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1040 Ez

1040 ez Publication 555 - Introductory Material Table of Contents Future Developments What's New Important Reminder IntroductionOrdering forms and publications. 1040 ez Tax questions. 1040 ez Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 555, such as legislation enacted after it was published, go to www. 1040 ez irs. 1040 ez gov/pub555. 1040 ez What's New Same-sex marriages. 1040 ez  For federal tax purposes, individuals of the same sex are married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 1040 ez The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. 1040 ez However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not called a marriage under state (or foreign) law are not married for federal tax purposes. 1040 ez The word “state” as used here includes the District of Columbia, Puerto Rico, and U. 1040 ez S. 1040 ez territories and possessions. 1040 ez It means any domestic jurisdiction that has the legal authority to sanction marriages. 1040 ez The term “foreign country” means any foreign jurisdiction that has the legal authority to sanction marriages. 1040 ez If individuals of the same sex are married, they generally must use the married filing jointly or married filing separately filing status. 1040 ez However, if they did not live together during the last 6 months of the year, one or both of them may be able to use the head of household filing status. 1040 ez For details, see Publication 501, Exemptions, Standard Deduction, and Filing Information. 1040 ez Also see Revenue Ruling 2013-17 and Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law on IRS. 1040 ez gov. 1040 ez Important Reminder Photographs of missing children. 1040 ez  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 1040 ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040 ez You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 1040 ez Introduction This publication is for married taxpayers who are domiciled in one of the following community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. 1040 ez This publication does not address the federal tax treatment of income or property subject to the “community property” election under Alaska state laws. 1040 ez Community property laws affect how you figure your income on your federal income tax return if you are married, live in a community property state or country, and file separate returns. 1040 ez If you are married, your tax usually will be less if you file married filing jointly than if you file married filing separately. 1040 ez However, sometimes it can be to your advantage to file separate returns. 1040 ez If you and your spouse file separate returns, you have to determine your community income and your separate income. 1040 ez Community property laws also affect your basis in property you inherit from a married person who lived in a community property state. 1040 ez See Death of spouse , later. 1040 ez Registered domestic partners. 1040 ez    This publication is also for registered domestic partners who are domiciled in Nevada, Washington, or California. 1040 ez Registered domestic partners in Nevada, Washington, or California generally must follow state community property laws and report half the combined community income of the individual and his or her registered domestic partner. 1040 ez   Registered domestic partners are not married for federal tax purposes. 1040 ez They can use the single filing status, or if they qualify, the head of household filing status. 1040 ez    You can find answers to frequently asked questions by going to www. 1040 ez irs. 1040 ez gov/pub555 and clicking on Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions under Other Items You May Find Useful. 1040 ez Comments and suggestions. 1040 ez    We welcome your comments about this publication and your suggestions for future editions. 1040 ez   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 1040 ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 1040 ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040 ez   You can send your comments from www. 1040 ez irs. 1040 ez gov/formspubs. 1040 ez Click on “More Information” and then on “Give us feedback on forms and publications. 1040 ez ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 1040 ez Ordering forms and publications. 1040 ez    Visit www. 1040 ez irs. 1040 ez gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 1040 ez Internal Revenue Service 1201 N. 1040 ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 1040 ez    If you have a tax question, check the information available on IRS. 1040 ez gov or call 1-800-829-1040. 1040 ez We cannot answer tax questions sent to either of the above addresses. 1040 ez Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals 505 Tax Withholding and Estimated Tax 971 Innocent Spouse Relief Form (and Instructions) 8857 Request for Innocent Spouse Relief 8958 Allocation of Tax Amounts Between Certain Individuals in Community Property States  See How To Get Tax Help near the end of this publication for information about getting these publications and forms. 1040 ez Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of Earthquake in Virginia

Updated 2/2/2012 to include Albemarle and King George Counties
Updated 1/3/2012 to include Culpeper, Fluvanna, Goochland, Orange and Spotsylvania Counties and the City of Fredericksburg.

VA-2011-22, Nov. 7, 2011

BALTIMORE — Victims of the earthquake that took place on Aug. 23, 2011 in parts of Virginia may qualify for tax relief from the Internal Revenue Service.

The President has declared Albemarle, Culpeper, Fluvanna, Goochland, King George, Louisa, Orange and Spotsylvania Counties and the City of Fredericksburg a federal disaster area. Individuals who reside or have a business in this county may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 23, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes previously obtained extensions to file 2010 returns and the estimated tax payment for the third quarter, normally due Sept. 15.  

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 23, and on or before Sept. 7, as long as the deposits are made by Sept. 7, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The county listed above constitutes a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 23 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 23 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 23 and on or before Sept. 7 provided the taxpayer makes these deposits by Sept. 7.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Virginia/Earthquake” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Page Last Reviewed or Updated: 05-Dec-2013

The 1040 Ez

1040 ez 1. 1040 ez   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. 1040 ez Exceptions. 1040 ez Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. 1040 ez Identical wagers. 1040 ez Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. 1040 ez Underreported interest or dividends. 1040 ez 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. 1040 ez This chapter explains in detail the rules for withholding tax from each of these types of income. 1040 ez The discussion of salaries and wages includes an explanation of how to complete Form W-4. 1040 ez This chapter also covers backup withholding on interest, dividends, and other payments. 1040 ez 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. 1040 ez Salaries and Wages Income tax is withheld from the pay of most employees. 1040 ez Your pay includes your regular pay, bonuses, commissions, and vacation allowances. 1040 ez It also includes reimbursements and other expense allowances paid under a nonaccountable plan. 1040 ez See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. 1040 ez If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. 1040 ez This is explained under Exemption From Withholding , later. 1040 ez You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. 1040 ez 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. 1040 ez Military retirees. 1040 ez   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. 1040 ez Household workers. 1040 ez   If you are a household worker, you can ask your employer to withhold income tax from your pay. 1040 ez A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. 1040 ez   Tax is withheld only if you want it withheld and your employer agrees to withhold it. 1040 ez If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. 1040 ez Farmworkers. 1040 ez   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. 1040 ez Differential wage payments. 1040 ez   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. 1040 ez 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. 1040 ez The wages and withholding will be reported on Form W-2, Wage and Tax Statement. 1040 ez 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. 1040 ez The amount you earn in each payroll period. 1040 ez The information you give your employer on Form W-4. 1040 ez Form W-4 includes four types of information that your employer will use to figure your withholding. 1040 ez Whether to withhold at the single rate or at the lower married rate. 1040 ez How many withholding allowances you claim (each allowance reduces the amount withheld). 1040 ez Whether you want an additional amount withheld. 1040 ez Whether you are claiming an exemption from withholding in 2014. 1040 ez See Exemption From Withholding , later. 1040 ez Note. 1040 ez You must specify a filing status and a number of withholding allowances on Form W-4. 1040 ez You cannot specify only a dollar amount of withholding. 1040 ez New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. 1040 ez Your employer should have copies of the form. 1040 ez If you need to change the information later, you must fill out a new form. 1040 ez 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. 1040 ez You may be able to avoid overwithholding if your employer agrees to use the part-year method. 1040 ez See Part-Year Method , later, for more information. 1040 ez Employee also receiving pension income. 1040 ez   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. 1040 ez However, you can choose to split your withholding allowances between your pension and job in any manner. 1040 ez 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. 1040 ez When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. 1040 ez 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. 1040 ez See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. 1040 ez Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. 1040 ez See Table 1-1 for examples of personal and financial changes you should consider. 1040 ez Table 1-1. 1040 ez 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. 1040 ez 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. 1040 ez If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. 1040 ez You can get a blank Form W-4 from your employer or print the form from IRS. 1040 ez gov. 1040 ez You should try to have your withholding match your actual tax liability. 1040 ez 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. 1040 ez If too much tax is withheld, you will lose the use of that money until you get your refund. 1040 ez 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. 1040 ez See Table 1-1 for examples. 1040 ez Note. 1040 ez 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. 1040 ez 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. 1040 ez You should check your withholding when any of the following situations occur. 1040 ez You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. 1040 ez 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. 1040 ez There are changes in your life or financial situation that affect your tax liability. 1040 ez See Table 1-1. 1040 ez There are changes in the tax law that affect your tax liability. 1040 ez 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. 1040 ez You can also use the IRS Withholding calculator at www. 1040 ez irs. 1040 ez gov/individuals. 1040 ez If you use the worksheets and tables in this publication, follow these steps. 1040 ez Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. 1040 ez 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. 1040 ez 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. 1040 ez 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. 1040 ez How Do You Increase Your Withholding? There are two ways to increase your withholding. 1040 ez 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. 1040 ez Requesting an additional amount withheld. 1040 ez   You can request that an additional amount be withheld from each paycheck by following these steps. 1040 ez Complete Worksheets 1-5 and 1-7. 1040 ez 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. 1040 ez Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. 1040 ez This is the number of allowances you entered on the last Form W-4 you gave your employer. 1040 ez Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. 1040 ez Give your newly completed Form W-4 to your employer. 1040 ez   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. 1040 ez Example. 1040 ez 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). 1040 ez Steve's tax will be underwithheld by $800 ($4,316 − $3,516). 1040 ez His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. 1040 ez Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. 1040 ez 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. 1040 ez He gives the completed form to his employer. 1040 ez 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. 1040 ez If this is the case, you can increase your withholding for one or more of the jobs. 1040 ez   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. 1040 ez 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. 1040 ez This will give you the additional amount to enter on the Form W-4 you will file for that job. 1040 ez You need to give your employer a new Form W-4 for each job for which you are changing your withholding. 1040 ez Example. 1040 ez Meg Green works in a store and earns $46,000 a year. 1040 ez Her husband, John, works full-time in manufacturing and earns $68,000 a year. 1040 ez In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. 1040 ez They expect to file a joint income tax return. 1040 ez Meg and John complete Worksheets 1-5, 1-6, and 1-7. 1040 ez Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. 1040 ez They can divide the $4,459 any way they want. 1040 ez They can enter an additional amount on either of their Forms W-4, or divide it between them. 1040 ez 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. 1040 ez Both claim the same number of allowances as before. 1040 ez 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. 1040 ez There are two ways to do this. 1040 ez You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. 1040 ez You can claim only the number of allowances to which you are entitled. 1040 ez To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. 1040 ez Increasing the number of allowances. 1040 ez   Figure and increase the number of withholding allowances you can claim as follows. 1040 ez On a new Form W-4, complete the Personal Allowances Worksheet. 1040 ez If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. 1040 ez If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. 1040 ez If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. 1040 ez 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. 1040 ez 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. 1040 ez The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. 1040 ez Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. 1040 ez Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. 1040 ez Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. 1040 ez 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. 1040 ez If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. 1040 ez Example. 1040 ez Brett and Alyssa Davis are married and expect to file a joint return for 2014. 1040 ez Their expected taxable income from all sources is $68,000. 1040 ez They expect to have $15,900 of itemized deductions. 1040 ez Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. 1040 ez The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. 1040 ez Line 1, expected child and dependent care credit—$960. 1040 ez Line 9, expected adoption credit—$1,500. 1040 ez Line 10, total estimated tax credits—$2,460. 1040 ez Line 11. 1040 ez 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). 1040 ez The number to the right of this range is 6. 1040 ez 7. 1040 ez Line 12, multiply line 10 by line 11—$16,482. 1040 ez Then the Davis' complete the Form W-4 worksheets. 1040 ez 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. 1040 ez 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. 1040 ez 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. 1040 ez If the change is for next year, your new Form W-4 will not take effect until next year. 1040 ez 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). 1040 ez However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. 1040 ez You completed either form based on your projected income at that time. 1040 ez 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. 1040 ez 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. 1040 ez Start off with the Personal Allowances Worksheet. 1040 ez 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. 1040 ez The third worksheet is the most important for this situation. 1040 ez 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. 1040 ez 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. 1040 ez 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. 1040 ez It is your decision how to divide up your withholding allowances between these sources of income. 1040 ez 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. 1040 ez ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. 1040 ez 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. 1040 ez Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. 1040 ez Contact your pension provider and your employer's payroll department. 1040 ez And remember, this is not a final decision. 1040 ez 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. 1040 ez You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. 1040 ez You may need more tax withheld, or you may need less. 1040 ez Table 1-2. 1040 ez Tax Credits for 2014 For more information about the . 1040 ez . 1040 ez . 1040 ez See . 1040 ez . 1040 ez . 1040 ez 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. 1040 ez S. 1040 ez 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. 1040 ez Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. 1040 ez Everyone else must have tax withheld at the higher single rate. 1040 ez Single. 1040 ez   You must check the “Single” box if any of the following applies. 1040 ez You are single. 1040 ez If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. 1040 ez You are married, but neither you nor your spouse is a citizen or resident of the United States. 1040 ez 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. 1040 ez For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. 1040 ez Married. 1040 ez   You qualify to check the “Married” box if any of the following applies. 1040 ez You are married and neither you nor your spouse is a nonresident alien. 1040 ez You are considered married for the whole year even if your spouse died during the year. 1040 ez 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. 1040 ez For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. 1040 ez You expect to be able to file your return as a qualifying widow or widower. 1040 ez 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. 1040 ez 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. 1040 ez 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. 1040 ez Married, but withhold at higher single rate. 1040 ez   Some married people find that they do not have enough tax withheld at the married rate. 1040 ez This can happen, for example, when both spouses work. 1040 ez To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). 1040 ez Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. 1040 ez Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. 1040 ez You will have the most tax withheld if you claim “0” allowances. 1040 ez The number of allowances you can claim depends on the following factors. 1040 ez How many exemptions you can take on your tax return. 1040 ez Whether you have income from more than one job. 1040 ez What deductions, adjustments to income, and credits you expect to have for the year. 1040 ez Whether you will file as head of household. 1040 ez 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. 1040 ez Or, if married filing separately, whether or not your spouse also works. 1040 ez Form W-4 worksheets. 1040 ez    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. 1040 ez The worksheets are for your own records. 1040 ez Do not give them to your employer. 1040 ez   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. 1040 ez 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. 1040 ez Complete separate sets of worksheets only if you and your spouse will file separate returns. 1040 ez   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. 1040 ez 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. 1040 ez 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. 1040 ez   Complete all worksheets that apply to your situation. 1040 ez 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. 1040 ez Multiple jobs. 1040 ez   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. 1040 ez Then split your allowances between the Forms W-4 for each job. 1040 ez You cannot claim the same allowances with more than one employer at the same time. 1040 ez You can claim all your allowances with one employer and none with the other(s), or divide them any other way. 1040 ez Married individuals. 1040 ez   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. 1040 ez Use only one set of worksheets. 1040 ez You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. 1040 ez   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. 1040 ez Alternative method of figuring withholding allowances. 1040 ez   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. 1040 ez   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. 1040 ez 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. 1040 ez   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. 1040 ez You still must give your employer a Form W-4 claiming your withholding allowances. 1040 ez Employees who are not citizens or residents. 1040 ez   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. 1040 ez However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. 1040 ez S. 1040 ez national. 1040 ez It also does not apply if your spouse is a U. 1040 ez S. 1040 ez citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. 1040 ez Special rules apply to residents of South Korea and India. 1040 ez For more information, see Withholding From Compensation in chapter 8 of Publication 519. 1040 ez 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. 1040 ez Exemptions. 1040 ez Only one job. 1040 ez Head of household filing status. 1040 ez Child and dependent care credit. 1040 ez Child tax credit. 1040 ez Exemptions (worksheet lines A, C, and D). 1040 ez   You can claim one withholding allowance for each exemption you expect to claim on your tax return. 1040 ez Self. 1040 ez   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. 1040 ez 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. 1040 ez Spouse. 1040 ez   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. 1040 ez Do not claim this allowance if you and your spouse expect to file separate returns. 1040 ez Dependents. 1040 ez   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. 1040 ez Only one job (worksheet line B). 1040 ez    You can claim an additional withholding allowance if any of the following apply for 2014. 1040 ez You are single and you have only one job at a time. 1040 ez You are married, you have only one job at a time, and your spouse does not work. 1040 ez Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. 1040 ez If you qualify for this allowance, enter “1” on line B of the worksheet. 1040 ez Head of household filing status (worksheet line E). 1040 ez   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. 1040 ez For more information, see Publication 501. 1040 ez   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. 1040 ez Reduction of personal allowances. 1040 ez   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. 1040 ez 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. 1040 ez Worksheet 1-1. 1040 ez Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. 1040 ez Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. 1040 ez   2. 1040 ez Enter your expected AGI 2. 1040 ez       3. 1040 ez 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. 1040 ez       4. 1040 ez Subtract line 3 from line 2 4. 1040 ez       5. 1040 ez Divide line 4 by $125,000 ($62,500 if married filing separately). 1040 ez Enter the result as a decimal 5. 1040 ez   6. 1040 ez Multiply line 1 by line 5. 1040 ez If the result is not a whole number, increase it to the next higher whole number 6. 1040 ez   7. 1040 ez Subtract line 6 from line 1. 1040 ez 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. 1040 ez     Child and dependent care credit (worksheet line F). 1040 ez   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. 1040 ez 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. 1040 ez For more information, see Publication 503, Child and Dependent Care Expenses. 1040 ez   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. 1040 ez Child tax credit (worksheet line G). 1040 ez   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. 1040 ez Subtract “1” from that amount if you have three to six eligible children. 1040 ez Subtract “2” from that amount if you have seven or more eligible children. 1040 ez   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. 1040 ez   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. 1040 ez S. 1040 ez citizen, U. 1040 ez S. 1040 ez national, or U. 1040 ez S. 1040 ez resident alien, and Who will be claimed as a dependent on your return. 1040 ez If you are a U. 1040 ez S. 1040 ez citizen or U. 1040 ez S. 1040 ez national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. 1040 ez   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. 1040 ez   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. 1040 ez   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. 1040 ez Total personal allowances (worksheet line H). 1040 ez    Add lines A through G and enter the total on line H. 1040 ez 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. 1040 ez 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. 1040 ez Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. 1040 ez Use the amount of each item you reasonably can expect to show on your return. 1040 ez 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. 1040 ez Do not include any amount shown on your last tax return that has been disallowed by the IRS. 1040 ez Example. 1040 ez On June 30, 2013, you bought your first home. 1040 ez 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. 1040 ez 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. 1040 ez You can use $13,200 to figure the number of your withholding allowances for itemized deductions. 1040 ez Not itemizing deductions. 1040 ez   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. 1040 ez Itemized deductions (worksheet line 1). 1040 ez   Enter your estimated total itemized deductions on line 1 of the worksheet. 1040 ez   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. 1040 ez You normally claim these deductions on Schedule A of Form 1040. 1040 ez Medical and dental expenses that are more than 10% (7. 1040 ez 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). 1040 ez State and local income or property taxes. 1040 ez Deductible home mortgage interest. 1040 ez Investment interest up to net investment income. 1040 ez Charitable contributions. 1040 ez Casualty and theft losses that are more than $100 and 10% of your AGI. 1040 ez 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. 1040 ez 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. 1040 ez AGI. 1040 ez   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. 1040 ez Phaseout of itemized deductions. 1040 ez   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. 1040 ez    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. 1040 ez Worksheet 1-2. 1040 ez Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. 1040 ez Enter the estimated total of your itemized deductions 1. 1040 ez   2. 1040 ez Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. 1040 ez   3. 1040 ez Is the amount on line 2 less than the amount on line 1? ❑ No. 1040 ez Stop here. 1040 ez Your deduction is not limited. 1040 ez Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. 1040 ez  ❑ Yes. 1040 ez Subtract line 2 from line 1. 1040 ez 3. 1040 ez       4. 1040 ez Multiply line 3 by 80% (. 1040 ez 80) 4. 1040 ez       5. 1040 ez Enter your expected AGI 5. 1040 ez       6. 1040 ez 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. 1040 ez   7. 1040 ez Is the amount on line 6 less than the amount on line 5? ❑ No. 1040 ez Stop here. 1040 ez Your deduction is not limited. 1040 ez Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. 1040 ez  ❑ Yes. 1040 ez Subtract line 6 from line 5. 1040 ez 7. 1040 ez       8. 1040 ez Multiply line 7 by 3% (. 1040 ez 03) 8. 1040 ez       9. 1040 ez Enter the smaller of line 4 or line 8 9. 1040 ez     10. 1040 ez Subtract line 9 from line 1. 1040 ez Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. 1040 ez     Adjustments to income (worksheet line 4). 1040 ez   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. 1040 ez   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. 1040 ez These adjustments appear on page 1 of your Form 1040 or 1040A. 1040 ez Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. 1040 ez Net operating loss carryovers. 1040 ez Certain business expenses of reservists, performing artists, and fee-based government officials. 1040 ez Health savings account or medical savings account deduction. 1040 ez Certain moving expenses. 1040 ez Deduction for self-employment tax. 1040 ez Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. 1040 ez Self-employed health insurance deduction. 1040 ez Penalty on early withdrawal of savings. 1040 ez Alimony paid. 1040 ez IRA deduction. 1040 ez Student loan interest deduction. 1040 ez Jury duty pay given to your employer. 1040 ez Reforestation amortization and expenses. 1040 ez Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. 1040 ez Repayment of certain supplemental unemployment benefits. 1040 ez Contributions to IRC 501(c)(18)(D) pension plans. 1040 ez Contributions by certain chaplains to IRC 403(b) plans. 1040 ez Attorney fees and court costs for certain unlawful discrimination claims. 1040 ez Attorney fees and court costs for certain whistleblower awards. 1040 ez Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). 1040 ez Tax credits (worksheet line 5). 1040 ez   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). 1040 ez But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. 1040 ez   If you take the child and dependent care credit into account on line 5, do not use line F. 1040 ez If you take the child tax credit into account on line 5, do not use line G. 1040 ez   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. 1040 ez See the individual tax form instructions for more details. 1040 ez Foreign tax credit, except any credit that applies to wages not subject to U. 1040 ez S. 1040 ez income tax withholding because they are subject to income tax withholding by a foreign country. 1040 ez See Publication 514, Foreign Tax Credit for Individuals. 1040 ez Credit for the elderly or the disabled. 1040 ez See Publication 524, Credit for the Elderly or the Disabled. 1040 ez Education credits. 1040 ez See Publication 970, Tax Benefits for Education. 1040 ez Retirement savings contributions credit (saver's credit). 1040 ez See Publication 590. 1040 ez Mortgage interest credit. 1040 ez See Publication 530, Tax Information for Homeowners. 1040 ez Adoption credit. 1040 ez See the Instructions for Form 8839. 1040 ez Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. 1040 ez See the Instructions for Form 8801. 1040 ez General business credit. 1040 ez See the Instructions for Form 3800. 1040 ez Earned income credit. 1040 ez See Publication 596. 1040 ez Figuring line 5 entry. 1040 ez   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 . 1040 ez Example. 1040 ez You are married and expect to file a joint return for 2014. 1040 ez Your combined estimated wages are $68,000. 1040 ez 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). 1040 ez In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. 1040 ez 7. 1040 ez Multiply your total estimated tax credits of $2,660 by 6. 1040 ez 7. 1040 ez 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. 1040 ez 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. 1040 ez Nonwage income (worksheet line 6). 1040 ez   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). 1040 ez Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. 1040 ez   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. 1040 ez See Getting the Right Amount of Tax Withheld , later. 1040 ez Net deductions and adjustments (worksheet line 8). 1040 ez    If line 7 is less than $3,950, enter “0” on line 8. 1040 ez If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. 1040 ez Example. 1040 ez If line 7 is $5,200, $5,200 ÷ $3,950 = 1. 1040 ez 32. 1040 ez Drop the fraction (. 1040 ez 32) and enter “1” on line 8. 1040 ez 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). 1040 ez Reducing your allowances (worksheet lines 1-3). 1040 ez   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). 1040 ez 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). 1040 ez Enter that number on line 2. 1040 ez 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. 1040 ez ”    Table 1-3. 1040 ez Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. 1040 ez  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. 1040 ez 0 $42,001 – 98,000 6. 1040 ez 7 $98,001 – 180,000 4. 1040 ez 0 $180,001 – 270,000 3. 1040 ez 6 $270,001 – 440,000 3. 1040 ez 0 $440,001 – 490,000. 1040 ez . 1040 ez . 1040 ez . 1040 ez 2. 1040 ez 9 $490,001 and over 2. 1040 ez 5 b. 1040 ez  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. 1040 ez 0 $19,001 – 47,000 6. 1040 ez 7 $47,001 – 104,000 4. 1040 ez 0 $104,001 – 205,000 3. 1040 ez 6 $205,001 – 430,000 3. 1040 ez 0 $430,001 and over 2. 1040 ez 5 c. 1040 ez  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. 1040 ez 0 $30,001 – 66,000 6. 1040 ez 7 $66,001 – 150,000 4. 1040 ez 0 $150,001 – 235,000 3. 1040 ez 6 $235,001 – 430,000 3. 1040 ez 0 $430,001 – 460,000 2. 1040 ez 9 $460,001 and over 2. 1040 ez 5 d. 1040 ez  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. 1040 ez 0 $21,001 – 49,000 6. 1040 ez 7 $49,001 – 90,000 4. 1040 ez 0 $90,001 – 135,000 3. 1040 ez 6 $135,001 – 220,000 3. 1040 ez 0 $220,001 – 245,000 2. 1040 ez 9 $245,001 and over 2. 1040 ez 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. 1040 ez If line 1 is more than or equal to line 2, do not use the rest of the worksheet. 1040 ez   If line 1 is less than line 2, enter “0” on Form W-4, line 5. 1040 ez Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. 1040 ez Other amounts owed. 1040 ez   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. 1040 ez The total is the additional withholding needed for the year. 1040 ez 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. 1040 ez You accurately complete all the Form W-4 worksheets that apply to you. 1040 ez You give your employer a new Form W-4 when changes occur. 1040 ez But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. 1040 ez This is most likely to happen in the following situations. 1040 ez You are married and both you and your spouse work. 1040 ez You have more than one job at a time. 1040 ez You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. 1040 ez You will owe additional amounts with your return, such as self-employment tax. 1040 ez Your withholding is based on obsolete Form W-4 information for a substantial part of the year. 1040 ez Your earnings are more than $130,000 if you are single or $180,000 if you are married. 1040 ez You work only part of the year. 1040 ez You change the number of your withholding allowances during the year. 1040 ez You are subject to Additional Medicare Tax or Net Investment Income Tax. 1040 ez 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. 1040 ez 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. 1040 ez To be eligible for the part-year method, you must meet both of the following requirements. 1040 ez You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. 1040 ez You cannot use a fiscal year. 1040 ez You must not expect to be employed for more than 245 days during the year. 1040 ez 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. 1040 ez If you are temporarily laid off for 30 days or less, count those days too. 1040 ez If you are laid off for more than 30 days, do not count those days. 1040 ez You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. 1040 ez How to apply for the part-year method. 1040 ez   You must ask your employer in writing to use this method. 1040 ez The request must state all three of the following. 1040 ez The date of your last day of work for any prior employer during the current calendar year. 1040 ez That you do not expect to be employed more than 245 days during the current calendar year. 1040 ez That you use the calendar year as your tax year. 1040 ez 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. 1040 ez 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. 1040 ez You must ask your employer in writing to use this method. 1040 ez To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. 1040 ez ) since the beginning of the year. 1040 ez Aids for Figuring Your Withholding IRS Withholding Calculator. 1040 ez   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. 1040 ez Go to www. 1040 ez irs. 1040 ez gov/Individuals/IRS-Withholding-Calculator. 1040 ez It can help you determine the correct amount to be withheld any time during the year. 1040 ez Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. 1040 ez These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. 1040 ez New Form W-4. 1040 ez   When you start a new job, your employer should give you a Form W-4 to fill out. 1040 ez Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. 1040 ez   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. 1040 ez 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. 1040 ez No Form W-4. 1040 ez   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. 1040 ez Repaying withheld tax. 1040 ez   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. 1040 ez Your employer cannot repay any of the tax previously withheld. 1040 ez Instead, claim the full amount withheld when you file your tax return. 1040 ez   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. 1040 ez Your employer can repay the amount that was withheld incorrectly. 1040 ez 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. 1040 ez IRS review of your withholding. 1040 ez   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. 1040 ez Your employer may be required to send a copy of the Form W-4 to the IRS. 1040 ez There is a penalty for supplying false information on Form W-4. 1040 ez See Penalties , later. 1040 ez   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. 1040 ez   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. 1040 ez 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. 1040 ez Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. 1040 ez 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. 1040 ez   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. 1040 ez   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. 1040 ez 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. 1040 ez   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. 1040 ez Your employer must then withhold tax based on this new Form W-4. 1040 ez   Additional information is available at IRS. 1040 ez gov. 1040 ez Enter “withholding compliance questions” in the search box. 1040 ez Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. 1040 ez The exemption applies only to income tax, not to social security or Medicare tax. 1040 ez You can claim exemption from withholding for 2014 only if both of the following situations apply. 1040 ez For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. 1040 ez For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. 1040 ez Use Figure 1-A to help you decide whether you can claim exemption from withholding. 1040 ez 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. 1040 ez These situations are discussed later. 1040 ez Students. 1040 ez   If you are a student, you are not automatically exempt. 1040 ez If you work only part time or during the summer, you may qualify for exemption from withholding. 1040 ez Example 1. 1040 ez You are a high school student and expect to earn $2,500 from a summer job. 1040 ez 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. 1040 ez You worked last summer and had $375 federal income tax withheld from your pay. 1040 ez The entire $375 was refunded when you filed your 2013 return. 1040 ez Using Figure 1-A, you find that you can claim exemption from withholding. 1040 ez Please click here for the text description of the image. 1040 ez Figure 1-A: Exemption From Withholding on Form W-4 Example 2. 1040 ez 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. 1040 ez 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. 1040 ez    You may have to file a tax return, even if you are exempt from withholding. 1040 ez See Publication 501 to see whether you must file a return. 1040 ez    Age 65 or older or blind. 1040 ez 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. 1040 ez Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. 1040 ez Instead, see Itemizing deductions or claiming exemptions or credits, next. 1040 ez Itemizing deductions or claiming exemptions or credits. 1040 ez   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. 1040 ez You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. 1040 ez Claiming exemption from withholding. 1040 ez   To claim exemption, you must give your employer a Form W-4. 1040 ez Do not complete lines 5 and 6. 1040 ez Enter “Exempt” on line 7. 1040 ez   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. 1040 ez 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. 1040 ez   Your claim of exempt status may be reviewed by the IRS. 1040 ez See IRS review of your withholding , earlier. 1040 ez An exemption is good for only 1 year. 1040 ez   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. 1040 ez Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. 1040 ez The payer can figure withholding on supplemental wages using the same method used for your regular wages. 1040 ez 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. 1040 ez Expense allowances. 1040 ez   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. 1040 ez 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. 1040 ez   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. 1040 ez Accountable plan. 1040 ez   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. 1040 ez Your expenses must have a business connection. 1040 ez That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. 1040 ez You must adequately account to your employer for these expenses within a reasonable period of time. 1040 ez You must return any excess reimbursement or allowance within a reasonable period of time. 1040 ez    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. 1040 ez   The definition of reasonable period of time depends on the facts and circumstances of your situation. 1040 ez 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. 1040 ez You receive an advance within 30 days of the time you have an expense. 1040 ez You adequately account for your expenses within 60 days after they were paid or incurred. 1040 ez You return any excess reimbursement within 120 days after the expense was paid or incurred. 1040 ez 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. 1040 ez Nonaccountable plan. 1040 ez   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. 1040 ez For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040 ez Penalties You may have to pay a penalty of $500 if both of the following apply. 1040 ez You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. 1040 ez You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. 1040 ez 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. 1040 ez The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. 1040 ez 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. 1040 ez A simple error or an honest mistake will not result in one of these penalties. 1040 ez 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. 1040 ez However, see chapter 4 for information on the penalty for underpaying your tax. 1040 ez Tips The tips you receive while working on your job are considered part of your pay. 1040 ez You must include your tips on your tax return on the same line as your regular pay. 1040 ez However, tax is not withheld directly from tip income, as it is from your regular pay. 1040 ez Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. 1040 ez Reporting tips to your employer. 1040 ez   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. 1040 ez The report is due by the 10th day of the following month. 1040 ez   If you have more than one job, make a separate report to each employer. 1040 ez Report only the tips you received while working for that employer, and only if they total $20 or more for the month. 1040 ez How employer figures amount to withhold. 1040 ez   The tips you report to your employer are counted as part of your income for the month you report them. 1040 ez Your employer can figure your withholding in either of two ways. 1040 ez By withholding at the regular rate on the sum of your pay plus your reported tips. 1040 ez By withholding at the regular rate on your pay plus a percentage of your reported tips. 1040 ez Not enough pay to cover taxes. 1040 ez   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. 1040 ez   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. 1040 ez If not enough tax is withheld, you may have to pay estimated tax. 1040 ez 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. 1040 ez Tips not reported to your employer. 1040 ez   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). 1040 ez Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. 1040 ez Allocated tips. 1040 ez   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. 1040 ez   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. 1040 ez Withholding is based only on your pay plus your reported tips. 1040 ez Your employer should refund to you any incorrectly withheld tax. 1040 ez More information. 1040 ez   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi