Publication 505
taxmap/pubs/p505-001.htm#en_us_publink10007179 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.
This chapter explains in detail the rules for withholding tax
from each of these types of income. The discussion of salaries and wages
includes an explanation of how to complete Form W-4.
This chapter also covers backup withholding on interest, dividends,
and other payments.
taxmap/pubs/p505-001.htm#TXMP04107f27Useful items
You may want to see:
Publication 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 See
chapter 5
of this publication for information about getting these publications and forms.
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 on page 12, for definitions of accountable and nonaccountable
plans.
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 beginning on page 10.
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 in
chapter 2.
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/pubs/p505-001.htm#en_us_publink10007184If you are a household worker, you can ask your employer to withhold
income tax from your pay. A household worker is an employee who performs
household work in a private home, local college club, or local fraternity or
sorority chapter.
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 in
chapter 2.
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.
When employees are on leave from employment for military duty,
some employers make up the difference between the military pay and civilian pay.
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. The wages and withholding will be reported on Form W-2, Wage and
Tax Statement.
taxmap/pubs/p505-001.htm#en_us_publink10007186The amount of income tax your employer withholds from your regular
pay depends on two things.
- The amount you earn in each payroll period.
- The information you give your employer on Form W-4.
Form W-4 includes four types of information that your employer
will use to figure your withholding.
- Whether to withhold at the single rate or at the lower married
rate.
- How many withholding allowances you claim (each allowance
reduces the amount withheld).
- Whether you want an additional amount withheld.
- Whether you are claiming an exemption from withholding in
2011. See
Exemption From Withholding on page 10.
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/pubs/p505-001.htm#en_us_publink10007188When you start a new job, you must fill out a 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 on page 10 for more information.
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/pubs/p505-001.htm#en_us_publink10007190During the year changes may occur to your marital status, 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.
Generally, you can submit a new Form W-4 whenever you wish to
change your withholding allowances for any other reason. See Table 1-1 for
examples of personal and financial changes you should consider.
Table 1-1. 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 on page 10.
If changes occur in 2011 that will decrease the number of your
withholding allowances for 2012, you must give your employer a new Form W-4 by
December 1, 2011. If such a change occurs in December 2011 or later, submit a
new Form W-4 within 10 days. See Table 1-1 above for examples of items that may
decrease the number of your withholding allowances.
taxmap/pubs/p505-001.htm#en_us_publink1000201317If your spouse died in 2011, you can file a joint return for
2011. Your spouse's death will not affect the number of your withholding
allowances until 2012. You will have to change from married to single status for
2012, unless you can file as a qualifying widow or widower because you have a
dependent child, or you remarry. For more information, see
Married on this page under
Marital Status (Line 3 of Form W-4).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
on page 10, for more information. 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 federal income
tax withholding on salaries and wages for past pay periods or a payment for
estimated tax.
taxmap/pubs/p505-001.htm#en_us_publink10007195When reading the following discussion, you may find it helpful
to refer to the filled-in Form W-4 on pages 8 and 9.
taxmap/pubs/p505-001.htm#en_us_publink10007196There is a lower withholding rate for people who qualify to check
the "Married" box on line 3 of Form W-4. Everyone else must have tax withheld at
the higher single rate.
taxmap/pubs/p505-001.htm#en_us_publink10007197You must check the "Single" box if any of the following applies.
- You are single. If you are divorced, or separated from your
spouse under a court decree of separate maintenance, you are considered single.
- You are married, but neither you nor your spouse is a citizen
or resident of the United States.
- 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. For more information, see
Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519.
You qualify to check the "Married" box if any of the following
applies.
- You are married and neither you nor your spouse is a nonresident
alien. You are considered married for the whole year even if your spouse died
during the year.
- 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. For
more information, see
Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519.
- You expect to be able to file your return as a qualifying
widow or widower. 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. 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. 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.
Some married people find that they do not have enough tax withheld
at the married rate. This can happen, for example, when both spouses work. To
avoid this, you can check the "Married, but withhold at higher Single rate" box
(even if you qualify for the married rate). Also, you may find that more tax is
withheld if you fill out the
Two-Earners/Multiple Jobs Worksheet, explained on page 7.
The more allowances you claim on Form W-4, the less income tax
your employer will withhold. You will have the most tax withheld if you claim
"0" allowances. The number of allowances you can claim depends on the following
factors.
- How many exemptions you can take on your tax return.
- Whether you have income from more than one job.
- What deductions, adjustments to income, and credits you expect
to have for the year.
- Whether you will file as head of household.
If you are married, it also depends on whether your spouse also
works and claims any allowances on his or her own Form W-4.
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.
Complete only one set of Form W-4 worksheets, no matter how many
jobs you have. 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. Complete separate sets of worksheets
only if you and your spouse will file separate returns.
If you are not exempt from withholding (see
Exemption From Withholding
beginning on page 10), complete the Personal Allowances Worksheet on page 1 of
the form. 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. 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.
Complete all worksheets that apply to your situation. 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.
taxmap/pubs/p505-001.htm#en_us_publink10007202If 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/pubs/p505-001.htm#en_us_publink10007203If 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/pubs/p505-001.htm#en_us_publink10007204You do not have to use the Form W-4 worksheets if you use a more
accurate method of figuring the number of withholding allowances.
The method you use must be based on withholding schedules, the
tax rate schedules, and the 2011 Estimated Tax Worksheet in chapter 2. 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.
You can use the number of withholding allowances determined under
an alternative method rather than the number determined using the Form W-4
worksheets. You still must give your employer a Form W-4 claiming your
withholding allowances.
taxmap/pubs/p505-001.htm#en_us_publink10007205If you are neither a citizen nor a resident of the United States,
you usually can claim only one withholding allowance. However, this rule does
not apply if you are a resident of Canada or Mexico, or if you are a U.S.
national. It also does not apply if your spouse is a U.S. citizen or resident
and you have chosen to be treated as a resident of the United States for tax
purposes. Special rules apply to residents of South Korea and India. For more
information, see
Withholding From Compensation in chapter 8 of Publication 519.
taxmap/pubs/p505-001.htm#en_us_publink10007206Use the Personal Allowances Worksheet on page 1 of Form W-4 to
figure your withholding allowances based on all of the following that apply.
- Exemptions.
- Only one job.
- Head of household filing status.
- Child and dependent care credit.
- Child tax credit.
You can claim one withholding allowance for each exemption you
expect to claim on your tax return.
taxmap/pubs/p505-001.htm#en_us_publink10007208You 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. 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.
taxmap/pubs/p505-001.htm#en_us_publink10007209You 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. Do not claim this allowance if you and your
spouse expect to file separate returns.
taxmap/pubs/p505-001.htm#en_us_publink10007210You can claim one allowance on line D for each exemption you
will claim for a dependent on your tax return.
taxmap/pubs/p505-001.htm#en_us_publink10007212
You can claim an additional withholding allowance if any of the following apply
for 2011.
- You are single and you have only one job at a time.
- You are married, you have only one job at a time, and your
spouse does not work.
- Your wages from a second job or your spouse's wages (or the
total of both) are $1,500 or less.
If you qualify for this allowance, enter "1" on line B of the
worksheet.
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 2011 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.
For more information, see Publication 501.
If you expect to file as head of household on your 2011 tax return,
enter "1" on line E of the worksheet.
taxmap/pubs/p505-001.htm#en_us_publink10007214Enter "1" on line F if you expect to claim a credit for at least
$1,900 of qualifying child or dependent care expenses on your 2011 return.
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.
For more information, see Publication 503, Child and Dependent Care Expenses.
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 beginning on page 6.
If your total income will be less than $61,000 ($90,000 if married),
enter "2" on line G for each eligible child. Subtract "1" from that amount if
you have three or more eligible children.
If your total income will be between $61,000 and $84,000 ($90,000
and $119,000 if married), enter "1" on line G for each eligible child plus "1"
additional if you have six or more eligible children.
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 2011,
- 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
2011,
- 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 2011,
- Who is a U.S. citizen, U.S. national, or U.S. resident alien,
and
- Who will be claimed as a dependent on your return.
If you are a U.S. citizen or U.S. national and your adopted
child lived with you all year as a member of your household, that child meets
the citizenship test.
Also, if any other person can claim the child as an eligible
child, see
Qualifying child of more than one person in the 2010 instructions for Form 1040 or 1040A, line 6c.
For more information about the child tax credit, see the instructions
for Form 1040 or Form 1040A.
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 beginning on page 6.
Add lines A through G and enter the total on line H. 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.
taxmap/pubs/p505-001.htm#en_us_publink10007217Use the Deductions and Adjustments Worksheet on page 2 of Form
W-4 in the following situations.
- You plan to itemize your deductions, claim certain credits,
or claim adjustments to the income on your 2011 tax return and you want to
reduce your withholding.
- You are increasing your standard deduction by certain items
allowed for 2011 (see
Adjustments to income on page 6).
- You have changes to any of the above items and need to see
if you should change your withholding.
Use the amount of each item you reasonably can expect to show
on your return. However, do not use more than:
- The amount shown for that item on your 2010 return (or your
2009 return if you have not yet filed your 2010 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 2010 or 2011.
Do not include any amount shown on your last tax return that
has been disallowed by the IRS.
On June 30, 2010, you bought your first home. On your 2010 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. 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
2011 return. You can use $13,200 to figure the number of your withholding
allowances for itemized deductions.
taxmap/pubs/p505-001.htm#en_us_publink10007219If 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.
taxmap/pubs/p505-001.htm#en_us_publink10007220Enter your estimated total itemized deductions on line 1 of the
worksheet.
Listed below are some of the deductions you can take into account
when figuring additional withholding allowances for 2011. You normally claim
these deductions on Schedule A of Form 1040.
- Medical and dental expenses that are more than 7.5% of your
2011 AGI (defined under
AGI on this page).
- State and local income or property taxes.
- Deductible home mortgage interest.
- Investment interest up to net investment income.
- Charitable contributions.
- Casualty and theft losses that are more than $100 and 10%
of your AGI.
- 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.
- 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.
For the purpose of estimating your itemized deductions, your AGI is your
estimated total income for 2011 minus any estimated adjustments to income
(discussed below) that you include on line 4 of the Deductions and Adjustments
Worksheet.
taxmap/pubs/p505-001.htm#en_us_publink10007223Enter your estimated total adjustments to income on line 4 of
the Deductions and Adjustments Worksheet.
You can take the following adjustments to income into account
when figuring additional withholding allowances for 2011. These adjustments
appear on page 1 of your Form 1040 or 1040A.
- Net losses from Schedules C, D, E, and F of Form 1040 and
from Part II of Form 4797, line 18b.
- Net operating loss carryovers.
- Educator expenses.
- Certain business expenses of reservists, performing artists,
and fee-based government officials.
- Health savings account or medical savings account deduction.
- Certain moving expenses.
- Deduction for self-employment tax.
- Deduction for contributions to self-employed SEP, and qualified
SIMPLE plans.
- Self-employed health insurance deduction.
- Penalty on early withdrawal of savings.
- Alimony paid.
- IRA deduction.
- Student loan interest deduction.
- Tuition and fees deduction.
- Jury duty pay given to your employer.
- Reforestation amortization and expenses.
- Deductible expenses related to income reported on line 21
from the rental of personal property engaged in for profit.
- Repayment of certain supplemental unemployment benefits.
- Contributions to IRC 501(c)(18)(D) pension plans.
- Contributions by certain chaplains to IRC 403(b) plans.
- Attorney fees and court costs for certain unlawful discrimination
claims.
- Attorney fees and court costs for certain whistleblower awards.
- Estimated amount of decrease in tax attributable to income
averaging using Schedule J (Form 1040).
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). But you
can take these credits and others into account by adding an extra amount on line
5 of the Deductions and Adjustments Worksheet.
If you take the child and dependent care credit into account
on line 5, do not use line F. If you take the child tax credit into account on
line 5, do not use line G.
In addition to the child and dependent care credit and the child
tax credit, you can take into account the following credits.
- Foreign tax credit, except any credit that applies to wages
not subject to U.S. income tax withholding because they are subject to income
tax withholding by a foreign country. See Publication 514, Foreign Tax Credit
for Individuals.
- Credit for the elderly or the disabled. See Publication 524,
Credit for the Elderly or the Disabled.
- Education credits. See Publication 970, Tax Benefits for Education.
- Retirement savings contributions credit (saver's credit).
See Publication 590.
- Mortgage interest credit. See Publication 530, Tax Information
for Homeowners.
- Adoption credit. See the Instructions for Form 8839.
- Credit for prior year minimum tax (both refundable and nonrefundable)
if you paid alternative minimum tax in an earlier year. See the Instructions for
Form 8801.
- General business credit. See the Instructions for Form 3800.
- Earned income credit. See Publication 596.
- Alternative motor vehicle credit (including the plug-in conversion
credit). See Form 8910, Part III, and instructions.
- Alternative fuel vehicle refueling property credit. See Form
8911, Part III, and instructions.
- Qualified plug-in electric vehicle credit. See Form 8834,
Part I, and instructions.
- Credit to holders of tax credit bonds. See Form 8912 and instructions.
- Health coverage tax credit. See Form 8885 and instructions.
- Residential energy credits. See Form 5695 and instructions.
- Qualified electric vehicle passive activity credit. See Form
8834, Part II, and instructions.
- District of Columbia first-time homebuyer credit. See the
Instructions for Form 8859.
- First-time homebuyer credit. See the Instructions for Form
5405.
- Qualified plug-in electric drive motor vehicle credit. See
the Instructions for Form 8936.
To figure the amount to add on line 5 for tax credits, multiply
your estimated total credits by the appropriate number from
Table 1-2 on this page.
You are married and expect to file a joint return for 2011. Your
combined estimated wages are $68,000. 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).
In Table 1-2a, the number corresponding to your combined estimated
wages ($40,001 – $92,000) is 6.7. Multiply your total estimated tax
credits of $2,660 by 6.7. 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. 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.
taxmap/pubs/p505-001.htm#en_us_publink1000240589Enter on line 6 your estimated total nonwage income (other than
tax-exempt income). Nonwage income includes interest, dividends, net rental
income, unemployment compensation, alimony, gambling winnings, prizes and
awards, hobby income, capital gains, royalties, and partnership income.
taxmap/pubs/p505-001.htm#en_us_publink1000240591
If line 7 is less than $3,700, enter "0" on line 8. If line 7 is $3,700 or more,
divide it by $3,700, drop any fraction, and enter the result on line 8.
taxmap/pubs/p505-001.htm#en_us_publink1000240592If line 7 is $5,200, $5,200 ÷ $3,700 = 1.41. Drop the fraction
(.41) and enter "1" on line 8.
taxmap/pubs/p505-001.htm#en_us_publink10007230Complete 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 $40,000 ($10,000
if married).
taxmap/pubs/p505-001.htm#en_us_publink10007232On 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). 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). Enter that number on line 2. 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."
taxmap/pubs/p505-001.htm#en_us_publink1000256367
Table 1-2. Deductions and Adjustments Worksheet (Form
W-4)—Line 5
| a. Married Filing Jointly or Qualifying Widow(er) | | If combined income from all sources is: | | Multiply credits by: | | $0 – 40,000 | 10.0 | | $40,001 – 92,000 | 6.7 | | $92,001 – 166,000 | 4.0 | | $166,001 – 250,000 | 3.6 | | $250,001 – 420,000 | 3.0 | | $420,001 and over | 2.8 | | b. Single | | If combined income from all sources is: | | Multiply credits by: | | $0 – 18,000 | 10.0 | | $18,001 – 44,000 | 6.7 | | $44,001 – 95,000 | 4.0 | | $95,001 – 190,000 | 3.6 | | $190,001 – 410,000 | 3.0 | | $410,001 and over | 2.8 | | c. Head of Household | | If combined income from all sources is: | | Multiply credits by: | | $0 – 28,000 | 10.0 | | $28,001 – 62,000 | 6.7 | | $62,001 – 136,000 | 4.0 | | $136,001 – 220,000 | 3.6 | | $220,001 – 410,000 | 3.0 | | $410,001 and over | 2.8 | | d. Married Filing Separately | | | If combined income from all sources is: | | Multiply credits by: | | $0 – 20,000 | 10.0 | | $20,001 – 46,000 | 6.7 | | $46,001 – 83,000 | 4.0 | | $83,001 – 125,000 | 3.6 | | $125,001 – 210,000 | 3.0 | | $210,001 and over | 2.8 |
|
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. If line 1 is more than or equal to
line 2, do not use the rest of the worksheet.
If line 1 is less than line 2, enter "0" on Form W-4, line 5.
Then complete lines 4 through 9 of the worksheet to figure the additional
withholding needed to avoid underwithholding.
taxmap/pubs/p505-001.htm#en_us_publink1000240586If you expect to owe amounts other than income tax, such as self-employment
tax, include them on line 8. The total is the additional withholding needed for
the year.
taxmap/pubs/p505-001.htm#en_us_publink10007234Joyce Green works in a bookstore and expects to earn about $13,300.
Her husband, John, works full time at the Acme Corporation, where his expected
pay is $48,500. They file a joint income tax return and claim exemptions for
their two children. Because they file jointly, they use only one set of Form W-4
worksheets to figure the number of withholding allowances. The Greens'
worksheets and John's Form W-4 are shown in
Figure 1-A, on pages 8 and 9.
On this worksheet, John and Joyce claim allowances for themselves
and their children by entering "1" on line A, "1" on line C, and "2" on line D.
Because both John and Joyce will receive wages of more than $1,500, they are not
entitled to the additional withholding allowance on line B. The Greens expect to
have child and dependent care expenses of $2,400. They enter "1" on line F of
the worksheet. Because they are married, their total income will be less than
$90,000, and they have two eligible children, they enter "4" on line G.
They enter their total personal allowances, "9," on line H.
taxmap/pubs/p505-001.htm#en_us_publink10007236Because they plan to itemize deductions and claim adjustments
to income, the Greens use this worksheet to see whether they are entitled to
additional allowances.
The Greens' estimated itemized deductions total $12,800, which
they enter on line 1 of the worksheet. Because they will file a joint return,
they enter $11,600 on line 2. They subtract $11,600 from $12,800 and enter the
result, $1,200, on line 3.
The Greens expect to have an adjustment to income of $4,000 for
their deductible IRA contributions. They do not expect to have any other
adjustments to income. They enter $4,000 on line 4.
They add line 3 and line 4 and enter the total, $5,200, on line
5.
Joyce and John expect to receive $600 in interest and dividend
income during the year. They enter $600 on line 6 and subtract line 6 from line
5. They enter the result, $4,600, on line 7. They divide line 7 by $3,700, and
drop the fraction to determine one additional allowance. They enter "1" on line
8.
The Greens enter "9" (the number from line H of the Personal
Allowances Worksheet) on line 9 and add it to line 8. They enter "10" on line
10.
taxmap/pubs/p505-001.htm#en_us_publink10007237The Greens use this worksheet because they both work and together
earn over $10,000. They enter "10" (the number from line 10 of the Deductions
and Adjustments Worksheet) on line 1.
Next, they use Table 1 of the worksheet to find the number to
enter on line 2. Because they will file a joint return and their expected wages
from their lowest paying job are $13,300, they enter "2" on line 2. They
subtract line 2 from line 1 and enter "8" on line 3 of the worksheet and on Form
W-4, line 5.
John and Joyce Green can take a total of 8 withholding allowances
between them. They decide that John will take all 8 allowances on his Form W-4.
Joyce, therefore, cannot claim any allowances on hers. She will enter "0" on
line 5 of the Form W-4 she gives to her employer.
taxmap/pubs/p505-001.htm#en_us_publink10007240In 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.
- You accurately complete all the Form W-4 worksheets that apply
to you.
- You give your employer a new Form W-4 when changes occur.
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.
- You are married and both you and your spouse work.
- You have more than one job at a time.
- You have nonwage income, such as interest, dividends, alimony,
unemployment compensation, or self-employment income.
- You will owe additional amounts with your return, such as
self-employment tax.
- Your withholding is based on obsolete Form W-4 information
for a substantial part of the year.
- Your earnings are more than $130,000 if you are single or
$180,000 if you are married.
- You work only part of the year.
- You change the number of your withholding allowances during
the year.
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. To be eligible for the
part-year method, you must meet both of the following requirements.
- You must use the calendar year (the 12 months from January
1 through December 31) as your tax year. You cannot use a fiscal year.
- You must not expect to be employed for more than 245 days
during the year. 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. If you are
temporarily laid off for 30 days or less, count those days too. If you are laid
off for more than 30 days, do not count those days. You will not meet this
requirement if you begin working before May 1 and expect to work for the rest of
the year.
You must ask your employer in writing to use this method. The
request must state all three of the following.
- The date of your last day of work for any prior employer during
the current calendar year.
- That you do not expect to be employed more than 245 days during
the current calendar year.
- That you use the calendar year as your tax year.
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/pubs/p505-001.htm#en_us_publink10007244taxmap/pubs/p505-001.htm#en_us_publink1000239327To 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, if any, additional withholding 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. See
chapter 2 for information about estimated tax.
If you had too much or too little income tax withheld from your
pay, the IRS provides a withholding calculator on its website. Go to IRS.gov and
click on "Estimate Your Withholding" under "Online Services." It can help you
determine the correct amount to be withheld any time during the year.
taxmap/pubs/p505-001.htm#en_us_publink10007245It 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/pubs/p505-001.htm#en_us_publink10007246When 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/pubs/p505-001.htm#en_us_publink10007247If 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/pubs/p505-001.htm#en_us_publink10007248If 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, which you
would claim when you file your tax return.
taxmap/pubs/p505-001.htm#en_us_publink10007249Whether you are entitled to claim a certain number of allowances
or a complete exemption from withholding is subject to review by the IRS. Your
employer may be required to send a copy of the Form W-4 to the IRS. There is a
penalty for supplying false information on Form W-4. See
Penalties on page 13.
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.
The IRS will provide a period of time during which you can dispute
the determination before your employer adjusts your withholding. 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. Contact information (a toll-free number and an
IRS office address) will be provided in the lock-in letter. 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.
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.
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. 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.
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. Your employer must then withhold tax based on
this new Form W-4.
Additional information is available at IRS.gov. Enter "withholding
compliance questions" in the search box.
taxmap/pubs/p505-001.htm#en_us_publink10007250If 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 2011 only if both
of the following situations apply.
- For 2010 you had a right to a refund of all federal income
tax withheld because you had no tax liability.
- For 2011 you expect a refund of all federal income tax withheld
because you expect to have no tax liability.
Use
Figure 1-B
below to help you decide whether you can claim exemption from withholding. Do
not use Figure 1-B if you:
- Are 65 or older,
- Are blind,
- Will itemize deductions on your 2011 return,
- Will claim an exemption for a dependent on your 2011 return,
or
- Will claim any tax credits on your 2011 return.
These situations are discussed later.
If you are a student, you are not automatically exempt. If you
work only part time or during the summer, you may qualify for exemption from
withholding.
taxmap/pubs/p505-001.htm#en_us_publink10007252You are a high school student and expect to earn $2,500 from
a summer job. 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. You
worked last summer and had $375 federal income tax withheld from your pay. The
entire $375 was refunded when you filed your 2010 return. Using Figure 1-B, you
find that you can claim exemption from withholding.
taxmap/pubs/p505-001.htm#en_us_publink10007254The facts are the same as in
Example 1, except that you also have a savings account and expect to
have $350 interest income during the year. Using Figure 1-B, you find that you
cannot claim exemption from withholding because your unearned income will be
more than $300 and your total income will be more than $950.
 | You may have to file a tax return, even if you are exempt
from withholding. See Publication 501 to see whether you must file a return. |
 | Age 65 or older or blind. If you are 65 or older or blind, use
Worksheet 1-1 or
Worksheet 1-2
on page 12 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 2011 return. Instead, see
Itemizing deductions or claiming exemptions or credits, next.
|
taxmap/pubs/p505-001.htm#en_us_publink1000248738
| | |
| Worksheet 1-1. | Exemption From Withholding for Persons Age 65 or Older or
Blind |
| Use this worksheet only if, for
2010 you had a right to a refund of
all federal income tax withheld because you had
no tax liability. |
| Caution.
This worksheet does not apply if you can be claimed as a
dependent. See Worksheet 1-2 instead. |
| 1. | Check the boxes below that apply to you. |
| | 65 or older □ | Blind □ |
| 2. | Check the boxes below that apply to your spouse if you will
claim your spouse's exemption on your 2011 return. |
| | 65 or older □ | Blind □ |
| 3. | Add the number of boxes you checked in
1 and 2 above. Enter the result
| |
| You
can claim exemption from withholding if:
|
| Your filing status is: | and the number on
line 3 above is:
| and your
2011 total
income will be
no more than:
|
| Single | 1 | $10,950 |
| | 2 | 12,400 |
| Head of | 1 | $13,650 |
| household | 2 | 15,100 |
| Married filing | 1 | $10,650 |
| separately for | 2 | 11,800 |
| both 2010 and | 3 | 12,950 |
| 2011 | 4 | 14,100 |
| Other married | 1 | $20,150* |
| status | 2 | 21,300* |
| | 3 | 22,450* |
| | 4 | 23,600* |
| * Include both spouses' income whether you will file separately
or jointly. |
| Qualifying | 1 | $16,450 |
| widow(er) | 2 | 17,600 |
| You
cannot claim exemption from withholding if your total income will
be
more than the amount shown for your filing status.
|
| | |
| Worksheet 1-2. | Exemption From Withholding for Dependents Age 65 or Older
or Blind |
| Use this worksheet only if, for
2011, you are a dependent and if, for
2010, you had a right to a refund of
all federal income tax withheld because you had
no tax liability. |
| 1. | Enter your expected earned income plus $300 | 1. | |
| 2. | Minimum amount | 2. | $ 950 |
| 3. | Compare lines 1 and 2. Enter the
larger amount
| 3. | |
| 4. | Limit | 4. | 5,800 |
| 5. | Compare lines 3 and 4. Enter the
smaller
amount
| 5. | |
| 6. | Enter the appropriate amount from the following table | 6. | |
| | Single | | | |
| | Either 65 or older or blind | $1,450 | | |
| | Both 65 or older and blind | 2,900 | | |
| | Married filing separately | | | |
| | Either 65 or older or blind | 1,150 | | |
| | Both 65 or older and blind
| 2,300 | | |
| 7. | Add lines 5 and 6. Enter the result | 7. | |
| 8. | Enter your total expected income | 8. | |
| You
can
claim exemption from withholding if line 7 is equal to or more than line 8. You
cannot claim exemption from withholding if line 8 is more than
line 7.
|
taxmap/pubs/p505-001.htm#en_us_publink10007257If you had no tax liability for 2010, and you will:
- Itemize deductions,
- Claim an exemption for a dependent, or
- Claim a tax credit,
use the 2011 Estimated Tax Worksheet in Form 1040-ES (also see
chapter 2), to figure your 2011 expected tax liability. You can claim
exemption from withholding only if your total expected tax liability (line 13c
of the worksheet) is zero.
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 2011 but you expect to owe
income tax for 2012, you must file a new Form W-4 by December 1, 2011.
taxmap/pubs/p505-001.htm#en_us_publink10007259You must give your employer a new Form W-4 by February 15 each
year to continue your exemption.
taxmap/pubs/p505-001.htm#en_us_publink10007260Supplemental 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 regular wages, your employer or other payer of supplemental
wages can withhold income tax from these wages at a flat rate.
taxmap/pubs/p505-001.htm#en_us_publink10007261Reimbursements or other expense allowances paid by your employer
under a nonaccountable plan are treated as supplemental wages. 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.
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.
taxmap/pubs/p505-001.htm#en_us_publink10007262To be an accountable plan, your employer's reimbursement or allowance
arrangement must include all three of the following rules.
- Your expenses must have a business connection. That is, you
must have paid or incurred deductible expenses while performing services as an
employee of your employer.
- You must adequately account to your employer for these expenses
within a reasonable period of time.
- You must return any excess reimbursement or allowance within
a reasonable period of time.
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.
The definition of reasonable period of time depends on the facts
and circumstances of your situation. 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.
- You receive an advance within 30 days of the time you have
an expense.
- You adequately account for your expenses within 60 days after
they were paid or incurred.
- You return any excess reimbursement within 120 days after
the expense was paid or incurred.
- 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.
Any plan that does not meet the definition of an accountable
plan is considered a nonaccountable plan.
For more information about accountable and nonaccountable plans, see chapter 6
of Publication 463, Travel, Entertainment, Gift, and Car Expenses.
taxmap/pubs/p505-001.htm#en_us_publink10007264You may have to pay a penalty of $500 if both of the following
apply.
- You make statements or claim withholding allowances on your
Form W-4 that reduce the amount of tax withheld.
- You have no reasonable basis for those statements or allowances
at the time you prepare your Form W-4.
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 Form W-4 penalty. However, see
chapter 4 for information on the penalty for underpaying your tax.
Previous Page |
Table of Contents |
Index |
Next Page
Figure 1-A. Illustrated Example--Form W-4 (John and Joyce Green) 
