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2012 Form 1040x

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2012 Form 1040x

2012 form 1040x 1. 2012 form 1040x   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. 2012 form 1040x Exceptions. 2012 form 1040x Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. 2012 form 1040x Identical wagers. 2012 form 1040x Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. 2012 form 1040x Underreported interest or dividends. 2012 form 1040x 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. 2012 form 1040x This chapter explains in detail the rules for withholding tax from each of these types of income. 2012 form 1040x The discussion of salaries and wages includes an explanation of how to complete Form W-4. 2012 form 1040x This chapter also covers backup withholding on interest, dividends, and other payments. 2012 form 1040x 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. 2012 form 1040x Salaries and Wages Income tax is withheld from the pay of most employees. 2012 form 1040x Your pay includes your regular pay, bonuses, commissions, and vacation allowances. 2012 form 1040x It also includes reimbursements and other expense allowances paid under a nonaccountable plan. 2012 form 1040x See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. 2012 form 1040x If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. 2012 form 1040x This is explained under Exemption From Withholding , later. 2012 form 1040x You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. 2012 form 1040x 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. 2012 form 1040x Military retirees. 2012 form 1040x   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. 2012 form 1040x Household workers. 2012 form 1040x   If you are a household worker, you can ask your employer to withhold income tax from your pay. 2012 form 1040x A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. 2012 form 1040x   Tax is withheld only if you want it withheld and your employer agrees to withhold it. 2012 form 1040x If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. 2012 form 1040x Farmworkers. 2012 form 1040x   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. 2012 form 1040x Differential wage payments. 2012 form 1040x   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. 2012 form 1040x 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. 2012 form 1040x The wages and withholding will be reported on Form W-2, Wage and Tax Statement. 2012 form 1040x 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. 2012 form 1040x The amount you earn in each payroll period. 2012 form 1040x The information you give your employer on Form W-4. 2012 form 1040x Form W-4 includes four types of information that your employer will use to figure your withholding. 2012 form 1040x Whether to withhold at the single rate or at the lower married rate. 2012 form 1040x How many withholding allowances you claim (each allowance reduces the amount withheld). 2012 form 1040x Whether you want an additional amount withheld. 2012 form 1040x Whether you are claiming an exemption from withholding in 2014. 2012 form 1040x See Exemption From Withholding , later. 2012 form 1040x Note. 2012 form 1040x You must specify a filing status and a number of withholding allowances on Form W-4. 2012 form 1040x You cannot specify only a dollar amount of withholding. 2012 form 1040x New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. 2012 form 1040x Your employer should have copies of the form. 2012 form 1040x If you need to change the information later, you must fill out a new form. 2012 form 1040x 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. 2012 form 1040x You may be able to avoid overwithholding if your employer agrees to use the part-year method. 2012 form 1040x See Part-Year Method , later, for more information. 2012 form 1040x Employee also receiving pension income. 2012 form 1040x   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. 2012 form 1040x However, you can choose to split your withholding allowances between your pension and job in any manner. 2012 form 1040x 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. 2012 form 1040x When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. 2012 form 1040x 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. 2012 form 1040x See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. 2012 form 1040x Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. 2012 form 1040x See Table 1-1 for examples of personal and financial changes you should consider. 2012 form 1040x Table 1-1. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. 2012 form 1040x You can get a blank Form W-4 from your employer or print the form from IRS. 2012 form 1040x gov. 2012 form 1040x You should try to have your withholding match your actual tax liability. 2012 form 1040x 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. 2012 form 1040x If too much tax is withheld, you will lose the use of that money until you get your refund. 2012 form 1040x 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. 2012 form 1040x See Table 1-1 for examples. 2012 form 1040x Note. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x You should check your withholding when any of the following situations occur. 2012 form 1040x You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. 2012 form 1040x 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. 2012 form 1040x There are changes in your life or financial situation that affect your tax liability. 2012 form 1040x See Table 1-1. 2012 form 1040x There are changes in the tax law that affect your tax liability. 2012 form 1040x 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. 2012 form 1040x You can also use the IRS Withholding calculator at www. 2012 form 1040x irs. 2012 form 1040x gov/individuals. 2012 form 1040x If you use the worksheets and tables in this publication, follow these steps. 2012 form 1040x Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x How Do You Increase Your Withholding? There are two ways to increase your withholding. 2012 form 1040x 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. 2012 form 1040x Requesting an additional amount withheld. 2012 form 1040x   You can request that an additional amount be withheld from each paycheck by following these steps. 2012 form 1040x Complete Worksheets 1-5 and 1-7. 2012 form 1040x 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. 2012 form 1040x Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. 2012 form 1040x This is the number of allowances you entered on the last Form W-4 you gave your employer. 2012 form 1040x Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. 2012 form 1040x Give your newly completed Form W-4 to your employer. 2012 form 1040x   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. 2012 form 1040x Example. 2012 form 1040x 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). 2012 form 1040x Steve's tax will be underwithheld by $800 ($4,316 − $3,516). 2012 form 1040x His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. 2012 form 1040x Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. 2012 form 1040x 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. 2012 form 1040x He gives the completed form to his employer. 2012 form 1040x 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. 2012 form 1040x If this is the case, you can increase your withholding for one or more of the jobs. 2012 form 1040x   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. 2012 form 1040x 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. 2012 form 1040x This will give you the additional amount to enter on the Form W-4 you will file for that job. 2012 form 1040x You need to give your employer a new Form W-4 for each job for which you are changing your withholding. 2012 form 1040x Example. 2012 form 1040x Meg Green works in a store and earns $46,000 a year. 2012 form 1040x Her husband, John, works full-time in manufacturing and earns $68,000 a year. 2012 form 1040x In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. 2012 form 1040x They expect to file a joint income tax return. 2012 form 1040x Meg and John complete Worksheets 1-5, 1-6, and 1-7. 2012 form 1040x Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. 2012 form 1040x They can divide the $4,459 any way they want. 2012 form 1040x They can enter an additional amount on either of their Forms W-4, or divide it between them. 2012 form 1040x 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. 2012 form 1040x Both claim the same number of allowances as before. 2012 form 1040x 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. 2012 form 1040x There are two ways to do this. 2012 form 1040x You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. 2012 form 1040x You can claim only the number of allowances to which you are entitled. 2012 form 1040x To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. 2012 form 1040x Increasing the number of allowances. 2012 form 1040x   Figure and increase the number of withholding allowances you can claim as follows. 2012 form 1040x On a new Form W-4, complete the Personal Allowances Worksheet. 2012 form 1040x If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. 2012 form 1040x If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. 2012 form 1040x If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. 2012 form 1040x Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. 2012 form 1040x Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. 2012 form 1040x Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. 2012 form 1040x 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. 2012 form 1040x If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. 2012 form 1040x Example. 2012 form 1040x Brett and Alyssa Davis are married and expect to file a joint return for 2014. 2012 form 1040x Their expected taxable income from all sources is $68,000. 2012 form 1040x They expect to have $15,900 of itemized deductions. 2012 form 1040x Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. 2012 form 1040x The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. 2012 form 1040x Line 1, expected child and dependent care credit—$960. 2012 form 1040x Line 9, expected adoption credit—$1,500. 2012 form 1040x Line 10, total estimated tax credits—$2,460. 2012 form 1040x Line 11. 2012 form 1040x 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). 2012 form 1040x The number to the right of this range is 6. 2012 form 1040x 7. 2012 form 1040x Line 12, multiply line 10 by line 11—$16,482. 2012 form 1040x Then the Davis' complete the Form W-4 worksheets. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x If the change is for next year, your new Form W-4 will not take effect until next year. 2012 form 1040x 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). 2012 form 1040x However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. 2012 form 1040x You completed either form based on your projected income at that time. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x Start off with the Personal Allowances Worksheet. 2012 form 1040x 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. 2012 form 1040x The third worksheet is the most important for this situation. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x It is your decision how to divide up your withholding allowances between these sources of income. 2012 form 1040x 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. 2012 form 1040x ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. 2012 form 1040x 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. 2012 form 1040x Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. 2012 form 1040x Contact your pension provider and your employer's payroll department. 2012 form 1040x And remember, this is not a final decision. 2012 form 1040x 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. 2012 form 1040x You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. 2012 form 1040x You may need more tax withheld, or you may need less. 2012 form 1040x Table 1-2. 2012 form 1040x Tax Credits for 2014 For more information about the . 2012 form 1040x . 2012 form 1040x . 2012 form 1040x See . 2012 form 1040x . 2012 form 1040x . 2012 form 1040x 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. 2012 form 1040x S. 2012 form 1040x 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. 2012 form 1040x Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. 2012 form 1040x Everyone else must have tax withheld at the higher single rate. 2012 form 1040x Single. 2012 form 1040x   You must check the “Single” box if any of the following applies. 2012 form 1040x You are single. 2012 form 1040x If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. 2012 form 1040x You are married, but neither you nor your spouse is a citizen or resident of the United States. 2012 form 1040x 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. 2012 form 1040x For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. 2012 form 1040x Married. 2012 form 1040x   You qualify to check the “Married” box if any of the following applies. 2012 form 1040x You are married and neither you nor your spouse is a nonresident alien. 2012 form 1040x You are considered married for the whole year even if your spouse died during the year. 2012 form 1040x 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. 2012 form 1040x For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. 2012 form 1040x You expect to be able to file your return as a qualifying widow or widower. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x Married, but withhold at higher single rate. 2012 form 1040x   Some married people find that they do not have enough tax withheld at the married rate. 2012 form 1040x This can happen, for example, when both spouses work. 2012 form 1040x To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). 2012 form 1040x Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. 2012 form 1040x Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. 2012 form 1040x You will have the most tax withheld if you claim “0” allowances. 2012 form 1040x The number of allowances you can claim depends on the following factors. 2012 form 1040x How many exemptions you can take on your tax return. 2012 form 1040x Whether you have income from more than one job. 2012 form 1040x What deductions, adjustments to income, and credits you expect to have for the year. 2012 form 1040x Whether you will file as head of household. 2012 form 1040x 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. 2012 form 1040x Or, if married filing separately, whether or not your spouse also works. 2012 form 1040x Form W-4 worksheets. 2012 form 1040x    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. 2012 form 1040x The worksheets are for your own records. 2012 form 1040x Do not give them to your employer. 2012 form 1040x   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. 2012 form 1040x 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. 2012 form 1040x Complete separate sets of worksheets only if you and your spouse will file separate returns. 2012 form 1040x   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x   Complete all worksheets that apply to your situation. 2012 form 1040x 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. 2012 form 1040x Multiple jobs. 2012 form 1040x   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. 2012 form 1040x Then split your allowances between the Forms W-4 for each job. 2012 form 1040x You cannot claim the same allowances with more than one employer at the same time. 2012 form 1040x You can claim all your allowances with one employer and none with the other(s), or divide them any other way. 2012 form 1040x Married individuals. 2012 form 1040x   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. 2012 form 1040x Use only one set of worksheets. 2012 form 1040x You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. 2012 form 1040x   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. 2012 form 1040x Alternative method of figuring withholding allowances. 2012 form 1040x   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. 2012 form 1040x   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. 2012 form 1040x 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. 2012 form 1040x   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. 2012 form 1040x You still must give your employer a Form W-4 claiming your withholding allowances. 2012 form 1040x Employees who are not citizens or residents. 2012 form 1040x   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. 2012 form 1040x However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. 2012 form 1040x S. 2012 form 1040x national. 2012 form 1040x It also does not apply if your spouse is a U. 2012 form 1040x S. 2012 form 1040x citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. 2012 form 1040x Special rules apply to residents of South Korea and India. 2012 form 1040x For more information, see Withholding From Compensation in chapter 8 of Publication 519. 2012 form 1040x 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. 2012 form 1040x Exemptions. 2012 form 1040x Only one job. 2012 form 1040x Head of household filing status. 2012 form 1040x Child and dependent care credit. 2012 form 1040x Child tax credit. 2012 form 1040x Exemptions (worksheet lines A, C, and D). 2012 form 1040x   You can claim one withholding allowance for each exemption you expect to claim on your tax return. 2012 form 1040x Self. 2012 form 1040x   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. 2012 form 1040x 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. 2012 form 1040x Spouse. 2012 form 1040x   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. 2012 form 1040x Do not claim this allowance if you and your spouse expect to file separate returns. 2012 form 1040x Dependents. 2012 form 1040x   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. 2012 form 1040x Only one job (worksheet line B). 2012 form 1040x    You can claim an additional withholding allowance if any of the following apply for 2014. 2012 form 1040x You are single and you have only one job at a time. 2012 form 1040x You are married, you have only one job at a time, and your spouse does not work. 2012 form 1040x Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. 2012 form 1040x If you qualify for this allowance, enter “1” on line B of the worksheet. 2012 form 1040x Head of household filing status (worksheet line E). 2012 form 1040x   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. 2012 form 1040x For more information, see Publication 501. 2012 form 1040x   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. 2012 form 1040x Reduction of personal allowances. 2012 form 1040x   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. 2012 form 1040x 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. 2012 form 1040x Worksheet 1-1. 2012 form 1040x Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. 2012 form 1040x Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. 2012 form 1040x   2. 2012 form 1040x Enter your expected AGI 2. 2012 form 1040x       3. 2012 form 1040x 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. 2012 form 1040x       4. 2012 form 1040x Subtract line 3 from line 2 4. 2012 form 1040x       5. 2012 form 1040x Divide line 4 by $125,000 ($62,500 if married filing separately). 2012 form 1040x Enter the result as a decimal 5. 2012 form 1040x   6. 2012 form 1040x Multiply line 1 by line 5. 2012 form 1040x If the result is not a whole number, increase it to the next higher whole number 6. 2012 form 1040x   7. 2012 form 1040x Subtract line 6 from line 1. 2012 form 1040x 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. 2012 form 1040x     Child and dependent care credit (worksheet line F). 2012 form 1040x   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. 2012 form 1040x 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. 2012 form 1040x For more information, see Publication 503, Child and Dependent Care Expenses. 2012 form 1040x   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. 2012 form 1040x Child tax credit (worksheet line G). 2012 form 1040x   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. 2012 form 1040x Subtract “1” from that amount if you have three to six eligible children. 2012 form 1040x Subtract “2” from that amount if you have seven or more eligible children. 2012 form 1040x   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. 2012 form 1040x   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. 2012 form 1040x S. 2012 form 1040x citizen, U. 2012 form 1040x S. 2012 form 1040x national, or U. 2012 form 1040x S. 2012 form 1040x resident alien, and Who will be claimed as a dependent on your return. 2012 form 1040x If you are a U. 2012 form 1040x S. 2012 form 1040x citizen or U. 2012 form 1040x S. 2012 form 1040x national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. 2012 form 1040x   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. 2012 form 1040x   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. 2012 form 1040x   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. 2012 form 1040x Total personal allowances (worksheet line H). 2012 form 1040x    Add lines A through G and enter the total on line H. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. 2012 form 1040x Use the amount of each item you reasonably can expect to show on your return. 2012 form 1040x 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. 2012 form 1040x Do not include any amount shown on your last tax return that has been disallowed by the IRS. 2012 form 1040x Example. 2012 form 1040x On June 30, 2013, you bought your first home. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x You can use $13,200 to figure the number of your withholding allowances for itemized deductions. 2012 form 1040x Not itemizing deductions. 2012 form 1040x   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. 2012 form 1040x Itemized deductions (worksheet line 1). 2012 form 1040x   Enter your estimated total itemized deductions on line 1 of the worksheet. 2012 form 1040x   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. 2012 form 1040x You normally claim these deductions on Schedule A of Form 1040. 2012 form 1040x Medical and dental expenses that are more than 10% (7. 2012 form 1040x 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). 2012 form 1040x State and local income or property taxes. 2012 form 1040x Deductible home mortgage interest. 2012 form 1040x Investment interest up to net investment income. 2012 form 1040x Charitable contributions. 2012 form 1040x Casualty and theft losses that are more than $100 and 10% of your AGI. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x AGI. 2012 form 1040x   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. 2012 form 1040x Phaseout of itemized deductions. 2012 form 1040x   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. 2012 form 1040x    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. 2012 form 1040x Worksheet 1-2. 2012 form 1040x Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. 2012 form 1040x Enter the estimated total of your itemized deductions 1. 2012 form 1040x   2. 2012 form 1040x Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. 2012 form 1040x   3. 2012 form 1040x Is the amount on line 2 less than the amount on line 1? ❑ No. 2012 form 1040x Stop here. 2012 form 1040x Your deduction is not limited. 2012 form 1040x Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. 2012 form 1040x  ❑ Yes. 2012 form 1040x Subtract line 2 from line 1. 2012 form 1040x 3. 2012 form 1040x       4. 2012 form 1040x Multiply line 3 by 80% (. 2012 form 1040x 80) 4. 2012 form 1040x       5. 2012 form 1040x Enter your expected AGI 5. 2012 form 1040x       6. 2012 form 1040x 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. 2012 form 1040x   7. 2012 form 1040x Is the amount on line 6 less than the amount on line 5? ❑ No. 2012 form 1040x Stop here. 2012 form 1040x Your deduction is not limited. 2012 form 1040x Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. 2012 form 1040x  ❑ Yes. 2012 form 1040x Subtract line 6 from line 5. 2012 form 1040x 7. 2012 form 1040x       8. 2012 form 1040x Multiply line 7 by 3% (. 2012 form 1040x 03) 8. 2012 form 1040x       9. 2012 form 1040x Enter the smaller of line 4 or line 8 9. 2012 form 1040x     10. 2012 form 1040x Subtract line 9 from line 1. 2012 form 1040x Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. 2012 form 1040x     Adjustments to income (worksheet line 4). 2012 form 1040x   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. 2012 form 1040x   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. 2012 form 1040x These adjustments appear on page 1 of your Form 1040 or 1040A. 2012 form 1040x Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. 2012 form 1040x Net operating loss carryovers. 2012 form 1040x Certain business expenses of reservists, performing artists, and fee-based government officials. 2012 form 1040x Health savings account or medical savings account deduction. 2012 form 1040x Certain moving expenses. 2012 form 1040x Deduction for self-employment tax. 2012 form 1040x Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. 2012 form 1040x Self-employed health insurance deduction. 2012 form 1040x Penalty on early withdrawal of savings. 2012 form 1040x Alimony paid. 2012 form 1040x IRA deduction. 2012 form 1040x Student loan interest deduction. 2012 form 1040x Jury duty pay given to your employer. 2012 form 1040x Reforestation amortization and expenses. 2012 form 1040x Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. 2012 form 1040x Repayment of certain supplemental unemployment benefits. 2012 form 1040x Contributions to IRC 501(c)(18)(D) pension plans. 2012 form 1040x Contributions by certain chaplains to IRC 403(b) plans. 2012 form 1040x Attorney fees and court costs for certain unlawful discrimination claims. 2012 form 1040x Attorney fees and court costs for certain whistleblower awards. 2012 form 1040x Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). 2012 form 1040x Tax credits (worksheet line 5). 2012 form 1040x   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). 2012 form 1040x But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. 2012 form 1040x   If you take the child and dependent care credit into account on line 5, do not use line F. 2012 form 1040x If you take the child tax credit into account on line 5, do not use line G. 2012 form 1040x   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. 2012 form 1040x See the individual tax form instructions for more details. 2012 form 1040x Foreign tax credit, except any credit that applies to wages not subject to U. 2012 form 1040x S. 2012 form 1040x income tax withholding because they are subject to income tax withholding by a foreign country. 2012 form 1040x See Publication 514, Foreign Tax Credit for Individuals. 2012 form 1040x Credit for the elderly or the disabled. 2012 form 1040x See Publication 524, Credit for the Elderly or the Disabled. 2012 form 1040x Education credits. 2012 form 1040x See Publication 970, Tax Benefits for Education. 2012 form 1040x Retirement savings contributions credit (saver's credit). 2012 form 1040x See Publication 590. 2012 form 1040x Mortgage interest credit. 2012 form 1040x See Publication 530, Tax Information for Homeowners. 2012 form 1040x Adoption credit. 2012 form 1040x See the Instructions for Form 8839. 2012 form 1040x Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. 2012 form 1040x See the Instructions for Form 8801. 2012 form 1040x General business credit. 2012 form 1040x See the Instructions for Form 3800. 2012 form 1040x Earned income credit. 2012 form 1040x See Publication 596. 2012 form 1040x Figuring line 5 entry. 2012 form 1040x   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 . 2012 form 1040x Example. 2012 form 1040x You are married and expect to file a joint return for 2014. 2012 form 1040x Your combined estimated wages are $68,000. 2012 form 1040x 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). 2012 form 1040x In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. 2012 form 1040x 7. 2012 form 1040x Multiply your total estimated tax credits of $2,660 by 6. 2012 form 1040x 7. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x Nonwage income (worksheet line 6). 2012 form 1040x   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). 2012 form 1040x Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. 2012 form 1040x   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. 2012 form 1040x See Getting the Right Amount of Tax Withheld , later. 2012 form 1040x Net deductions and adjustments (worksheet line 8). 2012 form 1040x    If line 7 is less than $3,950, enter “0” on line 8. 2012 form 1040x If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. 2012 form 1040x Example. 2012 form 1040x If line 7 is $5,200, $5,200 ÷ $3,950 = 1. 2012 form 1040x 32. 2012 form 1040x Drop the fraction (. 2012 form 1040x 32) and enter “1” on line 8. 2012 form 1040x 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). 2012 form 1040x Reducing your allowances (worksheet lines 1-3). 2012 form 1040x   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). 2012 form 1040x 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). 2012 form 1040x Enter that number on line 2. 2012 form 1040x 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. 2012 form 1040x ”    Table 1-3. 2012 form 1040x Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. 2012 form 1040x  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. 2012 form 1040x 0 $42,001 – 98,000 6. 2012 form 1040x 7 $98,001 – 180,000 4. 2012 form 1040x 0 $180,001 – 270,000 3. 2012 form 1040x 6 $270,001 – 440,000 3. 2012 form 1040x 0 $440,001 – 490,000. 2012 form 1040x . 2012 form 1040x . 2012 form 1040x . 2012 form 1040x 2. 2012 form 1040x 9 $490,001 and over 2. 2012 form 1040x 5 b. 2012 form 1040x  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. 2012 form 1040x 0 $19,001 – 47,000 6. 2012 form 1040x 7 $47,001 – 104,000 4. 2012 form 1040x 0 $104,001 – 205,000 3. 2012 form 1040x 6 $205,001 – 430,000 3. 2012 form 1040x 0 $430,001 and over 2. 2012 form 1040x 5 c. 2012 form 1040x  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. 2012 form 1040x 0 $30,001 – 66,000 6. 2012 form 1040x 7 $66,001 – 150,000 4. 2012 form 1040x 0 $150,001 – 235,000 3. 2012 form 1040x 6 $235,001 – 430,000 3. 2012 form 1040x 0 $430,001 – 460,000 2. 2012 form 1040x 9 $460,001 and over 2. 2012 form 1040x 5 d. 2012 form 1040x  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. 2012 form 1040x 0 $21,001 – 49,000 6. 2012 form 1040x 7 $49,001 – 90,000 4. 2012 form 1040x 0 $90,001 – 135,000 3. 2012 form 1040x 6 $135,001 – 220,000 3. 2012 form 1040x 0 $220,001 – 245,000 2. 2012 form 1040x 9 $245,001 and over 2. 2012 form 1040x 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. 2012 form 1040x If line 1 is more than or equal to line 2, do not use the rest of the worksheet. 2012 form 1040x   If line 1 is less than line 2, enter “0” on Form W-4, line 5. 2012 form 1040x Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. 2012 form 1040x Other amounts owed. 2012 form 1040x   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. 2012 form 1040x The total is the additional withholding needed for the year. 2012 form 1040x 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. 2012 form 1040x You accurately complete all the Form W-4 worksheets that apply to you. 2012 form 1040x You give your employer a new Form W-4 when changes occur. 2012 form 1040x But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. 2012 form 1040x This is most likely to happen in the following situations. 2012 form 1040x You are married and both you and your spouse work. 2012 form 1040x You have more than one job at a time. 2012 form 1040x You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. 2012 form 1040x You will owe additional amounts with your return, such as self-employment tax. 2012 form 1040x Your withholding is based on obsolete Form W-4 information for a substantial part of the year. 2012 form 1040x Your earnings are more than $130,000 if you are single or $180,000 if you are married. 2012 form 1040x You work only part of the year. 2012 form 1040x You change the number of your withholding allowances during the year. 2012 form 1040x You are subject to Additional Medicare Tax or Net Investment Income Tax. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x To be eligible for the part-year method, you must meet both of the following requirements. 2012 form 1040x You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. 2012 form 1040x You cannot use a fiscal year. 2012 form 1040x You must not expect to be employed for more than 245 days during the year. 2012 form 1040x 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. 2012 form 1040x If you are temporarily laid off for 30 days or less, count those days too. 2012 form 1040x If you are laid off for more than 30 days, do not count those days. 2012 form 1040x You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. 2012 form 1040x How to apply for the part-year method. 2012 form 1040x   You must ask your employer in writing to use this method. 2012 form 1040x The request must state all three of the following. 2012 form 1040x The date of your last day of work for any prior employer during the current calendar year. 2012 form 1040x That you do not expect to be employed more than 245 days during the current calendar year. 2012 form 1040x That you use the calendar year as your tax year. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x You must ask your employer in writing to use this method. 2012 form 1040x To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. 2012 form 1040x ) since the beginning of the year. 2012 form 1040x Aids for Figuring Your Withholding IRS Withholding Calculator. 2012 form 1040x   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. 2012 form 1040x Go to www. 2012 form 1040x irs. 2012 form 1040x gov/Individuals/IRS-Withholding-Calculator. 2012 form 1040x It can help you determine the correct amount to be withheld any time during the year. 2012 form 1040x Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. 2012 form 1040x These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. 2012 form 1040x New Form W-4. 2012 form 1040x   When you start a new job, your employer should give you a Form W-4 to fill out. 2012 form 1040x Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. 2012 form 1040x   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. 2012 form 1040x 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. 2012 form 1040x No Form W-4. 2012 form 1040x   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. 2012 form 1040x Repaying withheld tax. 2012 form 1040x   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. 2012 form 1040x Your employer cannot repay any of the tax previously withheld. 2012 form 1040x Instead, claim the full amount withheld when you file your tax return. 2012 form 1040x   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. 2012 form 1040x Your employer can repay the amount that was withheld incorrectly. 2012 form 1040x 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. 2012 form 1040x IRS review of your withholding. 2012 form 1040x   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. 2012 form 1040x Your employer may be required to send a copy of the Form W-4 to the IRS. 2012 form 1040x There is a penalty for supplying false information on Form W-4. 2012 form 1040x See Penalties , later. 2012 form 1040x   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. 2012 form 1040x   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. 2012 form 1040x 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. 2012 form 1040x Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. 2012 form 1040x 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. 2012 form 1040x   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. 2012 form 1040x   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. 2012 form 1040x 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. 2012 form 1040x   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. 2012 form 1040x Your employer must then withhold tax based on this new Form W-4. 2012 form 1040x   Additional information is available at IRS. 2012 form 1040x gov. 2012 form 1040x Enter “withholding compliance questions” in the search box. 2012 form 1040x Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. 2012 form 1040x The exemption applies only to income tax, not to social security or Medicare tax. 2012 form 1040x You can claim exemption from withholding for 2014 only if both of the following situations apply. 2012 form 1040x For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. 2012 form 1040x For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. 2012 form 1040x Use Figure 1-A to help you decide whether you can claim exemption from withholding. 2012 form 1040x 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. 2012 form 1040x These situations are discussed later. 2012 form 1040x Students. 2012 form 1040x   If you are a student, you are not automatically exempt. 2012 form 1040x If you work only part time or during the summer, you may qualify for exemption from withholding. 2012 form 1040x Example 1. 2012 form 1040x You are a high school student and expect to earn $2,500 from a summer job. 2012 form 1040x 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. 2012 form 1040x You worked last summer and had $375 federal income tax withheld from your pay. 2012 form 1040x The entire $375 was refunded when you filed your 2013 return. 2012 form 1040x Using Figure 1-A, you find that you can claim exemption from withholding. 2012 form 1040x Please click here for the text description of the image. 2012 form 1040x Figure 1-A: Exemption From Withholding on Form W-4 Example 2. 2012 form 1040x 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. 2012 form 1040x 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. 2012 form 1040x    You may have to file a tax return, even if you are exempt from withholding. 2012 form 1040x See Publication 501 to see whether you must file a return. 2012 form 1040x    Age 65 or older or blind. 2012 form 1040x 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. 2012 form 1040x Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. 2012 form 1040x Instead, see Itemizing deductions or claiming exemptions or credits, next. 2012 form 1040x Itemizing deductions or claiming exemptions or credits. 2012 form 1040x   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. 2012 form 1040x You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. 2012 form 1040x Claiming exemption from withholding. 2012 form 1040x   To claim exemption, you must give your employer a Form W-4. 2012 form 1040x Do not complete lines 5 and 6. 2012 form 1040x Enter “Exempt” on line 7. 2012 form 1040x   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. 2012 form 1040x 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. 2012 form 1040x   Your claim of exempt status may be reviewed by the IRS. 2012 form 1040x See IRS review of your withholding , earlier. 2012 form 1040x An exemption is good for only 1 year. 2012 form 1040x   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. 2012 form 1040x Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. 2012 form 1040x The payer can figure withholding on supplemental wages using the same method used for your regular wages. 2012 form 1040x 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. 2012 form 1040x Expense allowances. 2012 form 1040x   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. 2012 form 1040x 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. 2012 form 1040x   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. 2012 form 1040x Accountable plan. 2012 form 1040x   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. 2012 form 1040x Your expenses must have a business connection. 2012 form 1040x That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. 2012 form 1040x You must adequately account to your employer for these expenses within a reasonable period of time. 2012 form 1040x You must return any excess reimbursement or allowance within a reasonable period of time. 2012 form 1040x    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. 2012 form 1040x   The definition of reasonable period of time depends on the facts and circumstances of your situation. 2012 form 1040x 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. 2012 form 1040x You receive an advance within 30 days of the time you have an expense. 2012 form 1040x You adequately account for your expenses within 60 days after they were paid or incurred. 2012 form 1040x You return any excess reimbursement within 120 days after the expense was paid or incurred. 2012 form 1040x 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. 2012 form 1040x Nonaccountable plan. 2012 form 1040x   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. 2012 form 1040x For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2012 form 1040x Penalties You may have to pay a penalty of $500 if both of the following apply. 2012 form 1040x You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. 2012 form 1040x You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. 2012 form 1040x 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. 2012 form 1040x The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. 2012 form 1040x 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. 2012 form 1040x A simple error or an honest mistake will not result in one of these penalties. 2012 form 1040x 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. 2012 form 1040x However, see chapter 4 for information on the penalty for underpaying your tax. 2012 form 1040x Tips The tips you receive while working on your job are considered part of your pay. 2012 form 1040x You must include your tips on your tax return on the same line as your regular pay. 2012 form 1040x However, tax is not withheld directly from tip income, as it is from your regular pay. 2012 form 1040x Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. 2012 form 1040x Reporting tips to your employer. 2012 form 1040x   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. 2012 form 1040x The report is due by the 10th day of the following month. 2012 form 1040x   If you have more than one job, make a separate report to each employer. 2012 form 1040x Report only the tips you received while working for that employer, and only if they total $20 or more for the month. 2012 form 1040x How employer figures amount to withhold. 2012 form 1040x   The tips you report to your employer are counted as part of your income for the month you report them. 2012 form 1040x Your employer can figure your withholding in either of two ways. 2012 form 1040x By withholding at the regular rate on the sum of your pay plus your reported tips. 2012 form 1040x By withholding at the regular rate on your pay plus a percentage of your reported tips. 2012 form 1040x Not enough pay to cover taxes. 2012 form 1040x   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. 2012 form 1040x   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. 2012 form 1040x If not enough tax is withheld, you may have to pay estimated tax. 2012 form 1040x 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. 2012 form 1040x Tips not reported to your employer. 2012 form 1040x   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). 2012 form 1040x Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. 2012 form 1040x Allocated tips. 2012 form 1040x   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. 2012 form 1040x   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. 2012 form 1040x Withholding is based only on your pay plus your reported tips. 2012 form 1040x Your employer should refund to you any incorrectly withheld tax. 2012 form 1040x More information. 2012 form 1040x   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi
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The 2012 Form 1040x

2012 form 1040x 3. 2012 form 1040x   Exclusions From Gross Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident AliensForeign Earned Income and Housing Amount Nonresident AliensInterest Income Dividend Income Services Performed for Foreign Employer Gambling Winnings From Dog or Horse Racing Gain From the Sale of Your Main Home Scholarships and Fellowship GrantsExpenses that do not qualify. 2012 form 1040x Introduction Resident and nonresident aliens are allowed exclusions from gross income if they meet certain conditions. 2012 form 1040x An exclusion from gross income is generally income you receive that is not included in your U. 2012 form 1040x S. 2012 form 1040x income and is not subject to U. 2012 form 1040x S. 2012 form 1040x tax. 2012 form 1040x This chapter covers some of the more common exclusions allowed to resident and nonresident aliens. 2012 form 1040x Topics - This chapter discusses: Nontaxable interest, Nontaxable dividends, Certain compensation paid by a foreign employer, Gain from sale of home, and Scholarships and fellowship grants. 2012 form 1040x Useful Items - You may want to see: Publication 54 Tax Guide for U. 2012 form 1040x S. 2012 form 1040x Citizens and Resident Aliens Abroad 523 Selling Your Home See chapter 12 for information about getting these publications. 2012 form 1040x Resident Aliens Resident aliens may be able to exclude the following items from their gross income. 2012 form 1040x Foreign Earned Income and Housing Amount If you are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months, you may qualify for the foreign earned income exclusion. 2012 form 1040x The exclusion is $97,600 in 2013. 2012 form 1040x In addition, you may be able to exclude or deduct certain foreign housing amounts. 2012 form 1040x You may also qualify if you are a bona fide resident of a foreign country and you are a citizen or national of a country with which the United States has an income tax treaty. 2012 form 1040x For more information, see Publication 54. 2012 form 1040x Foreign country. 2012 form 1040x    A foreign country is any territory under the sovereignty of a government other than that of the United States. 2012 form 1040x   The term “foreign country” includes the country's territorial waters and airspace, but not international waters and the airspace above them. 2012 form 1040x It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. 2012 form 1040x   The term “foreign country” does not include U. 2012 form 1040x S. 2012 form 1040x possessions or territories. 2012 form 1040x It does not include the Antarctic region. 2012 form 1040x Nonresident Aliens Nonresident aliens can exclude the following items from their gross income. 2012 form 1040x Interest Income Interest income that is not connected with a U. 2012 form 1040x S. 2012 form 1040x trade or business is excluded from income if it is from: Deposits (including certificates of deposit) with persons in the banking business, Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law (if the interest paid or credited can be deducted by the association), and Amounts held by an insurance company under an agreement to pay interest on them. 2012 form 1040x State and local government obligations. 2012 form 1040x   Interest on obligations of a state or political subdivision, the District of Columbia, or a U. 2012 form 1040x S. 2012 form 1040x possession, generally is not included in income. 2012 form 1040x However, interest on certain private activity bonds, arbitrage bonds, and certain bonds not in registered form is included in income. 2012 form 1040x Portfolio interest. 2012 form 1040x   Interest and original issue discount that qualifies as portfolio interest is not subject to NRA withholding. 2012 form 1040x To qualify as portfolio interest, the interest must be paid on obligations issued after July 18, 1984, and otherwise subject to NRA withholding. 2012 form 1040x Note. 2012 form 1040x For obligations issued after March 18, 2012, portfolio interest does not include interest paid on debt that is not in registered form. 2012 form 1040x Before March 19, 2012, portfolio interest included interest on certain registered and nonregistered (bearer) bonds if the obligations meet the requirements described below. 2012 form 1040x Obligations in registered form. 2012 form 1040x   Portfolio interest includes interest paid on an obligation that is in registered form, and for which you have received documentation that the beneficial owner of the obligation is not a United States person. 2012 form 1040x   Generally, an obligation is in registered form if: (i) the obligation is registered as to both principal and any stated interest with the issuer (or its agent) and any transfer of the obligation may be effected only by surrender of the old obligation and reissuance to the new holder; (ii) the right to principal and stated interest with respect to the obligation may be transferred only through a book entry system maintained by the issuer or its agent; or (iii) the obligation is registered as to both principal and stated interest with the issuer or its agent and can be transferred both by surrender and reissuance and through a book entry system. 2012 form 1040x   An obligation that would otherwise be considered to be in registered form is not considered to be in registered form as of a particular time if it can be converted at any time in the future into an obligation that is not in registered form. 2012 form 1040x For more information on whether obligations are considered to be in registered form, see Portfolio interest in Publication 515. 2012 form 1040x Obligations not in registered form. 2012 form 1040x    For obligations issued before March 19, 2012, interest on an obligation that is not in registered form (bearer obligation) is portfolio interest if the obligation is foreign-targeted. 2012 form 1040x A bearer obligation is foreign-targeted if: There are arrangements to ensure that the obligation will be sold, or resold in connection with the original issue, only to a person who is not a United States person, Interest on the obligation is payable only outside the United States and its possessions, and The face of the obligation contains a statement that any United States person who holds the obligation will be subject to limits under the United States income tax laws. 2012 form 1040x   Documentation is not required for interest on bearer obligations to qualify as portfolio interest. 2012 form 1040x In some cases, however, you may need documentation for purposes of Form 1099 reporting and backup withholding. 2012 form 1040x Interest that does not qualify as portfolio interest. 2012 form 1040x   Payments to certain persons and payments of contingent interest do not qualify as portfolio interest. 2012 form 1040x You must withhold at the statutory rate on such payments unless some other exception, such as a treaty provision, applies. 2012 form 1040x Contingent interest. 2012 form 1040x   Portfolio interest does not include contingent interest. 2012 form 1040x Contingent interest is either of the following: Interest that is determined by reference to: Any receipts, sales, or other cash flow of the debtor or related person, Income or profits of the debtor or related person, Any change in value of any property of the debtor or a related person, or Any dividend, partnership distributions, or similar payments made by the debtor or a related person. 2012 form 1040x For exceptions, see Internal Revenue Code section 871(h)(4)(C). 2012 form 1040x Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations. 2012 form 1040x Related persons. 2012 form 1040x   Related persons include the following. 2012 form 1040x Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 2012 form 1040x ), and lineal descendants (children, grandchildren, etc. 2012 form 1040x ). 2012 form 1040x Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules. 2012 form 1040x Certain corporations, partnerships, and other entities. 2012 form 1040x For details, see Nondeductible Loss in chapter 2 of Publication 544. 2012 form 1040x Exception for existing debt. 2012 form 1040x   Contingent interest does not include interest paid or accrued on any debt with a fixed term that was issued: On or before April 7, 1993, or After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued. 2012 form 1040x Dividend Income The following dividend income is exempt from the 30% tax. 2012 form 1040x Certain dividends paid by foreign corporations. 2012 form 1040x   There is no 30% tax on U. 2012 form 1040x S. 2012 form 1040x source dividends you receive from a foreign corporation. 2012 form 1040x See Second exception under Dividends in chapter 2 for how to figure the amount of U. 2012 form 1040x S. 2012 form 1040x source dividends. 2012 form 1040x Certain interest-related dividends. 2012 form 1040x   There is no 30% tax on interest-related dividends from sources within the United States that you receive from a mutual fund or other regulated investment company in 2013. 2012 form 1040x The mutual fund will designate in writing which dividends are interest-related dividends. 2012 form 1040x Certain short-term capital gain dividends. 2012 form 1040x   There may not be any 30% tax on certain short-term capital gain dividends from sources within the United States that you receive from a mutual fund or other regulated investment company. 2012 form 1040x The mutual fund will designate in writing which dividends are short-term capital gain dividends. 2012 form 1040x This tax relief will not apply to you if you are present in the United States for 183 days or more during your tax year. 2012 form 1040x Services Performed for Foreign Employer If you were paid by a foreign employer, your U. 2012 form 1040x S. 2012 form 1040x source income may be exempt from U. 2012 form 1040x S. 2012 form 1040x tax, but only if you meet one of the situations discussed next. 2012 form 1040x Employees of foreign persons, organizations, or offices. 2012 form 1040x   Income for personal services performed in the United States as a nonresident alien is not considered to be from U. 2012 form 1040x S. 2012 form 1040x sources and is tax exempt if you meet all three of the following conditions. 2012 form 1040x You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U. 2012 form 1040x S. 2012 form 1040x corporation, a U. 2012 form 1040x S. 2012 form 1040x partnership, or a U. 2012 form 1040x S. 2012 form 1040x citizen or resident. 2012 form 1040x You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year. 2012 form 1040x Your pay for these services is not more than $3,000. 2012 form 1040x If you do not meet all three conditions, your income from personal services performed in the United States is U. 2012 form 1040x S. 2012 form 1040x source income and is taxed according to the rules in chapter 4. 2012 form 1040x   If your pay for these services is more than $3,000, the entire amount is income from a trade or business within the United States. 2012 form 1040x To find if your pay is more than $3,000, do not include any amounts you get from your employer for advances or reimbursements of business travel expenses, if you were required to and did account to your employer for those expenses. 2012 form 1040x If the advances or reimbursements are more than your expenses, include the excess in your pay for these services. 2012 form 1040x   A day means a calendar day during any part of which you are physically present in the United States. 2012 form 1040x Example 1. 2012 form 1040x During 2013, Henry Smythe, a nonresident alien from a nontreaty country, worked for an overseas office of a U. 2012 form 1040x S. 2012 form 1040x partnership. 2012 form 1040x Henry, who uses the calendar year as his tax year, was temporarily present in the United States for 60 days during 2013 performing personal services for the overseas office of the partnership. 2012 form 1040x That office paid him a total gross salary of $2,800 for those services. 2012 form 1040x During 2013, he was not engaged in a trade or business in the United States. 2012 form 1040x The salary is not considered U. 2012 form 1040x S. 2012 form 1040x source income and is exempt from U. 2012 form 1040x S. 2012 form 1040x tax. 2012 form 1040x Example 2. 2012 form 1040x The facts are the same as in Example 1, except that Henry's total gross salary for the services performed in the United States during 2013 was $4,500. 2012 form 1040x He received $2,875 in 2013, and $1,625 in 2014. 2012 form 1040x During 2013, he was engaged in a trade or business in the United States because the compensation for his personal services in the United States was more than $3,000. 2012 form 1040x Henry's salary is U. 2012 form 1040x S. 2012 form 1040x source income and is taxed under the rules in chapter 4. 2012 form 1040x Crew members. 2012 form 1040x   Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel (for example, a boat or ship) engaged in transportation between the United States and a foreign country or U. 2012 form 1040x S. 2012 form 1040x possession is not U. 2012 form 1040x S. 2012 form 1040x source income and is exempt from U. 2012 form 1040x S. 2012 form 1040x tax. 2012 form 1040x This exemption does not apply to compensation for services performed on foreign aircraft. 2012 form 1040x Students and exchange visitors. 2012 form 1040x   Nonresident alien students and exchange visitors present in the United States under “F,” “J,” or “Q” visas can exclude from gross income pay received from a foreign employer. 2012 form 1040x   This group includes bona fide students, scholars, trainees, teachers, professors, research assistants, specialists, or leaders in a field of specialized knowledge or skill, or persons of similar description. 2012 form 1040x It also includes the alien's spouse and minor children if they come with the alien or come later to join the alien. 2012 form 1040x   A nonresident alien temporarily present in the United States under a “J” visa includes an alien individual entering the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2012 form 1040x Foreign employer. 2012 form 1040x   A foreign employer is: A nonresident alien individual, foreign partnership, or foreign corporation, or An office or place of business maintained in a foreign country or in a U. 2012 form 1040x S. 2012 form 1040x possession by a U. 2012 form 1040x S. 2012 form 1040x corporation, a U. 2012 form 1040x S. 2012 form 1040x partnership, or an individual who is a U. 2012 form 1040x S. 2012 form 1040x citizen or resident. 2012 form 1040x   The term “foreign employer” does not include a foreign government. 2012 form 1040x Pay from a foreign government that is exempt from U. 2012 form 1040x S. 2012 form 1040x income tax is discussed in chapter 10. 2012 form 1040x Income from certain annuities. 2012 form 1040x   Do not include in income any annuity received under a qualified annuity plan or from a qualified trust exempt from U. 2012 form 1040x S. 2012 form 1040x income tax if you meet both of the following conditions. 2012 form 1040x You receive the annuity only because: You performed personal services outside the United States while you were a nonresident alien, or You performed personal services inside the United States while you were a nonresident alien and you met the three conditions, described earlier, under Employees of foreign persons, organizations, or offices . 2012 form 1040x At the time the first amount is paid as an annuity under the plan (or by the trust), 90% or more of the employees for whom contributions or benefits are provided under the annuity plan (or under the plan of which the trust is a part) are U. 2012 form 1040x S. 2012 form 1040x citizens or residents. 2012 form 1040x   If the annuity qualifies under condition (1) but not condition (2) above, you do not have to include the amount in income if: You are a resident of a country that gives a substantially equal exclusion to U. 2012 form 1040x S. 2012 form 1040x citizens and residents, or You are a resident of a beneficiary developing country under Title V of the Trade Act of 1974. 2012 form 1040x   If you are not sure whether the annuity is from a qualified annuity plan or qualified trust, ask the person who made the payment. 2012 form 1040x Income affected by treaties. 2012 form 1040x   Income of any kind that is exempt from U. 2012 form 1040x S. 2012 form 1040x tax under a treaty to which the United States is a party is excluded from your gross income. 2012 form 1040x Income on which the tax is only limited by treaty, however, is included in gross income. 2012 form 1040x See chapter 9. 2012 form 1040x Gambling Winnings From Dog or Horse Racing You can exclude from your gross income winnings from legal wagers initiated outside the United States in a parimutuel pool with respect to a live horse or dog race in the United States. 2012 form 1040x Gain From the Sale of Your Main Home If you sold your main home, you may be able to exclude up to $250,000 of the gain on the sale of your home. 2012 form 1040x If you are married and file a joint return, you may be able to exclude up to $500,000. 2012 form 1040x For information on the requirements for this exclusion, see Publication 523. 2012 form 1040x This exclusion does not apply to nonresident aliens who are subject to the expatriation tax rules discussed in chapter 4. 2012 form 1040x Scholarships and Fellowship Grants If you are a candidate for a degree, you may be able to exclude from your income part or all of the amounts you receive as a qualified scholarship. 2012 form 1040x The rules discussed here apply to both resident and nonresident aliens. 2012 form 1040x If a nonresident alien receives a grant that is not from U. 2012 form 1040x S. 2012 form 1040x sources, it is not subject to U. 2012 form 1040x S. 2012 form 1040x tax. 2012 form 1040x See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your grant is from U. 2012 form 1040x S. 2012 form 1040x sources. 2012 form 1040x A scholarship or fellowship is excludable from income only if: You are a candidate for a degree at an eligible educational institution, and You use the scholarship or fellowship to pay qualified education expenses. 2012 form 1040x Candidate for a degree. 2012 form 1040x   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. 2012 form 1040x Eligible educational institution. 2012 form 1040x   An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. 2012 form 1040x Qualified education expenses. 2012 form 1040x   These are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. 2012 form 1040x These items must be required of all students in your course of instruction. 2012 form 1040x However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. 2012 form 1040x Expenses that do not qualify. 2012 form 1040x   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. 2012 form 1040x This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. 2012 form 1040x Scholarship or fellowship amounts used to pay these costs are taxable. 2012 form 1040x Amounts used to pay expenses that do not qualify. 2012 form 1040x   A scholarship amount used to pay any expense that does not qualify is taxable, even if the expense is a fee that must be paid to the institution as a condition of enrollment or attendance. 2012 form 1040x Payment for services. 2012 form 1040x   You cannot exclude from income the portion of any scholarship, fellowship, or tuition reduction that represents payment for past, present, or future teaching, research, or other services. 2012 form 1040x This is true even if all candidates for a degree are required to perform the services as a condition for receiving the degree. 2012 form 1040x Example. 2012 form 1040x On January 7, Maria Gomez is notified of a scholarship of $2,500 for the spring semester. 2012 form 1040x As a condition for receiving the scholarship, Maria must serve as a part-time teaching assistant. 2012 form 1040x Of the $2,500 scholarship, $1,000 represents payment for her services. 2012 form 1040x Assuming that Maria meets all other conditions, she can exclude no more than $1,500 from income as a qualified scholarship. 2012 form 1040x Prev  Up  Next   Home   More Online Publications