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previous page Previous Page: Publication 17 - Your Federal Income Tax - Social Security Numbers for Dependents
next page Next Page: Publication 17 - Your Federal Income Tax - Estimated Tax
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pub17/p17-020.htm#en_us_publink100032323

Chapter 4
Tax Withholding and Estimated Tax(p35)

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previous topic occurrence Tax Withholding and Estimated Tax next topic occurrence


What's New for 2009(p35)


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taxmap/pub17/p17-020.htm#en_us_publink100032325

Tax law changes for 2009.(p35)

When you figure how much income tax you want withheld from your pay and when you figure your estimated tax, consider tax law changes effective in 2009. See What's New for 2009 in the front of this publication, or get Publication 553, Highlights of 2008 Tax Changes.

Reminders(p35)


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taxmap/pub17/p17-020.htm#en_us_publink100032327

Estimated tax safe harbor for higher income taxpayers.(p35)

If your adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you will have to deposit the smaller of 90% of your expected tax for 2009 or 110% of the tax shown on your 2008 return to avoid an estimated tax penalty.
taxmap/pub17/p17-020.htm#en_us_publink100032328

Payment of estimated tax electronically.(p35)

You may be able to pay your estimated tax by electronic means. For more information, see How To Pay Estimated Tax in chapter 2 of Publication 505.
taxmap/pub17/p17-020.htm#TXMP294868bb
This chapter discusses how to pay your tax as you earn or receive income during the year. In general, the federal income tax is a pay-as-you-go tax. There are two ways to pay as you go.
This chapter explains these methods. In addition, it also explains the following.

taxmap/pub17/p17-020.htm#TXMP31e72f41

Useful items

You may want to see:


Publication
 505 Tax Withholding and Estimated Tax
 553 Highlights of 2008 Tax Changes
 919 How Do I Adjust My Tax Withholding?
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
 1040-ES: Estimated Tax for Individuals
 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts
taxmap/pub17/p17-020.htm#en_us_publink100032329

Withholding(p36)


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previous topic occurrence Withholding next topic occurrence

This section discusses income tax withholding on: This section explains in detail the rules for withholding tax from each of these types of income.
This section also covers backup withholding on interest, dividends, and other payments.
taxmap/pub17/p17-020.htm#en_us_publink100032330

Salaries and Wages(p36)


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previous topic occurrence Compensation, Wage, Salary next topic occurrence

Income tax is withheld from the pay of most employees. Your pay includes your regular pay, bonuses, commissions, and vacation allowances. It also includes reimbursements and other expense allowances paid under a nonaccountable plan. See Supplemental Wages, later, for more information about reimbursements and allowances paid under a nonaccountable plan.
If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. This is explained under Exemption From Withholding, later.
taxmap/pub17/p17-020.htm#en_us_publink100032331

Military retirees.(p36)


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Military retirees.

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.
taxmap/pub17/p17-020.htm#en_us_publink100032332

Household workers.(p36)


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Household Employee

If you are a household worker, you can ask your employer to withhold income tax from your pay.
Tax is withheld only if you want it withheld and your employer agrees to withhold it. If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed later under Estimated Tax.
taxmap/pub17/p17-020.htm#en_us_publink100032333

Farmworkers.(p36)


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Farmworkers

Income tax generally is withheld from your cash wages for work on a farm unless your employer both:
You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed later under Estimated Tax.
taxmap/pub17/p17-020.htm#en_us_publink100032334

Determining Amount of Tax Withheld Using Form W-4(p36)


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previous topic occurrence Determining Amount of Tax Withheld Using Form W-4 next topic occurrence

The amount of income tax your employer withholds from your regular pay depends on two things.
Form W-4 includes three types of information that your employer will use to figure your withholding.
Note.You must specify a filing status and a number of withholding allowances on Form W-4. You cannot specify only a dollar amount of withholding.
taxmap/pub17/p17-020.htm#en_us_publink100032336

New Job(p36)


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previous topic occurrence New Job next topic occurrence

When you start a new job, you must fill out Form W-4 and give it to your employer. Your employer should have copies of the form. If you need to change the information later, you must fill out a new form.
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. You may be able to avoid overwithholding if your employer agrees to use the part-year method. See Part-Year Method in chapter 1 of Publication 505 for more information.
taxmap/pub17/p17-020.htm#en_us_publink100032337

Employee also receiving pension income.(p36)


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Employee also receiving pension income.

If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. However, you can choose to split your withholding allowances between your pension and job in any manner. See Publication 919 for more information.
taxmap/pub17/p17-020.htm#en_us_publink100032338

Changing Your Withholding(p36)


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previous topic occurrence Changing Your Withholding next topic occurrence

Events during the year may change your marital status or the exemptions, adjustments, deductions, or credits you expect to claim on your tax return. When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances.
If the event changes your withholding status or the number of allowances you are claiming, you must give your employer a new Form W-4 within 10 days after either of the following.
Generally, you can submit a new Form W-4 whenever you wish to change the number of your withholding allowances for any other reason.
taxmap/pub17/p17-020.htm#en_us_publink100032339

Changing your withholding for 2010.(p37)


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Changing your withholding for 2010.

If events in 2009 will decrease the number of your withholding allowances for 2010, you must give your employer a new Form W-4 by December 1, 2009. If the event occurs in December 2009, submit a new Form W-4 within 10 days.
taxmap/pub17/p17-020.htm#en_us_publink100032340

Checking Your Withholding(p37)


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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 little or too much. See Publication 919, later. If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding.
Note.You cannot give your employer a payment to cover withholding for past pay periods or a payment for estimated tax.
taxmap/pub17/p17-020.htm#en_us_publink100032342

Completing Form W-4 and Worksheets(p37)


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previous topic occurrence Employee's Withholding Allowance Certificate next topic occurrence

Form W-4 has worksheets to help you figure how many withholding allowances you can claim. The worksheets are for your own records. Do not give them to your employer.
taxmap/pub17/p17-020.htm#en_us_publink100032343

Multiple jobs.(p37)


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Multiple jobs.

If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Then split your allowances between the Forms W-4 for each job. You cannot claim the same allowances with more than one employer at the same time. You can claim all your allowances with one employer and none with the other(s), or divide them any other way.
taxmap/pub17/p17-020.htm#en_us_publink100032344

Married individuals.(p37)


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Married individuals.

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. Use only one set of worksheets. You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims.
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.
taxmap/pub17/p17-020.htm#en_us_publink100032345

Alternative method of figuring withholding allowances.(p37)


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Alternative method of figuring withholding allowances.

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. For more information, see Alternative method of figuring withholding allowances under Completing Form W-4 and Worksheets in Publication 505, chapter 1.
taxmap/pub17/p17-020.htm#en_us_publink100032346

Personal Allowances Worksheet.(p37)


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previous topic occurrence Personal Allowances Worksheet next topic occurrence

Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on exemptions and any special allowances that apply.
taxmap/pub17/p17-020.htm#en_us_publink100032347

Deductions and Adjustments Worksheet.(p37)


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previous topic occurrence Deductions and Adjustments Worksheet next topic occurrence

Use this worksheet if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2009 tax return and you want to reduce your withholding. Also, complete this worksheet when you have changes to these items to see if you need to change your withholding.
The Deductions and Adjustments Worksheet is on page 2 of Form W-4. Chapter 1 of Publication 505 explains this worksheet.
taxmap/pub17/p17-020.htm#en_us_publink100032348

Two-Earners/Multiple Jobs Worksheet.(p37)


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You may need to complete this worksheet if you have more than one job or a working spouse. You also can add to the amount, if any, on line 8 of this worksheet any additional withholding necessary to cover any amount you expect to owe other than income tax, such as self-employment tax.
taxmap/pub17/p17-020.htm#en_us_publink100032349

Getting the Right Amount of Tax Withheld(p37)


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previous topic occurrence Withholding Tax next topic occurrence

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. But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. This is most likely to happen in the following situations.
taxmap/pub17/p17-020.htm#en_us_publink100032350

Cumulative wage method.(p37)


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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. 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. You must ask your employer in writing to use this method.
To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc.) since the beginning of the year.
taxmap/pub17/p17-020.htm#en_us_publink100032351

Publication 919(p37)


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previous topic occurrence How Do I Adjust My Tax Withholding? next topic occurrence

To make sure you are getting the right amount of tax withheld, get Publication 919. It will help you compare the total tax to be withheld during the year with the tax you can expect to figure on your return. It also will help you determine how much additional withholding, if any, is needed each payday to avoid owing tax when you file your return. If you do not have enough tax withheld, you may have to pay estimated tax, as explained under Estimated Tax, later.
taxmap/pub17/p17-020.htm#en_us_publink100032352

Rules Your Employer Must Follow(p37)


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previous topic occurrence Rules Your Employer Must Follow next topic occurrence

It may be helpful for you to know some of the withholding rules your employer must follow. These rules can affect how to fill out your Form W-4 and how to handle problems that may arise.
taxmap/pub17/p17-020.htm#en_us_publink100032353

New Form W-4.(p37)


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New Form W-4.

When you start a new job, your employer should give you a Form W-4 to fill out. Beginning with your first payday, your employer will use the information you give on the form to figure your withholding.
If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. 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.
taxmap/pub17/p17-020.htm#en_us_publink100032354

No Form W-4.(p37)


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No Form W-4.

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.
taxmap/pub17/p17-020.htm#en_us_publink100032355

Repaying withheld tax.(p37)


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Repaying withheld tax.

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. Your employer cannot repay any of the tax previously withheld. Instead, claim the full amount withheld when you file your tax return.
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. Your employer can repay the amount that was withheld incorrectly. If you are not repaid, your Form W-2 will reflect the full amount actually withheld.
taxmap/pub17/p17-020.htm#en_us_publink100032356

Exemption From Withholding(p37)


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previous topic occurrence Exemption From Withholding next topic occurrence

If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. The exemption applies only to income tax, not to social security or Medicare tax.
You can claim exemption from withholding for 2009 only if both of the following situations apply.
taxmap/pub17/p17-020.htm#en_us_publink100032357

Students.(p37)


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previous topic occurrence Student next topic occurrence

If you are a student, you are not automatically exempt. See chapter 1 to see whether you must file a return. If you work only part time or only during the summer, you may qualify for exemption from withholding.
taxmap/pub17/p17-020.htm#en_us_publink100032358

Age 65 or older or blind.(p38)


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Age 65 or older or blind.

If you are 65 or older or blind, use one of the worksheets in chapter 1 of Publication 505, under Exemption From Withholding, to help you decide whether you can claim exemption from withholding. Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2009 return. Instead, see Itemizing deductions or claiming exemptions or credits in chapter 1 of Publication 505.
taxmap/pub17/p17-020.htm#en_us_publink100032359

Claiming exemption from withholding.(p38)


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Claiming exemption from withholding.

To claim exemption, you must give your employer a Form W-4. Do not complete lines 5 and 6. Enter "Exempt" on line 7.
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. If you claim exemption in 2009, but you expect to owe income tax for 2010, you must file a new Form W-4 by December 1, 2009.
Your claim of exempt status may be reviewed by the IRS.
taxmap/pub17/p17-020.htm#en_us_publink100032360

An exemption is good for only 1 year.(p38)
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You must give your employer a new Form W-4 by February 15 each year to continue your exemption.
taxmap/pub17/p17-020.htm#en_us_publink100032361

Supplemental Wages(p38)


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Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. The payer can figure withholding on supplemental wages using the same method used for your regular wages. However, if these payments are identified separately from your regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate.
taxmap/pub17/p17-020.htm#en_us_publink100032362

Expense allowances.(p38)


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Expense allowances.

Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages.
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.
For more information about accountable and nonaccountable expense allowance plans, see Reimbursements in chapter 26.
taxmap/pub17/p17-020.htm#en_us_publink100032363

Penalties(p38)


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You may have to pay a penalty of $500 if both of the following apply.
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. The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both.
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. A simple error or an honest mistake will not result in one of these penalties. 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 W-4 penalty.
taxmap/pub17/p17-020.htm#en_us_publink100032364

Tips(p38)


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previous topic occurrence Income, Tip next topic occurrence

The tips you receive while working on your job are considered part of your pay. You must include your tips on your tax return on the same line as your regular pay. However, tax is not withheld directly from tip income, as it is from your regular pay. Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay.
See chapter 6 for information on reporting your tips to your employer. For more information on the withholding rules for tip income, see Publication 531, Reporting Tip Income.
taxmap/pub17/p17-020.htm#en_us_publink100032365

How employer figures amount to withhold.(p38)


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How employer figures amount to withhold.

The tips you report to your employer are counted as part of your income for the month you report them. Your employer can figure your withholding in either of two ways.
taxmap/pub17/p17-020.htm#en_us_publink100032366

Not enough pay to cover taxes.(p38)


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Not enough pay to cover taxes.

If your regular pay is not enough for your employer to withhold all the tax (including income tax, social security tax, Medicare tax, or railroad retirement tax) due on your pay plus your tips, you can give your employer money to cover the shortage. See Giving your employer money for taxes in chapter 6.
taxmap/pub17/p17-020.htm#en_us_publink100032367

Allocated tips.(p38)


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previous topic occurrence Allocated Tips next topic occurrence

Your employer should not withhold income tax, social security tax, Medicare tax, or railroad retirement tax on any allocated tips. Withholding is based only on your pay plus your reported tips. Your employer should refund to you any incorrectly withheld tax. See Allocated Tips in chapter 6 for more information.
taxmap/pub17/p17-020.htm#en_us_publink100032368

Taxable Fringe Benefits(p38)


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The value of certain noncash fringe benefits you receive from your employer is considered part of your pay. Your employer generally must withhold income tax on these benefits from your regular pay.
For information on fringe benefits, see Fringe Benefits under Employee Compensation in chapter 5.
Although the value of your personal use of an employer-provided car, truck, or other highway motor vehicle is taxable, your employer can choose not to withhold income tax on that amount. Your employer must notify you if this choice is made.
For more information on withholding on taxable fringe benefits, see chapter 1 of Publication 505.
taxmap/pub17/p17-020.htm#en_us_publink100032369

Sick Pay(p38)


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previous topic occurrence Sick Pay next topic occurrence

Sick pay is a payment to you to replace your regular wages while you are temporarily absent from work due to sickness or personal injury. To qualify as sick pay, it must be paid under a plan to which your employer is a party.
If you receive sick pay from your employer or an agent of your employer, income tax must be withheld. An agent who does not pay regular wages to you may choose to withhold income tax at a flat rate.
However, if you receive sick pay from a third party who is not acting as an agent of your employer, income tax will be withheld only if you choose to have it withheld. See Form W-4S, below.
If you receive payments under a plan in which your employer does not participate (such as an accident or health plan where you paid all the premiums), the payments are not sick pay and usually are not taxable.
taxmap/pub17/p17-020.htm#en_us_publink100032370

Union agreements.(p38)


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Union agreements.

If you receive sick pay under a collective bargaining agreement between your union and your employer, the agreement may determine the amount of income tax withholding. See your union representative or your employer for more information.
taxmap/pub17/p17-020.htm#en_us_publink100032371

Form W-4S.(p38)


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Request for Federal Income Tax Withholding from Sick Pay

If you choose to have income tax withheld from sick pay paid by a third party, such as an insurance company, you must fill out Form W-4S. Its instructions contain a worksheet you can use to figure the amount you want withheld. They also explain restrictions that may apply.
Give the completed form to the payer of your sick pay. The payer must withhold according to your directions on the form.
taxmap/pub17/p17-020.htm#en_us_publink100032372

Estimated tax.(p38)


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If you do not request withholding on Form W-4S, or if you do not have enough tax withheld, you may have to make estimated tax payments. If you do not pay enough tax, either through estimated tax or withholding, or a combination of both, you may have to pay a penalty. See Underpayment Penalty at the end of this chapter.
taxmap/pub17/p17-020.htm#en_us_publink100032373

Pensions and Annuities(p38)


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previous topic occurrence Pensions and Annuities next topic occurrence

Income tax usually will be withheld from your pension or annuity distributions unless you choose not to have it withheld. This rule applies to distributions from:
The amount withheld depends on whether you receive payments spread out over more than 1 year (periodic payments), within 1 year (nonperiodic payments), or as an eligible rollover distribution (ERD). You cannot choose not to have income tax withheld from an ERD.
taxmap/pub17/p17-020.htm#en_us_publink100032374

More information.(p39)


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For more information on taxation of annuities and distributions (including ERDs) from qualified retirement plans, see chapter 10. For information on IRAs, see chapter 17. For more information on withholding on pensions and annuities, including a discussion of Form W-4P, see Pensions and Annuities in chapter 1 of Publication 505.
taxmap/pub17/p17-020.htm#en_us_publink100032375

Gambling Winnings(p39)


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Income tax is withheld at a flat 25% rate from certain kinds of gambling winnings.
Gambling winnings of more than $5,000 from the following sources are subject to income tax withholding. It does not matter whether your winnings are paid in cash, in property, or as an annuity. Winnings not paid in cash are taken into account at their fair market value.
taxmap/pub17/p17-020.htm#en_us_publink100010820

Exception.(p39)
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Gambling winnings from bingo, keno, and slot machines generally are not subject to income tax withholding. However, you may need to provide the payer with a social security number to avoid withholding. See Backup withholding on gambling winnings in chapter 1 of Publication 505. If you receive gambling winnings not subject to withholding, you may need to pay estimated tax. See Estimated Tax, later.
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. See Underpayment Penalty, later.
taxmap/pub17/p17-020.htm#en_us_publink100032376

Form W-2G.(p39)


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Form W-2G.

If a payer withholds income tax from your gambling winnings, you should receive a Form W-2G, Certain Gambling Winnings, showing the amount you won and the amount withheld. Report the tax withheld on line 62 of Form 1040.
taxmap/pub17/p17-020.htm#en_us_publink100032377

Unemployment Compensation(p39)


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previous topic occurrence Unemployment Compensation next topic occurrence

You can choose to have income tax withheld from unemployment compensation. To make this choice, you will have to fill out Form W-4V (or a similar form provided by the payer) and give it to the payer.
Unemployment compensation is taxable. So, if you do not have income tax withheld, you may have to pay estimated tax. See Estimated Tax, later.
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. See Underpayment Penalty, later, for information.
taxmap/pub17/p17-020.htm#en_us_publink100032378

Federal Payments(p39)


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previous topic occurrence Federal Payments next topic occurrence

You can choose to have income tax withheld from certain federal payments you receive. These payments are:
  1. Social security benefits,
  2. Tier 1 railroad retirement benefits,
  3. Commodity credit loans you choose to include in your gross income, and
  4. Payments under the Agricultural Act of 1949 (7 U.S.C. 1421 et. seq.), or title II of the Disaster Assistance Act of 1988, as amended, that are treated as insurance proceeds and that you receive because:
    1. Your crops were destroyed or damaged by drought, flood, or any other natural disaster, or
    2. You were unable to plant crops because of a natural disaster described in (a).
To make this choice, you will have to fill out Form W-4V (or a similar form provided by the payer) and give it to the payer.
If you do not choose to have income tax withheld, you may have to pay estimated tax. See Estimated Tax, later.
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. See Underpayment Penalty, at the end of this chapter, for information.
taxmap/pub17/p17-020.htm#en_us_publink100032379

More information.(p39)


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For more information about the tax treatment of social security and railroad retirement benefits, see chapter 11. Get Publication 225, Farmer's Tax Guide, for information about the tax treatment of commodity credit loans or crop disaster payments.
taxmap/pub17/p17-020.htm#en_us_publink100032380

Backup Withholding(p39)


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Banks or other businesses that pay you certain kinds of income must file an information return (Form 1099) with the IRS. The information return shows how much you were paid during the year. It also includes your name and taxpayer identification number (TIN). TINs are explained in chapter 1 under Social Security Number.
These payments generally are not subject to withholding. However, "backup" withholding is required in certain situations. Backup withholding can apply to most kinds of payments that are reported on Form 1099.
The payer must withhold at a flat 28% rate in the following situations.
See Backup Withholding in chapter 1 of Publication 505 for more information.
taxmap/pub17/p17-020.htm#en_us_publink100032381

Penalties.(p39)


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There are civil and criminal penalties for giving false information to avoid backup withholding. The civil penalty is $500. The criminal penalty, upon conviction, is a fine of up to $1,000 or imprisonment of up to 1 year, or both.
previous pagePrevious Page: Publication 17 - Your Federal Income Tax - Social Security Numbers for Dependents
next pageNext Page: Publication 17 - Your Federal Income Tax - Estimated Tax
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication