You should consider the items in this section when figuring the amount of your tax withholding for 2010.taxmap/pubs/p919-000.htm#en_us_publink1000239894
Limit on deductible farming losses.(p2)
Beginning in 2010, the farming loss of a taxpayer (other than a C corporation) who receives certain government subsidies will be limited to the greater of $300,000 ($150,000 if married filing separately) or the taxpayer's total net farm income for the prior 5 tax years. Farming losses caused by casualty, disease, or drought are disregarded in calculating the limitation. Disallowed amounts can be carried forward indefinitely.taxmap/pubs/p919-000.htm#en_us_publink1000239895
Half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010. In addition, for any tax year beginning after 2009, you can make a qualified rollover contribution to a Roth IRA regardless of your modified adjusted gross income (AGI).taxmap/pubs/p919-000.htm#en_us_publink1000233649
IRA deduction expanded.(p2)
You may be able to take an IRA deduction if you were covered by a retirement plan and your 2010 modified AGI is less than $66,000 ($109,000 if married filing jointly or a qualifying widow(er)). If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2010 modified AGI is less than $177,000.taxmap/pubs/p919-000.htm#en_us_publink1000239881
Domestic production activities income deduction.(p2)
The deduction rate for 2010 increases to 9%. However, the deduction is reduced if you have oil-related qualified production activities income.taxmap/pubs/p919-000.htm#en_us_publink1000233650
Personal casualty and theft loss limit reduced.(p2)
Each personal casualty or theft loss is limited to the excess of the loss over $100 (instead of $500).taxmap/pubs/p919-000.htm#en_us_publink1000239896
Standard mileage rates.(p2)
The rate for business use of your vehicle is reduced to 50 cents a mile. The rate for use of your vehicle to get medical care or move is reduced to 161/2 cents a mile. The rate of 14 cents a mile for charitable use is unchanged.taxmap/pubs/p919-000.htm#en_us_publink1000239897
Personal exemption and itemized deduction phaseouts.(p2)
For 2010, taxpayers with AGI above a certain amount will not lose part of their deduction for personal exemptions and itemized deductions. Under current law, these phaseouts will resume in 2011.taxmap/pubs/p919-000.htm#en_us_publink1000233651
Alternative minimum tax (AMT) exemption amount decreased.(p2)
The AMT exemption amount is decreased to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).taxmap/pubs/p919-000.htm#en_us_publink1000233652
Certain credits not allowed against the AMT.(p2)
The credit for child and dependent care expenses, credit for the elderly or the disabled, lifetime learning credit, nonbusiness energy property credit, mortgage interest credit, and the District of Columbia first-time homebuyer credit are not allowed against the AMT and a new tax liability limit applies. For most people, this limit is your regular tax minus any tentative minimum tax.taxmap/pubs/p919-000.htm#en_us_publink1000239898
Qualified fuel cell motor vehicle credit reduced.(p2)
For qualified vehicles placed in service after 2009, the credit allowed for purchases is reduced by 50%. This applies to vehicles with a gross vehicle weight rating of 8,500 pounds or less. For more information, see the instructions for Form 8910.taxmap/pubs/p919-000.htm#en_us_publink1000233654
Earned income credit (EIC).(p2)
You may be able to take the EIC if:
- Three or more children lived with you and you earned less than $43,352 ($48,362 if married filing jointly),
- Two children lived with you and you earned less than $40,363 ($45,373 if married filing jointly),
- One child lived with you and you earned less than $35,535 ($40,545 if married filing jointly), or
- A child did not live with you and you earned less than $13,460 ($18,470 if married filing jointly).
The maximum AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and get the credit is still $3,100.taxmap/pubs/p919-000.htm#en_us_publink1000239899
First-time homebuyer credit.(p2)
This credit has been extended for purchases of a main home in the United States after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010). The credit is generally 10% of the purchase price of the home but is limited to $8,000 ($4,000 if married filing separately).
Also, the credit has been modified to allow a smaller credit (limited to $6,500, $3,250 if married filing separately) if you (and your spouse if married) owned and used the same main home for any period of 5 consecutive years during the 8-year period ending on the date you bought your new main home in the United States. For this credit, the replacement home must be purchased after November 6, 2009, and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010).
You can choose to claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit.
See Form 5405 (Rev. December 2009) for more information, including special rules for certain members of the uniformed services, members of the U.S. Foreign Service, and employees of the intelligence community on official extended duty service.taxmap/pubs/p919-000.htm#en_us_publink1000239913taxmap/pubs/p919-000.htm#en_us_publink1000239912
Recapture of first-time homebuyer credit.(p2)
If you claimed the first-time homebuyer credit for a home you bought in 2008, you generally must begin repaying it in 2010.taxmap/pubs/p919-000.htm#en_us_publink1000242332
Charitable contributions for Haiti relief.(p2)
You were allowed to deduct on your 2009 tax return certain cash contributions made for the relief of Haiti earthquake victims. The contributions must have been made after January 11, 2010, and before March 1, 2010. If you took a deduction for these contributions on your 2009 tax return, do not claim the same deduction when estimating your 2010 taxable income to check your withholding.taxmap/pubs/p919-000.htm#en_us_publink1000239914
Expiring Tax Benefits(p3)
The following benefits are scheduled to expire and will not be available for 2010.
At the time these instructions went to print, Congress was considering legislation that would extend some of these items. To find out if legislation was enacted, and for details, go to www.irs.gov.
- Waiver of minimum required distribution (MRD) rules for IRAs and defined contribution plans. However, the waiver for 2009 MRDs applies through April 1, 2010.
- The exclusion from income of up to $2,400 in unemployment compensation.
- Tax-free distributions from certain individual retirement plans for charitable purposes.
- Deduction for educator expenses in figuring AGI.
- Tuition and fees deduction in figuring AGI.
- Extra $3,000 IRA deduction for employees of bankrupt companies.
- Increased standard deduction for real estate taxes or net disaster loss.
- Itemized deduction or increased standard deduction for state or local sales or excise taxes on the purchase of a new motor vehicle.
- Itemized deduction for state and local general sales taxes.
- District of Columbia first-time homebuyer credit for homes purchased after 2009.
- Credit to holders of clean renewable energy bonds issued after 2009.
- Alternative motor vehicle credit for all qualified hybrid motor vehicles placed in service after December 31, 2009, except for passenger automobiles and light trucks with a gross vehicle weight rating of 8,500 pounds or less.
- Government retiree credit.
- Decreased estimated tax payments for certain small businesses.
- Certain tax benefits for Midwestern disaster areas, including the following.
- • Additional exemption amount if you provided housing for a person displaced by the Midwestern storms, tornadoes, or flooding.
- • Increased Hope and lifetime learning credits.
- • Special rules for distributions from eligible retirement plans.
- • Exclusion from income for certain discharges of nonbusiness debts.
- • Credit to holders of Midwestern tax credit bonds for bonds issued after 2009.
Photographs of missing children.(p3)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year.
As a wage earner, you pay federal income tax by having it withheld from your pay during the year. This is your "withholding." Your withholding is based on the number of allowances you claim when you file Form W-4, Employee's Withholding Allowance Certificate, with your employer.
The purpose of this publication is to help you check your withholding and, if necessary, prepare a new Form W-4 to adjust your withholding. When you first start a new job, you must fill out a Form W-4 and give it to your employer to establish your initial withholding. You can adjust your withholding by giving a new Form W-4 to your employer at any time.taxmap/pubs/p919-000.htm#en_us_publink1000233659
If you have not changed jobs, you generally do not have to give your employer a new Form W-4 each year unless you need to adjust your withholding.
For more detailed information about Form W-4, see chapter 1 of Publication 505, Tax Withholding and Estimated Tax.taxmap/pubs/p919-000.htm#en_us_publink1000233660
Before completing Form W-4, nonresident alien employees should see the Instructions for Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Also see chapter 8 of Publication 519, U.S. Tax Guide for Aliens, for important information on withholding.taxmap/pubs/p919-000.htm#en_us_publink1000233661
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at *firstname.lastname@example.org
. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
If you have a tax question, check the information available on www.irs.gov
or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.
This section explains why, when, and how to check your withholding to see if you will have enough, but not too much, tax withheld for 2010. Also, you may want to use the withholding calculator on the IRS website. Go to www.irs.gov
and click on "Withholding Calculator" under "Online Services."
You should try to have your withholding match your actual tax liability. 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. If too much tax is withheld, you will lose the use of that money until you get your refund.
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. See Figure 1 for examples.taxmap/pubs/p919-000.htm#en_us_publink1000233667
The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld.
You should check your withholding when any of the following situations occur.
- You receive a paycheck stub (statement) covering a full pay period in 2010, showing tax withheld based on 2010 tax rates.
- You prepare your 2009 tax return and get a:
- Big refund, or
- Balance due that is:
- More than you can comfortably pay, or
- Subject to a penalty.
- There are changes in your life or financial situation that affect your tax liability. See Figure 1 below.
- There are changes in the tax law that affect your tax liability. See Tax Law Changes, below.
You must give your employer a new Form W-4 to adjust your withholding within 10 days of any event that decreases the number of withholding allowances you can claim, or requires you to change to single status.
If there are tax law changes that increase your tax for 2010 and you do not increase your withholding, you may have to pay tax when you file your return. If there are changes that decrease your tax for 2010 and you do not decrease your withholding, you may get a larger refund. You can get this money back earlier by reducing your withholding.
For information about changes in the law for 2009 and 2010, visit the IRS website at www.irs.gov
, click on "Forms and Publications," and then on "What's Hot in forms and publications."
Figure 1. Personal and Financial Changes
| Factor || Examples |
Birth or adoption of child
Loss of an exemption
Purchase of a new home
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|
IRA (including certain
Roth IRA) distributions
|Change in the amount of adjustments to income||IRA deduction|
Student loan interest deduction
|Change in the amount of itemized deductions or tax credits||Medical expenses|
Gifts to charity
Dependent care expenses
Child tax credit
Earned income credit
You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. Follow these steps.
- Fill out Worksheet 1 (see page 12) to project your total federal income tax liability for 2010.
- Fill out Worksheet 7 (see page 18) to project your total federal withholding for 2010 and compare that with your projected tax liability from Worksheet 1.
If you are not having enough tax withheld, line 6 of Worksheet 7 will show you how much more to have withheld each payday.
If you are having more tax withheld than necessary, line 5 of Worksheet 7 refers you to How Do I Decrease My Withholding, later.taxmap/pubs/p919-000.htm#en_us_publink1000233671
If not enough tax will be withheld, you should give your employer a new Form W-4 showing either a reduced number of withholding allowances or an additional amount to be withheld from your pay. See How Do I Increase My Withholding on this page.
There is a good chance you are not having enough tax withheld if:
- You have more than one job at a time,
- Your spouse also works,
- You have taxable income not subject to withholding, such as capital gains, rental income, interest, and dividends, or
- You owe other taxes such as self-employment tax or household employment taxes.
If your employer cannot withhold enough additional tax from your pay, you may need to make estimated tax payments. This might be the case if your pay is low and you have substantial nonwage income, such as interest, dividends, capital gains, or earnings from self-employment. For more information on estimated tax payments, see chapter 2 of Publication 505. taxmap/pubs/p919-000.htm#en_us_publink1000233672
If too much tax is withheld, you may receive a large refund when you file your return. If you would prefer to receive the money during the year, you should see if you qualify to have less tax withheld. If so, give your employer a new Form W-4 showing more withholding allowances.
There is a good chance you are having too much tax withheld if:
- You got a big refund for 2009 and your income, adjustments, deductions, and credits will remain about the same this year,
- Your income will remain about the same as last year, but your adjustments, deductions, or credits will increase significantly, or
- You got a refund last year; your income, adjustments, and deductions will remain about the same as last year, but you will qualify for one or more tax credits this year that you did not qualify for last year.
Adjustments to income are listed on Form 1040 and Form 1040A near the bottom of page 1. Itemized deductions appear on Schedule A (Form 1040). Credits appear on page 2 of Form 1040 and Form 1040A. See also Figures 1 (page 4) and 2 (page 9).