Job expenses Dependent care expenses Education credit Child tax credit Earned income credit If you change the number of your withholding allowances, you can request that your employer withhold using the Cumulative Wage Method , explained later. Federal tax booklet Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too much or too little. Federal tax booklet If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Federal tax booklet You can get a blank Form W-4 from your employer or print the form from IRS. Federal tax booklet gov. Federal tax booklet You should try to have your withholding match your actual tax liability. Federal tax booklet If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. Federal tax booklet If too much tax is withheld, you will lose the use of that money until you get your refund. Federal tax booklet Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. Federal tax booklet See Table 1-1 for examples. Federal tax booklet Note. Federal tax booklet You cannot give your employer a payment to cover federal income tax withholding on salaries and wages for past pay periods or a payment for estimated tax. Federal tax booklet When Should You Check Your Withholding? The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld. Federal tax booklet You should check your withholding when any of the following situations occur. Federal tax booklet You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. Federal tax booklet You prepare your 2013 tax return and get a: Big refund, or Balance due that is: More than you can comfortably pay, or Subject to a penalty. Federal tax booklet There are changes in your life or financial situation that affect your tax liability. Federal tax booklet See Table 1-1. Federal tax booklet There are changes in the tax law that affect your tax liability. Federal tax booklet How Do You Check Your Withholding? You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. Federal tax booklet You can also use the IRS Withholding calculator at www. Federal tax booklet irs. Federal tax booklet gov/individuals. Federal tax booklet If you use the worksheets and tables in this publication, follow these steps. Federal tax booklet Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. Federal tax booklet Fill out Worksheet 1-7 to project your total federal withholding for 2014 and compare that with your projected tax liability from Worksheet 1-5. Federal tax booklet If you are not having enough tax withheld, line 6 of Worksheet 1-7 will show you how much more to have withheld each payday. Federal tax booklet For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding? If line 5 of Worksheet 1-7 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, for ways to decrease the amount of tax you have withheld each payday. Federal tax booklet How Do You Increase Your Withholding? There are two ways to increase your withholding. Federal tax booklet You can: Decrease the number of allowances you claim on Form W-4, or Enter an additional amount that you want withheld from each paycheck on Form W-4. Federal tax booklet Requesting an additional amount withheld. Federal tax booklet   You can request that an additional amount be withheld from each paycheck by following these steps. Federal tax booklet Complete Worksheets 1-5 and 1-7. Federal tax booklet Complete a new Form W-4 if the amount on Worksheet 1-7, line 5: Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or Would cause you to pay a penalty when you file your tax return for 2014. Federal tax booklet Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. Federal tax booklet This is the number of allowances you entered on the last Form W-4 you gave your employer. Federal tax booklet Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. Federal tax booklet Give your newly completed Form W-4 to your employer. Federal tax booklet   If you have this additional amount withheld from your pay each payday, you should avoid owing a large amount at the end of the year. Federal tax booklet Example. Federal tax booklet Early in 2014, Steve Miller used Worksheets 1-5, 1-6, and 1-7 to project his 2014 tax liability ($4,316) and his withholding for the year ($3,516). Federal tax booklet Steve's tax will be underwithheld by $800 ($4,316 − $3,516). Federal tax booklet His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. Federal tax booklet Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. Federal tax booklet Steve completes the new Form W-4 as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on the form as the additional amount to be withheld from his pay each payday. Federal tax booklet He gives the completed form to his employer. Federal tax booklet What if I have more than one job or my spouse also has a job?   You are more likely to need to increase your withholding if you have more than one job or if you are married filing jointly and your spouse also works. Federal tax booklet If this is the case, you can increase your withholding for one or more of the jobs. Federal tax booklet   You can apply the amount on Worksheet 1-7, line 5, to only one job or divide it between the jobs any way you wish. Federal tax booklet For each job, determine the extra amount that you want to apply to that job and divide that amount by the number of paydays remaining in 2014 for that job. Federal tax booklet This will give you the additional amount to enter on the Form W-4 you will file for that job. Federal tax booklet You need to give your employer a new Form W-4 for each job for which you are changing your withholding. Federal tax booklet Example. Federal tax booklet Meg Green works in a store and earns $46,000 a year. Federal tax booklet Her husband, John, works full-time in manufacturing and earns $68,000 a year. Federal tax booklet In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. Federal tax booklet They expect to file a joint income tax return. Federal tax booklet Meg and John complete Worksheets 1-5, 1-6, and 1-7. Federal tax booklet Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Federal tax booklet They can divide the $4,459 any way they want. Federal tax booklet They can enter an additional amount on either of their Forms W-4, or divide it between them. Federal tax booklet They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. Federal tax booklet Both claim the same number of allowances as before. Federal tax booklet How Do You Decrease Your Withholding? If your completed Worksheets 1-5 and 1-7 show that you may have more tax withheld than your projected tax liability for 2014, you may be able to decrease your withholding. Federal tax booklet There are two ways to do this. Federal tax booklet You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. Federal tax booklet You can claim only the number of allowances to which you are entitled. Federal tax booklet To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. Federal tax booklet Increasing the number of allowances. Federal tax booklet   Figure and increase the number of withholding allowances you can claim as follows. Federal tax booklet On a new Form W-4, complete the Personal Allowances Worksheet. Federal tax booklet If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. Federal tax booklet If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. Federal tax booklet If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. Federal tax booklet If the number of allowances you can claim on Form W-4, is different from the number you already are claiming, give the newly completed Form W-4 to your employer. Federal tax booklet Converting Credits to Withholding Allowances Table 1-2 , later, shows many of the tax credits you may be able to use to decrease your withholding. Federal tax booklet The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. Federal tax booklet Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. Federal tax booklet Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. Federal tax booklet Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. Federal tax booklet If you take the child and dependent care credit into account on Worksheet 1-8, enter -0- on line F of the Personal Allowances Worksheet. Federal tax booklet If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. Federal tax booklet Example. Federal tax booklet Brett and Alyssa Davis are married and expect to file a joint return for 2014. Federal tax booklet Their expected taxable income from all sources is $68,000. Federal tax booklet They expect to have $15,900 of itemized deductions. Federal tax booklet Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. Federal tax booklet The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. Federal tax booklet Line 1, expected child and dependent care credit—$960. Federal tax booklet Line 9, expected adoption credit—$1,500. Federal tax booklet Line 10, total estimated tax credits—$2,460. Federal tax booklet Line 11. Federal tax booklet Their combined total income from all sources, $68,000, falls between $42,001 and $98,000 on the table for married filing jointly or qualifying widow(er). Federal tax booklet The number to the right of this range is 6. Federal tax booklet 7. Federal tax booklet Line 12, multiply line 10 by line 11—$16,482. Federal tax booklet Then the Davis' complete the Form W-4 worksheets. Federal tax booklet Because they choose to account for their child and dependent care credit on the Deductions and Adjustments Worksheet, they enter -0- on line F of the Personal Allowances Worksheet and figure a new total for line H. Federal tax booklet They take the result on line 12 of Worksheet 1-8, add it to their other adjustments on line 5 of the Form W-4 Deductions and Adjustments Worksheet, and complete the Form W-4 worksheets. Federal tax booklet When Will Your New Form W-4 Go Into Effect? If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4. Federal tax booklet If the change is for next year, your new Form W-4 will not take effect until next year. Federal tax booklet Retirees Returning to the Workforce When you first began receiving your pension, you told the payer how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or similar form). Federal tax booklet However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. Federal tax booklet You completed either form based on your projected income at that time. Federal tax booklet Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income. Federal tax booklet The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. Federal tax booklet Start off with the Personal Allowances Worksheet. Federal tax booklet Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet. Federal tax booklet The third worksheet is the most important for this situation. Federal tax booklet Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. Federal tax booklet If you have more than one source of income, in order to have enough withholding to cover the tax on your higher income, you may need to claim fewer withholding allowances or request your employer to withhold an additional amount from each paycheck. Federal tax booklet Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. Federal tax booklet It is your decision how to divide up your withholding allowances between these sources of income. Federal tax booklet For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your monthly pension to “pay the bills. Federal tax booklet ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. Federal tax booklet There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances. Federal tax booklet Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. Federal tax booklet Contact your pension provider and your employer's payroll department. Federal tax booklet And remember, this is not a final decision. Federal tax booklet If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above. Federal tax booklet You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. Federal tax booklet You may need more tax withheld, or you may need less. Federal tax booklet Table 1-2. Federal tax booklet Tax Credits for 2014 For more information about the . Federal tax booklet . Federal tax booklet . Federal tax booklet See . Federal tax booklet . Federal tax booklet . Federal tax booklet Adoption credit Form 8839 instructions Child and dependent care expenses, credit for Publication 503, Child and Dependent Care Expenses Child tax credit (including the additional child tax credit) Instructions for Form 1040 or Form 1040A Earned income credit Publication 596, Earned Income Credit Education credits Publication 970, Tax Benefits for Education Elderly or the disabled, credit for the Publication 524, Credit for the Elderly or the Disabled Foreign tax credit (except any credit that applies to wages not subject to U. Federal tax booklet S. Federal tax booklet income tax withholding because they are subject to income tax withholding by a foreign country) Publication 514, Foreign Tax Credit for Individuals General business credit Form 3800, General Business Credit Mortgage interest credit Publication 530, Tax Information for First-Time Homeowners Qualified electric vehicle passive activity credit Form 8834 Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) Form 8801 instructions Retirement savings contributions credit (saver's credit) Publication 590, Individual Retirement Arrangements (IRAs) Tax credit bonds, credit to holders of Form 8912 instructions Completing Form W-4 and Worksheets When reading the following discussion, you may find it helpful to refer to Form W-4. Federal tax booklet Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. Federal tax booklet Everyone else must have tax withheld at the higher single rate. Federal tax booklet Single. Federal tax booklet   You must check the “Single” box if any of the following applies. Federal tax booklet You are single. Federal tax booklet If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. Federal tax booklet You are married, but neither you nor your spouse is a citizen or resident of the United States. Federal tax booklet You are married, either you or your spouse is a nonresident alien, and you have not chosen to have that person treated as a resident alien for tax purposes. Federal tax booklet For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Federal tax booklet Married. Federal tax booklet   You qualify to check the “Married” box if any of the following applies. Federal tax booklet You are married and neither you nor your spouse is a nonresident alien. Federal tax booklet You are considered married for the whole year even if your spouse died during the year. Federal tax booklet You are married and either you or your spouse is a nonresident alien who has chosen to be treated as a resident alien for tax purposes. Federal tax booklet For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Federal tax booklet You expect to be able to file your return as a qualifying widow or widower. Federal tax booklet You usually can use this filing status if your spouse died within the previous 2 years and you provide more than half the cost of keeping up a home for the entire year that was the main home for you and your child whom you can claim as a dependent. Federal tax booklet However, you must file a new Form W-4 showing your filing status as single by December 1 of the last year you are eligible to file as a qualifying widow or widower. Federal tax booklet For more information on this filing status, see Qualifying Widow(er) With Dependent Child under Filing Status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Federal tax booklet Married, but withhold at higher single rate. Federal tax booklet   Some married people find that they do not have enough tax withheld at the married rate. Federal tax booklet This can happen, for example, when both spouses work. Federal tax booklet To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). Federal tax booklet Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. Federal tax booklet Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. Federal tax booklet You will have the most tax withheld if you claim “0” allowances. Federal tax booklet The number of allowances you can claim depends on the following factors. Federal tax booklet How many exemptions you can take on your tax return. Federal tax booklet Whether you have income from more than one job. Federal tax booklet What deductions, adjustments to income, and credits you expect to have for the year. Federal tax booklet Whether you will file as head of household. Federal tax booklet If you are married (filing jointly), it also depends on whether your spouse also works and claims any allowances on his or her own Form W-4. Federal tax booklet Or, if married filing separately, whether or not your spouse also works. Federal tax booklet Form W-4 worksheets. Federal tax booklet    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Federal tax booklet The worksheets are for your own records. Federal tax booklet Do not give them to your employer. Federal tax booklet   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. Federal tax booklet If you are married and will file a joint return, complete only one set of worksheets for you and your spouse, even if you both earn wages and each must give Form W-4 to your employers. Federal tax booklet Complete separate sets of worksheets only if you and your spouse will file separate returns. Federal tax booklet   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. Federal tax booklet Also, use the worksheets on page 2 of the form to adjust the number of your withholding allowances for itemized deductions and adjustments to income, and for two-earner or multiple-job situations. Federal tax booklet If you want to adjust the number of your withholding allowances for certain tax credits, use the Deductions and Adjustments Worksheet on page 2 of Form W-4, even if you do not have any deductions or adjustments. Federal tax booklet   Complete all worksheets that apply to your situation. Federal tax booklet The worksheets will help you figure the maximum number of withholding allowances you are entitled to claim so that the amount of income tax withheld from your wages will match, as closely as possible, the amount of income tax you will owe at the end of the year. Federal tax booklet Multiple jobs. Federal tax booklet   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Federal tax booklet Then split your allowances between the Forms W-4 for each job. Federal tax booklet You cannot claim the same allowances with more than one employer at the same time. Federal tax booklet You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Federal tax booklet Married individuals. Federal tax booklet   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Federal tax booklet Use only one set of worksheets. Federal tax booklet You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Federal tax booklet   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. Federal tax booklet Alternative method of figuring withholding allowances. Federal tax booklet   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. Federal tax booklet   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. Federal tax booklet It must take into account only the items of income, adjustments to income, deductions, and tax credits that are taken into account on Form W-4. Federal tax booklet   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. Federal tax booklet You still must give your employer a Form W-4 claiming your withholding allowances. Federal tax booklet Employees who are not citizens or residents. Federal tax booklet   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. Federal tax booklet However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. Federal tax booklet S. Federal tax booklet national. Federal tax booklet It also does not apply if your spouse is a U. Federal tax booklet S. Federal tax booklet citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Federal tax booklet Special rules apply to residents of South Korea and India. Federal tax booklet For more information, see Withholding From Compensation in chapter 8 of Publication 519. Federal tax booklet Personal Allowances Worksheet Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on all of the following that apply. Federal tax booklet Exemptions. Federal tax booklet Only one job. Federal tax booklet Head of household filing status. Federal tax booklet Child and dependent care credit. Federal tax booklet Child tax credit. Federal tax booklet Exemptions (worksheet lines A, C, and D). Federal tax booklet   You can claim one withholding allowance for each exemption you expect to claim on your tax return. Federal tax booklet Self. Federal tax booklet   You can claim an allowance for your exemption on line A unless another person can claim an exemption for you on his or her tax return. Federal tax booklet If another person is entitled to claim an exemption for you, you cannot claim an allowance for your exemption even if the other person will not claim your exemption. Federal tax booklet Spouse. Federal tax booklet   You can claim an allowance for your spouse's exemption on line C unless your spouse is claiming his or her own exemption or another person can claim an exemption for your spouse. Federal tax booklet Do not claim this allowance if you and your spouse expect to file separate returns. Federal tax booklet Dependents. Federal tax booklet   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. Federal tax booklet Only one job (worksheet line B). Federal tax booklet    You can claim an additional withholding allowance if any of the following apply for 2014. Federal tax booklet You are single and you have only one job at a time. Federal tax booklet You are married, you have only one job at a time, and your spouse does not work. Federal tax booklet Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. Federal tax booklet If you qualify for this allowance, enter “1” on line B of the worksheet. Federal tax booklet Head of household filing status (worksheet line E). Federal tax booklet   Generally, you can file as head of household if you are unmarried and pay more than half the cost of keeping up a home that: Was the main home for all of 2014 of your parent whom you can claim as a dependent, or You lived in for more than half the year with your qualifying child or any other person you can claim as a dependent. Federal tax booklet For more information, see Publication 501. Federal tax booklet   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. Federal tax booklet Reduction of personal allowances. Federal tax booklet   For 2014, your deduction for personal exemptions on your tax return is reduced if your adjusted gross income (AGI) is more than the AGI shown next for your filing status. Federal tax booklet Personal Allowance Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1-1 to figure your reduced number of personal allowances on lines A, C, and D of the Personal Allowances Worksheet. Federal tax booklet Worksheet 1-1. Federal tax booklet Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. Federal tax booklet Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. Federal tax booklet   2. Federal tax booklet Enter your expected AGI 2. Federal tax booklet       3. Federal tax booklet Enter $254,200 if single $305,050 if married filing jointly or qualifying widow(er) $152,525 if married filing separately $279,650 if head of household 3. Federal tax booklet       4. Federal tax booklet Subtract line 3 from line 2 4. Federal tax booklet       5. Federal tax booklet Divide line 4 by $125,000 ($62,500 if married filing separately). Federal tax booklet Enter the result as a decimal 5. Federal tax booklet   6. Federal tax booklet Multiply line 1 by line 5. Federal tax booklet If the result is not a whole number, increase it to the next higher whole number 6. Federal tax booklet   7. Federal tax booklet Subtract line 6 from line 1. Federal tax booklet The total of the numbers you enter on A, C, and D of the Personal Allowances Worksheet can not be more than this amount 7. Federal tax booklet     Child and dependent care credit (worksheet line F). Federal tax booklet   Enter “1” on line F if you expect to claim a credit for at least $2,000 of qualifying child or dependent care expenses on your 2014 return. Federal tax booklet Generally, qualifying expenses are those you pay for the care of your dependent who is your qualifying child under age 13 or for your spouse or dependent who is not able to care for himself or herself so that you can work or look for work. Federal tax booklet For more information, see Publication 503, Child and Dependent Care Expenses. Federal tax booklet   Instead of using line F, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Federal tax booklet Child tax credit (worksheet line G). Federal tax booklet   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. Federal tax booklet Subtract “1” from that amount if you have three to six eligible children. Federal tax booklet Subtract “2” from that amount if you have seven or more eligible children. Federal tax booklet   If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” on line G for each eligible child. Federal tax booklet   An eligible child is any child: Who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Who will be under age 17 at the end of 2014, Who is younger than you (or your spouse if filing jointly) or permanently and totally disabled, Who will not provide over half of his or her own support for 2014, Who will not file a joint return, unless the return is filed only as a claim for refund, Who will live with you for more than half of 2014, Who is a U. Federal tax booklet S. Federal tax booklet citizen, U. Federal tax booklet S. Federal tax booklet national, or U. Federal tax booklet S. Federal tax booklet resident alien, and Who will be claimed as a dependent on your return. Federal tax booklet If you are a U. Federal tax booklet S. Federal tax booklet citizen or U. Federal tax booklet S. Federal tax booklet national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. Federal tax booklet   Also, if any other person can claim the child as an eligible child, see Qualifying child of more than one person in the 2013 instructions for Form 1040 or 1040A, line 6c. Federal tax booklet   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. Federal tax booklet   Instead of using line G, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Federal tax booklet Total personal allowances (worksheet line H). Federal tax booklet    Add lines A through G and enter the total on line H. Federal tax booklet If you do not use either of the worksheets on the back of Form W-4, enter the number from line H on line 5 of Form W-4. Federal tax booklet Deductions and Adjustments Worksheet Use the Deductions and Adjustments Worksheet on page 2 of Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Federal tax booklet Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. Federal tax booklet Use the amount of each item you reasonably can expect to show on your return. Federal tax booklet However, do not use more than: The amount shown for that item on your 2013 return (or your 2012 return if you have not yet filed your 2013 return), plus Any additional amount related to a transaction or occurrence (such as payments already made, the signing of an agreement, or the sale of property) that you can prove has happened or will happen during 2013 or 2014. Federal tax booklet Do not include any amount shown on your last tax return that has been disallowed by the IRS. Federal tax booklet Example. Federal tax booklet On June 30, 2013, you bought your first home. Federal tax booklet On your 2013 tax return, you claimed itemized deductions of $6,600, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. Federal tax booklet Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $13,200 for those items on your 2014 return. Federal tax booklet You can use $13,200 to figure the number of your withholding allowances for itemized deductions. Federal tax booklet Not itemizing deductions. Federal tax booklet   If you expect to claim the standard deduction on your tax return, skip lines 1 and 2, and enter “0” on line 3 of the worksheet. Federal tax booklet Itemized deductions (worksheet line 1). Federal tax booklet   Enter your estimated total itemized deductions on line 1 of the worksheet. Federal tax booklet   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. Federal tax booklet You normally claim these deductions on Schedule A of Form 1040. Federal tax booklet Medical and dental expenses that are more than 10% (7. Federal tax booklet 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). Federal tax booklet State and local income or property taxes. Federal tax booklet Deductible home mortgage interest. Federal tax booklet Investment interest up to net investment income. Federal tax booklet Charitable contributions. Federal tax booklet Casualty and theft losses that are more than $100 and 10% of your AGI. Federal tax booklet Fully deductible miscellaneous itemized deductions, including: Impairment-related work expenses of persons with disabilities, Federal estate tax on income in respect of a decedent, Repayment of more than $3,000 of income held under a claim of right that you included in income in an earlier year because at the time you thought you had an unrestricted right to it, Unrecovered investments in an annuity contract under which payments have ceased because of the annuitant's death, Gambling losses up to the amount of gambling winnings reported on your return, and Casualty and theft losses from  income-producing property. Federal tax booklet Other miscellaneous itemized deductions that are more than 2% of your AGI, including: Unreimbursed employee business expenses, such as education expenses, work clothes and uniforms, union dues and fees, and the cost of work-related small tools and supplies, Safe deposit box rental, Tax counsel and assistance, and Certain fees paid to an IRA trustee or custodian. Federal tax booklet AGI. Federal tax booklet   For the purpose of estimating your itemized deductions, your AGI is your estimated total income for 2014 minus any estimated adjustments to income (discussed later) that you include on line 4 of the Deductions and Adjustments Worksheet. Federal tax booklet Phaseout of itemized deductions. Federal tax booklet   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. Federal tax booklet    Itemized Deduction Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1–2 to figure your reduction in itemized deductions. Federal tax booklet Worksheet 1-2. Federal tax booklet Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. Federal tax booklet Enter the estimated total of your itemized deductions 1. Federal tax booklet   2. Federal tax booklet Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. Federal tax booklet   3. Federal tax booklet Is the amount on line 2 less than the amount on line 1? ❑ No. Federal tax booklet Stop here. Federal tax booklet Your deduction is not limited. Federal tax booklet Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Federal tax booklet  ❑ Yes. Federal tax booklet Subtract line 2 from line 1. Federal tax booklet 3. Federal tax booklet       4. Federal tax booklet Multiply line 3 by 80% (. Federal tax booklet 80) 4. Federal tax booklet       5. Federal tax booklet Enter your expected AGI 5. Federal tax booklet       6. Federal tax booklet Enter $305,050 If married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately 6. Federal tax booklet   7. Federal tax booklet Is the amount on line 6 less than the amount on line 5? ❑ No. Federal tax booklet Stop here. Federal tax booklet Your deduction is not limited. Federal tax booklet Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Federal tax booklet  ❑ Yes. Federal tax booklet Subtract line 6 from line 5. Federal tax booklet 7. Federal tax booklet       8. Federal tax booklet Multiply line 7 by 3% (. Federal tax booklet 03) 8. Federal tax booklet       9. Federal tax booklet Enter the smaller of line 4 or line 8 9. Federal tax booklet     10. Federal tax booklet Subtract line 9 from line 1. Federal tax booklet Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. Federal tax booklet     Adjustments to income (worksheet line 4). Federal tax booklet   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. Federal tax booklet   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. Federal tax booklet These adjustments appear on page 1 of your Form 1040 or 1040A. Federal tax booklet Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. Federal tax booklet Net operating loss carryovers. Federal tax booklet Certain business expenses of reservists, performing artists, and fee-based government officials. Federal tax booklet Health savings account or medical savings account deduction. Federal tax booklet Certain moving expenses. Federal tax booklet Deduction for self-employment tax. Federal tax booklet Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. Federal tax booklet Self-employed health insurance deduction. Federal tax booklet Penalty on early withdrawal of savings. Federal tax booklet Alimony paid. Federal tax booklet IRA deduction. Federal tax booklet Student loan interest deduction. Federal tax booklet Jury duty pay given to your employer. Federal tax booklet Reforestation amortization and expenses. Federal tax booklet Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Federal tax booklet Repayment of certain supplemental unemployment benefits. Federal tax booklet Contributions to IRC 501(c)(18)(D) pension plans. Federal tax booklet Contributions by certain chaplains to IRC 403(b) plans. Federal tax booklet Attorney fees and court costs for certain unlawful discrimination claims. Federal tax booklet Attorney fees and court costs for certain whistleblower awards. Federal tax booklet Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). Federal tax booklet Tax credits (worksheet line 5). Federal tax booklet   Although you can take most tax credits into account when figuring withholding allowances, the Personal Allowances Worksheet uses only the child and dependent care credit (line F) and the child tax credit (line G). Federal tax booklet But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. Federal tax booklet   If you take the child and dependent care credit into account on line 5, do not use line F. Federal tax booklet If you take the child tax credit into account on line 5, do not use line G. Federal tax booklet   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. Federal tax booklet See the individual tax form instructions for more details. Federal tax booklet Foreign tax credit, except any credit that applies to wages not subject to U. Federal tax booklet S. Federal tax booklet income tax withholding because they are subject to income tax withholding by a foreign country. Federal tax booklet See Publication 514, Foreign Tax Credit for Individuals. Federal tax booklet Credit for the elderly or the disabled. Federal tax booklet See Publication 524, Credit for the Elderly or the Disabled. Federal tax booklet Education credits. Federal tax booklet See Publication 970, Tax Benefits for Education. Federal tax booklet Retirement savings contributions credit (saver's credit). Federal tax booklet See Publication 590. Federal tax booklet Mortgage interest credit. Federal tax booklet See Publication 530, Tax Information for Homeowners. Federal tax booklet Adoption credit. Federal tax booklet See the Instructions for Form 8839. Federal tax booklet Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. Federal tax booklet See the Instructions for Form 8801. Federal tax booklet General business credit. Federal tax booklet See the Instructions for Form 3800. Federal tax booklet Earned income credit. Federal tax booklet See Publication 596. Federal tax booklet Figuring line 5 entry. Federal tax booklet   To figure the amount to add on line 5 for tax credits, multiply your estimated total credits by the appropriate number from Table 1-3 . Federal tax booklet Example. Federal tax booklet You are married and expect to file a joint return for 2014. Federal tax booklet Your combined estimated wages are $68,000. Federal tax booklet Your estimated tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700 (total credits = $2,660). Federal tax booklet In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. Federal tax booklet 7. Federal tax booklet Multiply your total estimated tax credits of $2,660 by 6. Federal tax booklet 7. Federal tax booklet Add the result, $17,822, to the amount you otherwise would show on line 5 of the Deductions and Adjustments Worksheet and enter the total on line 5. Federal tax booklet Because you choose to account for your child and dependent care credit this way, do not make an entry on line F of the Personal Allowances Worksheet. Federal tax booklet Nonwage income (worksheet line 6). Federal tax booklet   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Federal tax booklet Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. Federal tax booklet   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. Federal tax booklet See Getting the Right Amount of Tax Withheld , later. Federal tax booklet Net deductions and adjustments (worksheet line 8). Federal tax booklet    If line 7 is less than $3,950, enter “0” on line 8. Federal tax booklet If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. Federal tax booklet Example. Federal tax booklet If line 7 is $5,200, $5,200 ÷ $3,950 = 1. Federal tax booklet 32. Federal tax booklet Drop the fraction (. Federal tax booklet 32) and enter “1” on line 8. Federal tax booklet Two-Earners/Multiple Jobs Worksheet Complete the Two-Earners/Multiple Jobs Worksheet on page 2 of Form W-4 if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $50,000 ($20,000 if married). Federal tax booklet Reducing your allowances (worksheet lines 1-3). Federal tax booklet   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). Federal tax booklet Using Table 1 in the Two-Earners/Multiple Jobs Worksheet, find the number listed beside the amount of your estimated wages for the year from your lowest paying job (or if lower and you are filing jointly, your spouse's job). Federal tax booklet Enter that number on line 2. Federal tax booklet However, if you are married filing jointly and estimated wages from the highest paying job are $65,000 or less, do not enter more than “3. Federal tax booklet ”    Table 1-3. Federal tax booklet Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. Federal tax booklet  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. Federal tax booklet 0 $42,001 – 98,000 6. Federal tax booklet 7 $98,001 – 180,000 4. Federal tax booklet 0 $180,001 – 270,000 3. Federal tax booklet 6 $270,001 – 440,000 3. Federal tax booklet 0 $440,001 – 490,000. Federal tax booklet . Federal tax booklet . Federal tax booklet . Federal tax booklet 2. Federal tax booklet 9 $490,001 and over 2. Federal tax booklet 5 b. Federal tax booklet  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. Federal tax booklet 0 $19,001 – 47,000 6. Federal tax booklet 7 $47,001 – 104,000 4. Federal tax booklet 0 $104,001 – 205,000 3. Federal tax booklet 6 $205,001 – 430,000 3. Federal tax booklet 0 $430,001 and over 2. Federal tax booklet 5 c. Federal tax booklet  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. Federal tax booklet 0 $30,001 – 66,000 6. Federal tax booklet 7 $66,001 – 150,000 4. Federal tax booklet 0 $150,001 – 235,000 3. Federal tax booklet 6 $235,001 – 430,000 3. Federal tax booklet 0 $430,001 – 460,000 2. Federal tax booklet 9 $460,001 and over 2. Federal tax booklet 5 d. Federal tax booklet  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. Federal tax booklet 0 $21,001 – 49,000 6. Federal tax booklet 7 $49,001 – 90,000 4. Federal tax booklet 0 $90,001 – 135,000 3. Federal tax booklet 6 $135,001 – 220,000 3. Federal tax booklet 0 $220,001 – 245,000 2. Federal tax booklet 9 $245,001 and over 2. Federal tax booklet 5   Subtract line 2 from line 1 and enter the result (but not less than zero) on line 3 and on Form W-4, line 5. Federal tax booklet If line 1 is more than or equal to line 2, do not use the rest of the worksheet. Federal tax booklet   If line 1 is less than line 2, enter “0” on Form W-4, line 5. Federal tax booklet Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. Federal tax booklet Other amounts owed. Federal tax booklet   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. Federal tax booklet The total is the additional withholding needed for the year. Federal tax booklet Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Federal tax booklet You accurately complete all the Form W-4 worksheets that apply to you. Federal tax booklet You give your employer a new Form W-4 when changes occur. Federal tax booklet But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Federal tax booklet This is most likely to happen in the following situations. Federal tax booklet You are married and both you and your spouse work. Federal tax booklet You have more than one job at a time. Federal tax booklet You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Federal tax booklet You will owe additional amounts with your return, such as self-employment tax. Federal tax booklet Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Federal tax booklet Your earnings are more than $130,000 if you are single or $180,000 if you are married. Federal tax booklet You work only part of the year. Federal tax booklet You change the number of your withholding allowances during the year. Federal tax booklet You are subject to Additional Medicare Tax or Net Investment Income Tax. Federal tax booklet If you anticipate liability for Additional Medicare Tax or Net Investment Income Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. Federal tax booklet Part-Year Method If you work only part of the year and your employer agrees to use the part-year withholding method, less tax will be withheld from each wage payment than would be withheld if you worked all year. Federal tax booklet To be eligible for the part-year method, you must meet both of the following requirements. Federal tax booklet You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. Federal tax booklet You cannot use a fiscal year. Federal tax booklet You must not expect to be employed for more than 245 days during the year. Federal tax booklet To figure this limit, count all calendar days that you are employed (including weekends, vacations, and sick days) beginning with the first day you are on the job for pay and ending with your last day of work. Federal tax booklet If you are temporarily laid off for 30 days or less, count those days too. Federal tax booklet If you are laid off for more than 30 days, do not count those days. Federal tax booklet You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. Federal tax booklet How to apply for the part-year method. Federal tax booklet   You must ask your employer in writing to use this method. Federal tax booklet The request must state all three of the following. Federal tax booklet The date of your last day of work for any prior employer during the current calendar year. Federal tax booklet That you do not expect to be employed more than 245 days during the current calendar year. Federal tax booklet That you use the calendar year as your tax year. Federal tax booklet Cumulative Wage Method If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Federal tax booklet You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. Federal tax booklet You must ask your employer in writing to use this method. Federal tax booklet To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Federal tax booklet ) since the beginning of the year. Federal tax booklet Aids for Figuring Your Withholding IRS Withholding Calculator. Federal tax booklet   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Federal tax booklet Go to www. Federal tax booklet irs. Federal tax booklet gov/Individuals/IRS-Withholding-Calculator. Federal tax booklet It can help you determine the correct amount to be withheld any time during the year. Federal tax booklet Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Federal tax booklet These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Federal tax booklet New Form W-4. Federal tax booklet   When you start a new job, your employer should give you a Form W-4 to fill out. Federal tax booklet Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Federal tax booklet   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Federal tax booklet The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. Federal tax booklet No Form W-4. Federal tax booklet   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. Federal tax booklet Repaying withheld tax. Federal tax booklet   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Federal tax booklet Your employer cannot repay any of the tax previously withheld. Federal tax booklet Instead, claim the full amount withheld when you file your tax return. Federal tax booklet   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Federal tax booklet Your employer can repay the amount that was withheld incorrectly. Federal tax booklet If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. Federal tax booklet IRS review of your withholding. Federal tax booklet   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Federal tax booklet Your employer may be required to send a copy of the Form W-4 to the IRS. Federal tax booklet There is a penalty for supplying false information on Form W-4. Federal tax booklet See Penalties , later. Federal tax booklet   If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer. Federal tax booklet   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Federal tax booklet If you believe that you are entitled to claim complete exemption from withholding or claim more withholding allowances than the maximum number specified by the IRS in the lock-in letter, you must submit a new Form W-4 and a written statement to support your claims to the IRS. Federal tax booklet Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. Federal tax booklet At the end of this period, if you have not responded or if your response is not adequate, your employer will be required to withhold based on the original lock-in letter. Federal tax booklet   After the lock-in letter takes effect, your employer must withhold tax on the basis of the withholding rate (marital status) and maximum number of withholding allowances specified in that letter. Federal tax booklet   If you later believe that you are entitled to claim exemption from withholding or more allowances than the IRS determined, you can complete a new Form W-4 and a written statement to support the claims made on the Form W-4 and send them directly to the IRS address shown on the lock-in letter. Federal tax booklet Your employer must continue to figure your withholding on the basis of the number of allowances previously determined by the IRS until the IRS advises your employer otherwise. Federal tax booklet   At any time, either before or after the lock-in letter becomes effective, you may give your employer a new Form W-4 that does not claim complete exemption from withholding and results in more income tax withheld than specified in the lock-in letter. Federal tax booklet Your employer must then withhold tax based on this new Form W-4. Federal tax booklet   Additional information is available at IRS. Federal tax booklet gov. Federal tax booklet Enter “withholding compliance questions” in the search box. Federal tax booklet Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Federal tax booklet The exemption applies only to income tax, not to social security or Medicare tax. Federal tax booklet You can claim exemption from withholding for 2014 only if both of the following situations apply. Federal tax booklet For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Federal tax booklet For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Federal tax booklet Use Figure 1-A to help you decide whether you can claim exemption from withholding. Federal tax booklet Do not use Figure 1-A if you: Are 65 or older, Are blind, Will itemize deductions on your 2014 return, Will claim an exemption for a dependent on your 2014 return, or Will claim any tax credits on your 2014 return. Federal tax booklet These situations are discussed later. Federal tax booklet Students. Federal tax booklet   If you are a student, you are not automatically exempt. Federal tax booklet If you work only part time or during the summer, you may qualify for exemption from withholding. Federal tax booklet Example 1. Federal tax booklet You are a high school student and expect to earn $2,500 from a summer job. Federal tax booklet You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you on their tax return. Federal tax booklet You worked last summer and had $375 federal income tax withheld from your pay. Federal tax booklet The entire $375 was refunded when you filed your 2013 return. Federal tax booklet Using Figure 1-A, you find that you can claim exemption from withholding. Federal tax booklet Please click here for the text description of the image. Federal tax booklet Figure 1-A: Exemption From Withholding on Form W-4 Example 2. Federal tax booklet The facts are the same as in Example 1, except that you also have a savings account and expect to have $400 interest income during the year. Federal tax booklet Using Figure 1-A, you find that you cannot claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,000. Federal tax booklet    You may have to file a tax return, even if you are exempt from withholding. Federal tax booklet See Publication 501 to see whether you must file a return. Federal tax booklet    Age 65 or older or blind. Federal tax booklet If you are 65 or older or blind, use Worksheet 1-3 or Worksheet 1-4, to help you decide whether you can claim exemption from withholding. Federal tax booklet Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Federal tax booklet Instead, see Itemizing deductions or claiming exemptions or credits, next. Federal tax booklet Itemizing deductions or claiming exemptions or credits. Federal tax booklet   If you had no tax liability for 2013, and you will: Itemize deductions, Claim an exemption for a dependent, or Claim a tax credit, use the 2014 Estimated Tax Worksheet (also see chapter 2), to figure your 2014 expected tax liability. Federal tax booklet You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. Federal tax booklet Claiming exemption from withholding. Federal tax booklet   To claim exemption, you must give your employer a Form W-4. Federal tax booklet Do not complete lines 5 and 6. Federal tax booklet Enter “Exempt” on line 7. Federal tax booklet   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. Federal tax booklet If you claim exemption in 2014 but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Federal tax booklet   Your claim of exempt status may be reviewed by the IRS. Federal tax booklet See IRS review of your withholding , earlier. Federal tax booklet An exemption is good for only 1 year. Federal tax booklet   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Federal tax booklet Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Federal tax booklet The payer can figure withholding on supplemental wages using the same method used for your regular wages. Federal tax booklet However, if these payments are identified separately from regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. Federal tax booklet Expense allowances. Federal tax booklet   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Federal tax booklet A nonaccountable plan is a reimbursement arrangement that does not require you to account for, or prove, your business expenses to your employer or does not require you to return your employer's payments that are more than your proven expenses. Federal tax booklet   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. Federal tax booklet Accountable plan. Federal tax booklet   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. Federal tax booklet Your expenses must have a business connection. Federal tax booklet That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Federal tax booklet You must adequately account to your employer for these expenses within a reasonable period of time. Federal tax booklet You must return any excess reimbursement or allowance within a reasonable period of time. Federal tax booklet    An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Federal tax booklet   The definition of reasonable period of time depends on the facts and circumstances of your situation. Federal tax booklet However, regardless of those facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Federal tax booklet You receive an advance within 30 days of the time you have an expense. Federal tax booklet You adequately account for your expenses within 60 days after they were paid or incurred. Federal tax booklet You return any excess reimbursement within 120 days after the expense was paid or incurred. Federal tax booklet You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Federal tax booklet Nonaccountable plan. Federal tax booklet   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. Federal tax booklet For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Federal tax booklet Penalties You may have to pay a penalty of $500 if both of the following apply. Federal tax booklet You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Federal tax booklet You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Federal tax booklet There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. Federal tax booklet The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Federal tax booklet These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. Federal tax booklet A simple error or an honest mistake will not result in one of these penalties. Federal tax booklet For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a Form W-4 penalty. Federal tax booklet However, see chapter 4 for information on the penalty for underpaying your tax. Federal tax booklet Tips The tips you receive while working on your job are considered part of your pay. Federal tax booklet You must include your tips on your tax return on the same line as your regular pay. Federal tax booklet However, tax is not withheld directly from tip income, as it is from your regular pay. Federal tax booklet Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Federal tax booklet Reporting tips to your employer. Federal tax booklet   If you receive tips of $20 or more in a month while working for any one employer, you must report to your employer the total amount of tips you receive on the job during the month. Federal tax booklet The report is due by the 10th day of the following month. Federal tax booklet   If you have more than one job, make a separate report to each employer. Federal tax booklet Report only the tips you received while working for that employer, and only if they total $20 or more for the month. Federal tax booklet How employer figures amount to withhold. Federal tax booklet   The tips you report to your employer are counted as part of your income for the month you report them. Federal tax booklet Your employer can figure your withholding in either of two ways. Federal tax booklet By withholding at the regular rate on the sum of your pay plus your reported tips. Federal tax booklet By withholding at the regular rate on your pay plus a percentage of your reported tips. Federal tax booklet Not enough pay to cover taxes. Federal tax booklet   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Federal tax booklet   If you do not give your employer money to cover the shortage, your employer first withholds as much Medicare tax and social security or railroad retirement tax as possible, up to the proper amount, and then withholds income tax up to the full amount of your pay. Federal tax booklet If not enough tax is withheld, you may have to pay estimated tax. Federal tax booklet When you file your return, you also may have to pay any Medicare and social security tax or railroad retirement tax your employer could not withhold. Federal tax booklet Tips not reported to your employer. Federal tax booklet   On your tax return, you must report all the tips you receive during the year, even tips you do not report to your employer (this includes the value of any noncash tips you received, such as tickets, passes, or other items of value). Federal tax booklet Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. Federal tax booklet Allocated tips. Federal tax booklet   If you work in a large food or beverage establishment, your employer may have to report an allocated amount of tips on your Form W-2. Federal tax booklet   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. Federal tax booklet Withholding is based only on your pay plus your reported tips. Federal tax booklet Your employer should refund to you any incorrectly withheld tax. Federal tax booklet More information. Federal tax booklet   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi
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Understanding Your CP211B Notice

We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, wasn't signed or was signed by someone who wasn’t authorized.


What you need to do

  • File Exempt Organization Return or a correct Form 8868 by the due date of the Exempt Organization Return. If the Exempt Organization Return is filed after the due date of the return (including any extension), the return is considered late and subject to late filing penalties.
  • We encourage you to use electronic filing – the fastest and easiest way to file.

You may want to

  • Visit www.irs.gov/Charities-&-Non-Profits to learn about approved e-File providers, what types of returns can be filed electronically, and whether you are required to file electronically.

Answers to Common Questions

Q. Where can I go for more information about tax-exempt organizations?

A. For more information on Employee Benefit Plans, see Tax Information for Charities & Other Non-Profits.

Q. Can I get help over the phone?

A. If you have questions and/or need help, you can call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.


Tips for next year

Be sure to sign and mail your Form 8868 on or before the due date of your return.

Page Last Reviewed or Updated: 24-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Federal Tax Booklet

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