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Filing Tax Extension 2012

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Filing Tax Extension 2012

Filing tax extension 2012 4. Filing tax extension 2012   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. Filing tax extension 2012 Resident aliens are generally taxed in the same way as U. Filing tax extension 2012 S. Filing tax extension 2012 citizens. Filing tax extension 2012 Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business and how it is taxed. Filing tax extension 2012 Topics - This chapter discusses: Income that is effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 Income that is not effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 Interrupted period of residence. Filing tax extension 2012 Expatriation tax. Filing tax extension 2012 Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. Filing tax extension 2012 Resident Aliens Resident aliens are generally taxed in the same way as U. Filing tax extension 2012 S. Filing tax extension 2012 citizens. Filing tax extension 2012 This means that their worldwide income is subject to U. Filing tax extension 2012 S. Filing tax extension 2012 tax and must be reported on their U. Filing tax extension 2012 S. Filing tax extension 2012 tax return. Filing tax extension 2012 Income of resident aliens is subject to the graduated tax rates that apply to U. Filing tax extension 2012 S. Filing tax extension 2012 citizens. Filing tax extension 2012 Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. Filing tax extension 2012 S. Filing tax extension 2012 citizens. Filing tax extension 2012 Nonresident Aliens A nonresident alien's income that is subject to U. Filing tax extension 2012 S. Filing tax extension 2012 income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). Filing tax extension 2012 The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. Filing tax extension 2012 These are the same rates that apply to U. Filing tax extension 2012 S. Filing tax extension 2012 citizens and residents. Filing tax extension 2012 Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. Filing tax extension 2012 If you were formerly a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen or resident alien, these rules may not apply. Filing tax extension 2012 See Expatriation Tax, later, in this chapter. Filing tax extension 2012 Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. Filing tax extension 2012 Whether you are engaged in a trade or business in the United States depends on the nature of your activities. Filing tax extension 2012 The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. Filing tax extension 2012 Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. Filing tax extension 2012 Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. Filing tax extension 2012 For more information, see Services Performed for Foreign Employer in chapter 3. Filing tax extension 2012 Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. Filing tax extension 2012 Students and trainees. Filing tax extension 2012   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. Filing tax extension 2012 A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. Filing tax extension 2012 The taxable part of any scholarship or fellowship grant that is U. Filing tax extension 2012 S. Filing tax extension 2012 source income is treated as effectively connected with a trade or business in the United States. Filing tax extension 2012 Business operations. Filing tax extension 2012   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. Filing tax extension 2012 Partnerships. Filing tax extension 2012   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. Filing tax extension 2012 Beneficiary of an estate or trust. Filing tax extension 2012   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. Filing tax extension 2012 Trading in stocks, securities, and commodities. Filing tax extension 2012   If your only U. Filing tax extension 2012 S. Filing tax extension 2012 business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. Filing tax extension 2012 S. Filing tax extension 2012 resident broker or other agent, you are not engaged in a trade or business in the United States. Filing tax extension 2012   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. Filing tax extension 2012   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. Filing tax extension 2012   This discussion does not apply if you have a U. Filing tax extension 2012 S. Filing tax extension 2012 office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. Filing tax extension 2012 Trading for a nonresident alien's own account. Filing tax extension 2012   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. Filing tax extension 2012 S. Filing tax extension 2012 business activity. Filing tax extension 2012 This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. Filing tax extension 2012   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. Filing tax extension 2012 This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. Filing tax extension 2012 Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . Filing tax extension 2012 Effectively Connected Income If you are engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. Filing tax extension 2012 This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. Filing tax extension 2012 Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. Filing tax extension 2012 In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. Filing tax extension 2012 For a discussion of these rules, see Foreign Income , later. Filing tax extension 2012 Investment Income Investment income from U. Filing tax extension 2012 S. Filing tax extension 2012 sources that may or may not be treated as effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business generally falls into the following three categories. Filing tax extension 2012 Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. Filing tax extension 2012 ). Filing tax extension 2012 Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. Filing tax extension 2012 Timber, coal, or domestic iron ore with a retained economic interest. Filing tax extension 2012 Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. Filing tax extension 2012 Patents transferred before October 5, 1966. Filing tax extension 2012 Original issue discount obligations. Filing tax extension 2012 Capital gains (and losses). Filing tax extension 2012 Use the two tests, described next, to determine whether an item of U. Filing tax extension 2012 S. Filing tax extension 2012 source income falling in one of the three categories above and received during the tax year is effectively connected with your U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. Filing tax extension 2012 If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. Filing tax extension 2012 Asset-use test. Filing tax extension 2012   This test usually applies to income that is not directly produced by trade or business activities. Filing tax extension 2012 Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. Filing tax extension 2012   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. Filing tax extension 2012 Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. Filing tax extension 2012 Business-activities test. Filing tax extension 2012   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. Filing tax extension 2012 The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. Filing tax extension 2012 Under this test, if the conduct of the U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business was a material factor in producing the income, the income is considered effectively connected. Filing tax extension 2012 Personal Service Income You usually are engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business when you perform personal services in the United States. Filing tax extension 2012 Personal service income you receive in a tax year in which you are engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business is effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. Filing tax extension 2012 Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. Filing tax extension 2012 The income may be paid to you in the form of cash, services, or property. Filing tax extension 2012 If you are engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. Filing tax extension 2012 However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. Filing tax extension 2012 Pensions. Filing tax extension 2012   If you were a nonresident alien engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. Filing tax extension 2012 This is true whether or not you are engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business in the year you receive the retirement pay. Filing tax extension 2012 Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. Filing tax extension 2012 You had a fixed place of business in the United States involved in earning the income. Filing tax extension 2012 At least 90% of your U. Filing tax extension 2012 S. Filing tax extension 2012 source transportation income is attributable to regularly scheduled transportation. Filing tax extension 2012 “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. Filing tax extension 2012 “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. Filing tax extension 2012 This definition applies to both scheduled and chartered air transportation. Filing tax extension 2012 If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. Filing tax extension 2012 See Transportation Tax, later, in this chapter. Filing tax extension 2012 Business Profits and Losses and Sales Transactions All profits or losses from U. Filing tax extension 2012 S. Filing tax extension 2012 sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. Filing tax extension 2012 For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. Filing tax extension 2012 A share of U. Filing tax extension 2012 S. Filing tax extension 2012 source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. Filing tax extension 2012 Real Property Gain or Loss Gains and losses from the sale or exchange of U. Filing tax extension 2012 S. Filing tax extension 2012 real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. Filing tax extension 2012 You must treat the gain or loss as effectively connected with that trade or business. Filing tax extension 2012 U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest. Filing tax extension 2012   This is any interest in real property located in the United States or the U. Filing tax extension 2012 S. Filing tax extension 2012 Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. Filing tax extension 2012 S. Filing tax extension 2012 real property holding corporation. Filing tax extension 2012 Real property includes the following. Filing tax extension 2012 Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. Filing tax extension 2012 Improvements on land, including buildings, other permanent structures, and their structural components. Filing tax extension 2012 Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. Filing tax extension 2012 U. Filing tax extension 2012 S. Filing tax extension 2012 real property holding corporation. Filing tax extension 2012   A corporation is a U. Filing tax extension 2012 S. Filing tax extension 2012 real property holding corporation if the fair market value of the corporation's U. Filing tax extension 2012 S. Filing tax extension 2012 real property interests are at least 50% of the total fair market value of: The corporation's U. Filing tax extension 2012 S. Filing tax extension 2012 real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. Filing tax extension 2012   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business unless you establish that the corporation is not a U. Filing tax extension 2012 S. Filing tax extension 2012 real property holding corporation. Filing tax extension 2012   A U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. Filing tax extension 2012 An interest in a foreign corporation owning U. Filing tax extension 2012 S. Filing tax extension 2012 real property generally is not a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest unless the corporation chooses to be treated as a domestic corporation. Filing tax extension 2012 Qualified investment entities. Filing tax extension 2012   Special rules apply to qualified investment entities (QIEs). Filing tax extension 2012 A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. Filing tax extension 2012 S. Filing tax extension 2012 real property holding corporation. Filing tax extension 2012    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest is treated as a U. Filing tax extension 2012 S. Filing tax extension 2012 real property gain by the shareholder receiving the distribution. Filing tax extension 2012 A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. Filing tax extension 2012 A distribution that you do not treat as gain from the sale or exchange of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest is included in your gross income as a regular dividend. Filing tax extension 2012 Note. Filing tax extension 2012 Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. Filing tax extension 2012 S. Filing tax extension 2012 real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. Filing tax extension 2012 Domestically controlled QIE. Filing tax extension 2012   The sale of an interest in a domestically controlled QIE is not the sale of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest. Filing tax extension 2012 The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. Filing tax extension 2012 The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. Filing tax extension 2012 Wash sale. Filing tax extension 2012    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. Filing tax extension 2012 An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. Filing tax extension 2012 If this occurs, you are treated as having gain from the sale or exchange of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. Filing tax extension 2012 This also applies to any substitute dividend payment. Filing tax extension 2012   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. Filing tax extension 2012 Alternative minimum tax. Filing tax extension 2012   There may be a minimum tax on your net gain from the disposition of U. Filing tax extension 2012 S. Filing tax extension 2012 real property interests. Filing tax extension 2012 Figure the amount of this tax, if any, on Form 6251. Filing tax extension 2012 Withholding of tax. Filing tax extension 2012   If you dispose of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest, the buyer may have to withhold tax. Filing tax extension 2012 See the discussion of Tax Withheld on Real Property Sales in chapter 8. Filing tax extension 2012 Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Filing tax extension 2012 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Filing tax extension 2012 The three kinds of foreign source income are listed below. Filing tax extension 2012 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. Filing tax extension 2012 Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. Filing tax extension 2012 Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. Filing tax extension 2012 A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Filing tax extension 2012 Income, gain, or loss from the sale outside the United States, through the U. Filing tax extension 2012 S. Filing tax extension 2012 office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Filing tax extension 2012 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. Filing tax extension 2012 Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 For example, foreign source interest and dividend equivalents are treated as U. Filing tax extension 2012 S. Filing tax extension 2012 effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. Filing tax extension 2012 Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. Filing tax extension 2012 S. Filing tax extension 2012 citizens and residents. Filing tax extension 2012 Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. Filing tax extension 2012 However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. Filing tax extension 2012 Example. Filing tax extension 2012 Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. Filing tax extension 2012 S. Filing tax extension 2012 office of his overseas employer. Filing tax extension 2012 He worked in the U. Filing tax extension 2012 S. Filing tax extension 2012 office until December 25, 2012, but did not leave this country until January 11, 2013. Filing tax extension 2012 On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. Filing tax extension 2012 All of Ted's income during his stay here is U. Filing tax extension 2012 S. Filing tax extension 2012 source income. Filing tax extension 2012 During 2012, Ted was engaged in the trade or business of performing personal services in the United States. Filing tax extension 2012 Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. Filing tax extension 2012 The salary payment Ted received in January 2013 is U. Filing tax extension 2012 S. Filing tax extension 2012 source income to him in 2013. Filing tax extension 2012 It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. Filing tax extension 2012 Real property income. Filing tax extension 2012   You may be able to choose to treat all income from real property as effectively connected. Filing tax extension 2012 See Income From Real Property , later, in this chapter. Filing tax extension 2012 The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. Filing tax extension 2012 S. Filing tax extension 2012 sources but only if the items are not effectively connected with your U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. Filing tax extension 2012 S. Filing tax extension 2012 source fixed or determinable annual or periodic gains, profits, or income. Filing tax extension 2012 Income is fixed when it is paid in amounts known ahead of time. Filing tax extension 2012 Income is determinable whenever there is a basis for figuring the amount to be paid. Filing tax extension 2012 Income can be periodic if it is paid from time to time. Filing tax extension 2012 It does not have to be paid annually or at regular intervals. Filing tax extension 2012 Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. Filing tax extension 2012 Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. Filing tax extension 2012 A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Filing tax extension 2012 Other items of income, such as royalties, also may be subject to the 30% tax. Filing tax extension 2012 Some fixed or determinable income may be exempt from U. Filing tax extension 2012 S. Filing tax extension 2012 tax. Filing tax extension 2012 See chapter 3 if you are not sure whether the income is taxable. Filing tax extension 2012 Original issue discount (OID). Filing tax extension 2012   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. Filing tax extension 2012 The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. Filing tax extension 2012 The 30% tax applies in the following circumstances. Filing tax extension 2012 You received a payment on a debt instrument. Filing tax extension 2012 In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. Filing tax extension 2012 But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. Filing tax extension 2012 You sold or exchanged the debt instrument. Filing tax extension 2012 The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. Filing tax extension 2012   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. Filing tax extension 2012 S. Filing tax extension 2012 Source Income Subject to Withholding, if you bought the debt instrument at original issue. Filing tax extension 2012 However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. Filing tax extension 2012 You bought the debt instrument at a premium or paid an acquisition premium. Filing tax extension 2012 The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. Filing tax extension 2012 S. Filing tax extension 2012 Treasury securities). Filing tax extension 2012 The debt instrument is a contingent payment or inflation-indexed debt instrument. Filing tax extension 2012 For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. Filing tax extension 2012   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. Filing tax extension 2012 See chapter 12. Filing tax extension 2012 Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business and is not exempted by treaty. Filing tax extension 2012 However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. Filing tax extension 2012 Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 Social Security Benefits A nonresident alien must include 85% of any U. Filing tax extension 2012 S. Filing tax extension 2012 social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. Filing tax extension 2012 S. Filing tax extension 2012 source fixed or determinable annual or periodic income. Filing tax extension 2012 Social security benefits include monthly retirement, survivor, and disability benefits. Filing tax extension 2012 This income is exempt under some tax treaties. Filing tax extension 2012 See Table 1 in Publication 901, U. Filing tax extension 2012 S. Filing tax extension 2012 Tax Treaties, for a list of tax treaties that exempt U. Filing tax extension 2012 S. Filing tax extension 2012 social security benefits from U. Filing tax extension 2012 S. Filing tax extension 2012 tax. Filing tax extension 2012 Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. Filing tax extension 2012 They apply even if you are engaged in a trade or business in the United States. Filing tax extension 2012 These rules do not apply to the sale or exchange of a U. Filing tax extension 2012 S. Filing tax extension 2012 real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. Filing tax extension 2012 See Real Property Gain or Loss , earlier, under Effectively Connected Income. Filing tax extension 2012 A capital asset is everything you own except: Inventory. Filing tax extension 2012 Business accounts or notes receivable. Filing tax extension 2012 Depreciable property used in a trade or business. Filing tax extension 2012 Real property used in a trade or business. Filing tax extension 2012 Supplies regularly used in a trade or business. Filing tax extension 2012 Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. Filing tax extension 2012 Certain U. Filing tax extension 2012 S. Filing tax extension 2012 government publications. Filing tax extension 2012 Certain commodities derivative financial instruments held by a commodities derivatives dealer. Filing tax extension 2012 Hedging transactions. Filing tax extension 2012 A capital gain is a gain on the sale or exchange of a capital asset. Filing tax extension 2012 A capital loss is a loss on the sale or exchange of a capital asset. Filing tax extension 2012 If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. Filing tax extension 2012 S. Filing tax extension 2012 currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. Filing tax extension 2012 You may want to read Publication 544. Filing tax extension 2012 However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. Filing tax extension 2012 Specific tax treatment that applies to U. Filing tax extension 2012 S. Filing tax extension 2012 citizens or residents generally does not apply to you. Filing tax extension 2012 The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. Filing tax extension 2012 Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. Filing tax extension 2012 Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. Filing tax extension 2012 Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. Filing tax extension 2012 Gains on the sale or exchange of original issue discount obligations. Filing tax extension 2012 Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 See Income From Real Property , later. Filing tax extension 2012 183-day rule. Filing tax extension 2012   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. Filing tax extension 2012 For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. Filing tax extension 2012 S. Filing tax extension 2012 sources over your capital losses from U. Filing tax extension 2012 S. Filing tax extension 2012 sources. Filing tax extension 2012 This rule applies even if any of the transactions occurred while you were not in the United States. Filing tax extension 2012   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. Filing tax extension 2012   In arriving at your net gain, do not take the following into consideration. Filing tax extension 2012 The four types of gains listed earlier. Filing tax extension 2012 The deduction for a capital loss carryover. Filing tax extension 2012 Capital losses in excess of capital gains. Filing tax extension 2012 Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). Filing tax extension 2012 Losses from the sale or exchange of property held for personal use. Filing tax extension 2012 However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). Filing tax extension 2012 See Itemized Deductions in chapter 5. Filing tax extension 2012   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. Filing tax extension 2012 Also, you must file your tax return on a calendar-year basis. Filing tax extension 2012   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. Filing tax extension 2012 Reporting. Filing tax extension 2012   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. Filing tax extension 2012 Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. Filing tax extension 2012 Attach them to Form 1040NR. Filing tax extension 2012 Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. Filing tax extension 2012 The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. Filing tax extension 2012 This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. Filing tax extension 2012 It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. Filing tax extension 2012 You can make this choice only for real property income that is not otherwise effectively connected with your U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. Filing tax extension 2012 This choice does not treat a nonresident alien, who is not otherwise engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business, as being engaged in a trade or business in the United States during the year. Filing tax extension 2012 Example. Filing tax extension 2012 You are a nonresident alien and are not engaged in a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 You own a single-family house in the United States that you rent out. Filing tax extension 2012 Your rental income for the year is $10,000. Filing tax extension 2012 This is your only U. Filing tax extension 2012 S. Filing tax extension 2012 source income. Filing tax extension 2012 As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. Filing tax extension 2012 You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. Filing tax extension 2012 You do not have to file a U. Filing tax extension 2012 S. Filing tax extension 2012 tax return (Form 1040NR) because your U. Filing tax extension 2012 S. Filing tax extension 2012 tax liability is satisfied by the withholding of tax. Filing tax extension 2012 If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. Filing tax extension 2012 (See Publication 527, Residential Rental Property, for information on rental expenses. Filing tax extension 2012 ) Any resulting net income is taxed at graduated rates. Filing tax extension 2012 If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. Filing tax extension 2012 For the first year you make the choice, also attach the statement discussed next. Filing tax extension 2012 Making the choice. Filing tax extension 2012   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. Filing tax extension 2012 Include the following in your statement. Filing tax extension 2012 That you are making the choice. Filing tax extension 2012 Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. Filing tax extension 2012 A complete list of all your real property, or any interest in real property, located in the United States. Filing tax extension 2012 Give the legal identification of U. Filing tax extension 2012 S. Filing tax extension 2012 timber, coal, or iron ore in which you have an interest. Filing tax extension 2012 The extent of your ownership in the property. Filing tax extension 2012 The location of the property. Filing tax extension 2012 A description of any major improvements to the property. Filing tax extension 2012 The dates you owned the property. Filing tax extension 2012 Your income from the property. Filing tax extension 2012 Details of any previous choices and revocations of the real property income choice. Filing tax extension 2012   This choice stays in effect for all later tax years unless you revoke it. Filing tax extension 2012 Revoking the choice. Filing tax extension 2012   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. Filing tax extension 2012 S. Filing tax extension 2012 Individual Income Tax Return, for the year you made the choice and for later tax years. Filing tax extension 2012 You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. Filing tax extension 2012 If this time period has expired for the year of choice, you cannot revoke the choice for that year. Filing tax extension 2012 However, you may revoke the choice for later tax years only if you have IRS approval. Filing tax extension 2012 For information on how to get IRS approval, see Regulation section 1. Filing tax extension 2012 871-10(d)(2). Filing tax extension 2012 Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . Filing tax extension 2012 If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. Filing tax extension 2012 Attach a statement to your return that includes the following information (if applicable). Filing tax extension 2012 Your name, taxpayer identification number, and tax year. Filing tax extension 2012 A description of the types of services performed (whether on or off board). Filing tax extension 2012 Names of vessels or registration numbers of aircraft on which you performed the services. Filing tax extension 2012 Amount of U. Filing tax extension 2012 S. Filing tax extension 2012 source transportation income derived from each type of service for each vessel or aircraft for the calendar year. Filing tax extension 2012 Total amount of U. Filing tax extension 2012 S. Filing tax extension 2012 source transportation income derived from all types of services for the calendar year. Filing tax extension 2012 This 4% tax applies to your U. Filing tax extension 2012 S. Filing tax extension 2012 source gross transportation income. Filing tax extension 2012 This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. Filing tax extension 2012 For transportation income from personal services, the transportation must be between the United States and a U. Filing tax extension 2012 S. Filing tax extension 2012 possession. Filing tax extension 2012 For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. Filing tax extension 2012 Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. Filing tax extension 2012 S. Filing tax extension 2012 residence with a period of nonresidence. Filing tax extension 2012 The special rule applies if you meet all of the following conditions. Filing tax extension 2012 You were a U. Filing tax extension 2012 S. Filing tax extension 2012 resident for a period that includes at least 3 consecutive calendar years. Filing tax extension 2012 You were a U. Filing tax extension 2012 S. Filing tax extension 2012 resident for at least 183 days in each of those years. Filing tax extension 2012 You ceased to be treated as a U. Filing tax extension 2012 S. Filing tax extension 2012 resident. Filing tax extension 2012 You then again became a U. Filing tax extension 2012 S. Filing tax extension 2012 resident before the end of the third calendar year after the end of the period described in (1) above. Filing tax extension 2012 Under this special rule, you are subject to tax on your U. Filing tax extension 2012 S. Filing tax extension 2012 source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. Filing tax extension 2012 Example. Filing tax extension 2012 John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. Filing tax extension 2012 On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. Filing tax extension 2012 During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). Filing tax extension 2012 He returned to the United States on October 5, 2013, as a lawful permanent resident. Filing tax extension 2012 He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). Filing tax extension 2012 Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. Filing tax extension 2012 Reporting requirements. Filing tax extension 2012   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. Filing tax extension 2012 The return is due by the due date (including extensions) for filing your U. Filing tax extension 2012 S. Filing tax extension 2012 income tax return for the year that you again become a U. Filing tax extension 2012 S. Filing tax extension 2012 resident. Filing tax extension 2012 If you already filed returns for that period, you must file amended returns. Filing tax extension 2012 You must attach a statement to your return that identifies the source of all of your U. Filing tax extension 2012 S. Filing tax extension 2012 and foreign gross income and the items of income subject to this special rule. Filing tax extension 2012 Expatriation Tax The expatriation tax provisions apply to U. Filing tax extension 2012 S. Filing tax extension 2012 citizens who have renounced their citizenship and long-term residents who have ended their residency. Filing tax extension 2012 The rules that apply are based on the dates of expatriation, which are described in the following sections. Filing tax extension 2012 Expatriation Before June 4, 2004. Filing tax extension 2012 Expatriation After June 3, 2004, and Before June 17, 2008. Filing tax extension 2012 Expatriation After June 16, 2008. Filing tax extension 2012 Long-term resident defined. Filing tax extension 2012   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. Filing tax extension 2012 In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. Filing tax extension 2012 Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. Filing tax extension 2012 S. Filing tax extension 2012 taxes. Filing tax extension 2012 Unless you received a ruling from the IRS that you did not expatriate to avoid U. Filing tax extension 2012 S. Filing tax extension 2012 taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. Filing tax extension 2012 The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). Filing tax extension 2012 Table 4-1. Filing tax extension 2012 Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012   THEN the rules outlined on this page apply if . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012     Your 5-year average annual net income tax was more than . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012 OR Your net worth equaled or exceeded . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. Filing tax extension 2012 Reporting requirements. Filing tax extension 2012   If you lost your U. Filing tax extension 2012 S. Filing tax extension 2012 citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. Filing tax extension 2012 If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. Filing tax extension 2012   Your U. Filing tax extension 2012 S. Filing tax extension 2012 residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. Filing tax extension 2012 Penalties. Filing tax extension 2012   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. Filing tax extension 2012 The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. Filing tax extension 2012 The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. Filing tax extension 2012 Expatriation tax. Filing tax extension 2012   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. Filing tax extension 2012 It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. Filing tax extension 2012 See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. Filing tax extension 2012 Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. Filing tax extension 2012 Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. Filing tax extension 2012 $127,000 if you expatriated or terminated residency in 2005. Filing tax extension 2012 $131,000 if you expatriated or terminated residency in 2006. Filing tax extension 2012 $136,000 if you expatriated or terminated residency in 2007. Filing tax extension 2012 $139,000 if you expatriated or terminated residency in 2008. Filing tax extension 2012 Your net worth is $2 million or more on the date of your expatriation or termination of residency. Filing tax extension 2012 You fail to certify on Form 8854 that you have complied with all U. Filing tax extension 2012 S. Filing tax extension 2012 federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. Filing tax extension 2012 Exception for dual-citizens and certain minors. Filing tax extension 2012   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. Filing tax extension 2012 However, they still must provide the certification required in (3). Filing tax extension 2012 Certain dual-citizens. Filing tax extension 2012   You may qualify for the exception described above if all of the following apply. Filing tax extension 2012 You became at birth a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen and a citizen of another country and you continue to be a citizen of that other country. Filing tax extension 2012 You were never a resident alien of the United States (as defined in chapter 1). Filing tax extension 2012 You never held a U. Filing tax extension 2012 S. Filing tax extension 2012 passport. Filing tax extension 2012 You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. Filing tax extension 2012 S. Filing tax extension 2012 citizenship. Filing tax extension 2012 Certain minors. Filing tax extension 2012   You may qualify for the exception described above if you meet all of the following requirements. Filing tax extension 2012 You became a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen at birth. Filing tax extension 2012 Neither of your parents was a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen at the time of your birth. Filing tax extension 2012 You expatriated before you were 18½. Filing tax extension 2012 You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. Filing tax extension 2012 Tax consequences of presence in the United States. Filing tax extension 2012   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. Filing tax extension 2012   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. Filing tax extension 2012 Instead, you are treated as a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen or resident and taxed on your worldwide income for that tax year. Filing tax extension 2012 You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. Filing tax extension 2012   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. Filing tax extension 2012 However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. Filing tax extension 2012 You have ties with other countries. Filing tax extension 2012 You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. Filing tax extension 2012 You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. Filing tax extension 2012 Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. Filing tax extension 2012 See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. Filing tax extension 2012 Related employer. Filing tax extension 2012   If your employer in the United States is any of the following, then your employer is related to you. Filing tax extension 2012 You must count any days you performed services in the United States for that employer as days of presence in the United States. Filing tax extension 2012 Members of your family. Filing tax extension 2012 This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Filing tax extension 2012 ), and lineal descendants (children, grandchildren, etc. Filing tax extension 2012 ). Filing tax extension 2012 A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Filing tax extension 2012 A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Filing tax extension 2012 (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. Filing tax extension 2012 ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Filing tax extension 2012 Date of tax expatriation. Filing tax extension 2012   For purposes of U. Filing tax extension 2012 S. Filing tax extension 2012 tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. Filing tax extension 2012 You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. Filing tax extension 2012 You file Form 8854 in accordance with the form instructions. Filing tax extension 2012 Annual return. Filing tax extension 2012   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. Filing tax extension 2012 You must file this form even if you owe no U. Filing tax extension 2012 S. Filing tax extension 2012 tax. Filing tax extension 2012 Penalty. Filing tax extension 2012   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. Filing tax extension 2012 You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. Filing tax extension 2012 How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. Filing tax extension 2012 S. Filing tax extension 2012 source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. Filing tax extension 2012 S. Filing tax extension 2012 trade or business. Filing tax extension 2012 For this purpose, U. Filing tax extension 2012 S. Filing tax extension 2012 source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. Filing tax extension 2012 S. Filing tax extension 2012 domestic corporation, and Debt obligations of U. Filing tax extension 2012 S. Filing tax extension 2012 persons or of the United States, a state or political subdivision thereof, or the District of Columbia. Filing tax extension 2012 U. Filing tax extension 2012 S. Filing tax extension 2012 source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. Filing tax extension 2012 The income or gain is considered U. Filing tax extension 2012 S. Filing tax extension 2012 source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. Filing tax extension 2012 Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. Filing tax extension 2012 S. Filing tax extension 2012 source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. Filing tax extension 2012 Other information. Filing tax extension 2012   For more information on the expatriation tax provisions, including exceptions to the tax and special U. Filing tax extension 2012 S. Filing tax extension 2012 source rules, see section 877 of the Internal Revenue Code. Filing tax extension 2012 Expatriation Tax Return If you expatriated or terminated your U. Filing tax extension 2012 S. Filing tax extension 2012 residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. Filing tax extension 2012 Attach it to Form 1040NR if you are required to file that form. Filing tax extension 2012 If you are present in the United States following your expatriation and are subject to tax as a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen or resident, file Form 8854 with Form 1040. Filing tax extension 2012 Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. Filing tax extension 2012 Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. Filing tax extension 2012 $145,000 if you expatriated or terminated residency in 2009 or 2010. Filing tax extension 2012 $147,000 if you expatriated or terminated residency in 2011. Filing tax extension 2012 $151,000 if you expatriated or terminated residency in 2012. Filing tax extension 2012 $155,000 if you expatriated or terminated residency in 2013. Filing tax extension 2012 Your net worth is $2 million or more on the date of your expatriation or termination of residency. Filing tax extension 2012 You fail to certify on Form 8854 that you have complied with all U. Filing tax extension 2012 S. Filing tax extension 2012 federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. Filing tax extension 2012 Exception for dual-citizens and certain minors. Filing tax extension 2012   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. Filing tax extension 2012 However, they still must provide the certification required in (3) above. Filing tax extension 2012 Certain dual-citizens. Filing tax extension 2012   You may qualify for the exception described above if both of the following apply. Filing tax extension 2012 You became at birth a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. Filing tax extension 2012 You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. Filing tax extension 2012 For the purpose of determining U. Filing tax extension 2012 S. Filing tax extension 2012 residency, use the substantial presence test described in chapter 1. Filing tax extension 2012 Certain minors. Filing tax extension 2012   You may qualify for the exception described earlier if you meet both of the following requirements. Filing tax extension 2012 You expatriated before you were 18½. Filing tax extension 2012 You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. Filing tax extension 2012 For the purpose of determining U. Filing tax extension 2012 S. Filing tax extension 2012 residency, use the substantial presence test described in chapter 1. Filing tax extension 2012 Expatriation date. Filing tax extension 2012   Your expatriation date is the date you relinquish U. Filing tax extension 2012 S. Filing tax extension 2012 citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. Filing tax extension 2012 S. Filing tax extension 2012 resident). Filing tax extension 2012 Former U. Filing tax extension 2012 S. Filing tax extension 2012 citizen. Filing tax extension 2012   You are considered to have relinquished your U. Filing tax extension 2012 S. Filing tax extension 2012 citizenship on the earliest of the following dates. Filing tax extension 2012 The date you renounced U. Filing tax extension 2012 S. Filing tax extension 2012 citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). Filing tax extension 2012 The date you furnished to the State Department a signed statement of voluntary relinquishment of U. Filing tax extension 2012 S. Filing tax extension 2012 nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). Filing tax extension 2012 The date the State Department issued a certificate of loss of nationality. Filing tax extension 2012 The date that a U. Filing tax extension 2012 S. Filing tax extension 2012 court canceled your certificate of naturalization. Filing tax extension 2012 Former long-term resident. Filing tax extension 2012   You are considered to have terminated your long-term residency on the earliest of the following dates. Filing tax extension 2012 The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. Filing tax extension 2012 S. Filing tax extension 2012 consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. Filing tax extension 2012 The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. Filing tax extension 2012 If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. Filing tax extension 2012 See Effect of Tax Treaties in chapter 1 for more information about dual residents. Filing tax extension 2012 How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). Filing tax extension 2012 This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. Filing tax extension 2012 But see Exceptions , later. Filing tax extension 2012 Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. Filing tax extension 2012 S. Filing tax extension 2012 internal revenue laws. Filing tax extension 2012 Losses from deemed sales must be taken into account to the extent otherwise provided under U. Filing tax extension 2012 S. Filing tax extension 2012 internal revenue laws. Filing tax extension 2012 However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. Filing tax extension 2012 The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. Filing tax extension 2012 $626,000 if you expatriated or terminated residency in 2009. Filing tax extension 2012 $627,000 if you expatriated or terminated residency in 2010. Filing tax extension 2012 $636,000 if you expatriated or terminated residency in 2011. Filing tax extension 2012 $651,000 if you expatriated or terminated residency in 2012. Filing tax extension 2012 $668,000 if you expatriated or terminated residency in 2013. Filing tax extension 2012 Exceptions. Filing tax extension 2012   The mark-to-market tax does not apply to the following. Filing tax extension 2012 Eligible deferred compensation items. Filing tax extension 2012 Ineligible deferred compensation items. Filing tax extension 2012 Interests in nongrantor trusts. Filing tax extension 2012 Specified tax deferred accounts. Filing tax extension 2012 Instead, items (1) and (3) may be subject to withholding at source. Filing tax extension 2012 In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. Filing tax extension 2012 In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. Filing tax extension 2012 See paragraphs (d), (e), and (f) of section 877A for more information. Filing tax extension 2012 Expatriation Tax Return If you expatriated or terminated your U. Filing tax extension 2012 S. Filing tax extension 2012 residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. Filing tax extension 2012 Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. Filing tax extension 2012 Deferral of payment of mark-to-market tax. Filing tax extension 2012   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. Filing tax extension 2012 If you make this election, the following rules apply. Filing tax extension 2012 You can make the election on a property-by-property basis. Filing tax extension 2012 The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. Filing tax extension 2012 Interest is charged for the period the tax is deferred. Filing tax extension 2012 The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. Filing tax extension 2012 The due date of the return required for the year of death. Filing tax extension 2012 The time that the security provided for the property fails to be adequate. Filing tax extension 2012 See item (6) below. Filing tax extension 2012 You make the election on Form 8854. Filing tax extension 2012 You must provide adequate security (such as a bond). Filing tax extension 2012 You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. Filing tax extension 2012   For more information about the deferral of payment, see the Instructions for Form 8854. Filing tax extension 2012 Prev  Up  Next   Home   More Online Publications
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The Filing Tax Extension 2012

Filing tax extension 2012 1. Filing tax extension 2012   Tax Withholding for 2014 Table of Contents Introduction Useful Items - You may want to see: Salaries and WagesDetermining Amount of Tax Withheld Using Form W-4 Completing Form W-4 and Worksheets Getting the Right Amount of Tax Withheld Rules Your Employer Must Follow Exemption From Withholding Supplemental Wages Penalties Tips Taxable Fringe BenefitsSpecial rule. Filing tax extension 2012 Exceptions. Filing tax extension 2012 Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. Filing tax extension 2012 Identical wagers. Filing tax extension 2012 Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. Filing tax extension 2012 Underreported interest or dividends. Filing tax extension 2012 Introduction This chapter discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Filing tax extension 2012 This chapter explains in detail the rules for withholding tax from each of these types of income. Filing tax extension 2012 The discussion of salaries and wages includes an explanation of how to complete Form W-4. Filing tax extension 2012 This chapter also covers backup withholding on interest, dividends, and other payments. Filing tax extension 2012 Useful Items - You may want to see: Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request See chapter 5 of this publication for information about getting these publications and forms. Filing tax extension 2012 Salaries and Wages Income tax is withheld from the pay of most employees. Filing tax extension 2012 Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Filing tax extension 2012 It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Filing tax extension 2012 See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. Filing tax extension 2012 If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Filing tax extension 2012 This is explained under Exemption From Withholding , later. Filing tax extension 2012 You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Filing tax extension 2012 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. Filing tax extension 2012 Military retirees. Filing tax extension 2012   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. Filing tax extension 2012 Household workers. Filing tax extension 2012   If you are a household worker, you can ask your employer to withhold income tax from your pay. Filing tax extension 2012 A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Filing tax extension 2012   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Filing tax extension 2012 If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. Filing tax extension 2012 Farmworkers. Filing tax extension 2012   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. Filing tax extension 2012 Differential wage payments. Filing tax extension 2012   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Filing tax extension 2012 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. Filing tax extension 2012 The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Filing tax extension 2012 Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Filing tax extension 2012 The amount you earn in each payroll period. Filing tax extension 2012 The information you give your employer on Form W-4. Filing tax extension 2012 Form W-4 includes four types of information that your employer will use to figure your withholding. Filing tax extension 2012 Whether to withhold at the single rate or at the lower married rate. Filing tax extension 2012 How many withholding allowances you claim (each allowance reduces the amount withheld). Filing tax extension 2012 Whether you want an additional amount withheld. Filing tax extension 2012 Whether you are claiming an exemption from withholding in 2014. Filing tax extension 2012 See Exemption From Withholding , later. Filing tax extension 2012 Note. Filing tax extension 2012 You must specify a filing status and a number of withholding allowances on Form W-4. Filing tax extension 2012 You cannot specify only a dollar amount of withholding. Filing tax extension 2012 New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. Filing tax extension 2012 Your employer should have copies of the form. Filing tax extension 2012 If you need to change the information later, you must fill out a new form. Filing tax extension 2012 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. Filing tax extension 2012 You may be able to avoid overwithholding if your employer agrees to use the part-year method. Filing tax extension 2012 See Part-Year Method , later, for more information. Filing tax extension 2012 Employee also receiving pension income. Filing tax extension 2012   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Filing tax extension 2012 However, you can choose to split your withholding allowances between your pension and job in any manner. Filing tax extension 2012 Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Filing tax extension 2012 When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. Filing tax extension 2012 If the changes reduce the number of allowances you are allowed to claim or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Filing tax extension 2012 See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. Filing tax extension 2012 Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. Filing tax extension 2012 See Table 1-1 for examples of personal and financial changes you should consider. Filing tax extension 2012 Table 1-1. Filing tax extension 2012 Personal and Financial Changes Factor Examples Lifestyle change Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement Filing chapter 11 bankruptcy Wage income You or your spouse start or stop working, or start or stop a second job Change in the amount of taxable income not subject to withholding Interest income Dividends Capital gains Self-employment income IRA (including certain Roth  IRA) distributions Change in the amount of adjustments to income IRA deduction Student loan interest deduction Alimony expense Change in the amount of itemized deductions or tax credits Medical expenses Taxes Interest expense Gifts to charity Job expenses Dependent care expenses Education credit Child tax credit Earned income credit If you change the number of your withholding allowances, you can request that your employer withhold using the Cumulative Wage Method , explained later. Filing tax extension 2012 Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too much or too little. Filing tax extension 2012 If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Filing tax extension 2012 You can get a blank Form W-4 from your employer or print the form from IRS. Filing tax extension 2012 gov. Filing tax extension 2012 You should try to have your withholding match your actual tax liability. Filing tax extension 2012 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. Filing tax extension 2012 If too much tax is withheld, you will lose the use of that money until you get your refund. Filing tax extension 2012 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. Filing tax extension 2012 See Table 1-1 for examples. Filing tax extension 2012 Note. Filing tax extension 2012 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. Filing tax extension 2012 When Should You Check Your Withholding? The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld. Filing tax extension 2012 You should check your withholding when any of the following situations occur. Filing tax extension 2012 You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. Filing tax extension 2012 You prepare your 2013 tax return and get a: Big refund, or Balance due that is: More than you can comfortably pay, or Subject to a penalty. Filing tax extension 2012 There are changes in your life or financial situation that affect your tax liability. Filing tax extension 2012 See Table 1-1. Filing tax extension 2012 There are changes in the tax law that affect your tax liability. Filing tax extension 2012 How Do You Check Your Withholding? You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. Filing tax extension 2012 You can also use the IRS Withholding calculator at www. Filing tax extension 2012 irs. Filing tax extension 2012 gov/individuals. Filing tax extension 2012 If you use the worksheets and tables in this publication, follow these steps. Filing tax extension 2012 Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. Filing tax extension 2012 Fill out Worksheet 1-7 to project your total federal withholding for 2014 and compare that with your projected tax liability from Worksheet 1-5. Filing tax extension 2012 If you are not having enough tax withheld, line 6 of Worksheet 1-7 will show you how much more to have withheld each payday. Filing tax extension 2012 For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding? If line 5 of Worksheet 1-7 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, for ways to decrease the amount of tax you have withheld each payday. Filing tax extension 2012 How Do You Increase Your Withholding? There are two ways to increase your withholding. Filing tax extension 2012 You can: Decrease the number of allowances you claim on Form W-4, or Enter an additional amount that you want withheld from each paycheck on Form W-4. Filing tax extension 2012 Requesting an additional amount withheld. Filing tax extension 2012   You can request that an additional amount be withheld from each paycheck by following these steps. Filing tax extension 2012 Complete Worksheets 1-5 and 1-7. Filing tax extension 2012 Complete a new Form W-4 if the amount on Worksheet 1-7, line 5: Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or Would cause you to pay a penalty when you file your tax return for 2014. Filing tax extension 2012 Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. Filing tax extension 2012 This is the number of allowances you entered on the last Form W-4 you gave your employer. Filing tax extension 2012 Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. Filing tax extension 2012 Give your newly completed Form W-4 to your employer. Filing tax extension 2012   If you have this additional amount withheld from your pay each payday, you should avoid owing a large amount at the end of the year. Filing tax extension 2012 Example. Filing tax extension 2012 Early in 2014, Steve Miller used Worksheets 1-5, 1-6, and 1-7 to project his 2014 tax liability ($4,316) and his withholding for the year ($3,516). Filing tax extension 2012 Steve's tax will be underwithheld by $800 ($4,316 − $3,516). Filing tax extension 2012 His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. Filing tax extension 2012 Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. Filing tax extension 2012 Steve completes the new Form W-4 as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on the form as the additional amount to be withheld from his pay each payday. Filing tax extension 2012 He gives the completed form to his employer. Filing tax extension 2012 What if I have more than one job or my spouse also has a job?   You are more likely to need to increase your withholding if you have more than one job or if you are married filing jointly and your spouse also works. Filing tax extension 2012 If this is the case, you can increase your withholding for one or more of the jobs. Filing tax extension 2012   You can apply the amount on Worksheet 1-7, line 5, to only one job or divide it between the jobs any way you wish. Filing tax extension 2012 For each job, determine the extra amount that you want to apply to that job and divide that amount by the number of paydays remaining in 2014 for that job. Filing tax extension 2012 This will give you the additional amount to enter on the Form W-4 you will file for that job. Filing tax extension 2012 You need to give your employer a new Form W-4 for each job for which you are changing your withholding. Filing tax extension 2012 Example. Filing tax extension 2012 Meg Green works in a store and earns $46,000 a year. Filing tax extension 2012 Her husband, John, works full-time in manufacturing and earns $68,000 a year. Filing tax extension 2012 In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. Filing tax extension 2012 They expect to file a joint income tax return. Filing tax extension 2012 Meg and John complete Worksheets 1-5, 1-6, and 1-7. Filing tax extension 2012 Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Filing tax extension 2012 They can divide the $4,459 any way they want. Filing tax extension 2012 They can enter an additional amount on either of their Forms W-4, or divide it between them. Filing tax extension 2012 They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. Filing tax extension 2012 Both claim the same number of allowances as before. Filing tax extension 2012 How Do You Decrease Your Withholding? If your completed Worksheets 1-5 and 1-7 show that you may have more tax withheld than your projected tax liability for 2014, you may be able to decrease your withholding. Filing tax extension 2012 There are two ways to do this. Filing tax extension 2012 You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. Filing tax extension 2012 You can claim only the number of allowances to which you are entitled. Filing tax extension 2012 To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. Filing tax extension 2012 Increasing the number of allowances. Filing tax extension 2012   Figure and increase the number of withholding allowances you can claim as follows. Filing tax extension 2012 On a new Form W-4, complete the Personal Allowances Worksheet. Filing tax extension 2012 If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. Filing tax extension 2012 If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. Filing tax extension 2012 If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. Filing tax extension 2012 If the number of allowances you can claim on Form W-4, is different from the number you already are claiming, give the newly completed Form W-4 to your employer. Filing tax extension 2012 Converting Credits to Withholding Allowances Table 1-2 , later, shows many of the tax credits you may be able to use to decrease your withholding. Filing tax extension 2012 The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. Filing tax extension 2012 Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. Filing tax extension 2012 Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. Filing tax extension 2012 Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. Filing tax extension 2012 If you take the child and dependent care credit into account on Worksheet 1-8, enter -0- on line F of the Personal Allowances Worksheet. Filing tax extension 2012 If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. Filing tax extension 2012 Example. Filing tax extension 2012 Brett and Alyssa Davis are married and expect to file a joint return for 2014. Filing tax extension 2012 Their expected taxable income from all sources is $68,000. Filing tax extension 2012 They expect to have $15,900 of itemized deductions. Filing tax extension 2012 Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. Filing tax extension 2012 The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. Filing tax extension 2012 Line 1, expected child and dependent care credit—$960. Filing tax extension 2012 Line 9, expected adoption credit—$1,500. Filing tax extension 2012 Line 10, total estimated tax credits—$2,460. Filing tax extension 2012 Line 11. Filing tax extension 2012 Their combined total income from all sources, $68,000, falls between $42,001 and $98,000 on the table for married filing jointly or qualifying widow(er). Filing tax extension 2012 The number to the right of this range is 6. Filing tax extension 2012 7. Filing tax extension 2012 Line 12, multiply line 10 by line 11—$16,482. Filing tax extension 2012 Then the Davis' complete the Form W-4 worksheets. Filing tax extension 2012 Because they choose to account for their child and dependent care credit on the Deductions and Adjustments Worksheet, they enter -0- on line F of the Personal Allowances Worksheet and figure a new total for line H. Filing tax extension 2012 They take the result on line 12 of Worksheet 1-8, add it to their other adjustments on line 5 of the Form W-4 Deductions and Adjustments Worksheet, and complete the Form W-4 worksheets. Filing tax extension 2012 When Will Your New Form W-4 Go Into Effect? If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4. Filing tax extension 2012 If the change is for next year, your new Form W-4 will not take effect until next year. Filing tax extension 2012 Retirees Returning to the Workforce When you first began receiving your pension, you told the payer how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or similar form). Filing tax extension 2012 However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. Filing tax extension 2012 You completed either form based on your projected income at that time. Filing tax extension 2012 Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income. Filing tax extension 2012 The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. Filing tax extension 2012 Start off with the Personal Allowances Worksheet. Filing tax extension 2012 Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet. Filing tax extension 2012 The third worksheet is the most important for this situation. Filing tax extension 2012 Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. Filing tax extension 2012 If you have more than one source of income, in order to have enough withholding to cover the tax on your higher income, you may need to claim fewer withholding allowances or request your employer to withhold an additional amount from each paycheck. Filing tax extension 2012 Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. Filing tax extension 2012 It is your decision how to divide up your withholding allowances between these sources of income. Filing tax extension 2012 For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your monthly pension to “pay the bills. Filing tax extension 2012 ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. Filing tax extension 2012 There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances. Filing tax extension 2012 Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. Filing tax extension 2012 Contact your pension provider and your employer's payroll department. Filing tax extension 2012 And remember, this is not a final decision. Filing tax extension 2012 If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above. Filing tax extension 2012 You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. Filing tax extension 2012 You may need more tax withheld, or you may need less. Filing tax extension 2012 Table 1-2. Filing tax extension 2012 Tax Credits for 2014 For more information about the . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012 See . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012 Adoption credit Form 8839 instructions Child and dependent care expenses, credit for Publication 503, Child and Dependent Care Expenses Child tax credit (including the additional child tax credit) Instructions for Form 1040 or Form 1040A Earned income credit Publication 596, Earned Income Credit Education credits Publication 970, Tax Benefits for Education Elderly or the disabled, credit for the Publication 524, Credit for the Elderly or the Disabled Foreign tax credit (except any credit that applies to wages not subject to U. Filing tax extension 2012 S. Filing tax extension 2012 income tax withholding because they are subject to income tax withholding by a foreign country) Publication 514, Foreign Tax Credit for Individuals General business credit Form 3800, General Business Credit Mortgage interest credit Publication 530, Tax Information for First-Time Homeowners Qualified electric vehicle passive activity credit Form 8834 Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) Form 8801 instructions Retirement savings contributions credit (saver's credit) Publication 590, Individual Retirement Arrangements (IRAs) Tax credit bonds, credit to holders of Form 8912 instructions Completing Form W-4 and Worksheets When reading the following discussion, you may find it helpful to refer to Form W-4. Filing tax extension 2012 Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. Filing tax extension 2012 Everyone else must have tax withheld at the higher single rate. Filing tax extension 2012 Single. Filing tax extension 2012   You must check the “Single” box if any of the following applies. Filing tax extension 2012 You are single. Filing tax extension 2012 If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. Filing tax extension 2012 You are married, but neither you nor your spouse is a citizen or resident of the United States. Filing tax extension 2012 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. Filing tax extension 2012 For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Filing tax extension 2012 Married. Filing tax extension 2012   You qualify to check the “Married” box if any of the following applies. Filing tax extension 2012 You are married and neither you nor your spouse is a nonresident alien. Filing tax extension 2012 You are considered married for the whole year even if your spouse died during the year. Filing tax extension 2012 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. Filing tax extension 2012 For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Filing tax extension 2012 You expect to be able to file your return as a qualifying widow or widower. Filing tax extension 2012 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. Filing tax extension 2012 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. Filing tax extension 2012 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. Filing tax extension 2012 Married, but withhold at higher single rate. Filing tax extension 2012   Some married people find that they do not have enough tax withheld at the married rate. Filing tax extension 2012 This can happen, for example, when both spouses work. Filing tax extension 2012 To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). Filing tax extension 2012 Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. Filing tax extension 2012 Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. Filing tax extension 2012 You will have the most tax withheld if you claim “0” allowances. Filing tax extension 2012 The number of allowances you can claim depends on the following factors. Filing tax extension 2012 How many exemptions you can take on your tax return. Filing tax extension 2012 Whether you have income from more than one job. Filing tax extension 2012 What deductions, adjustments to income, and credits you expect to have for the year. Filing tax extension 2012 Whether you will file as head of household. Filing tax extension 2012 If you are married (filing jointly), it also depends on whether your spouse also works and claims any allowances on his or her own Form W-4. Filing tax extension 2012 Or, if married filing separately, whether or not your spouse also works. Filing tax extension 2012 Form W-4 worksheets. Filing tax extension 2012    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Filing tax extension 2012 The worksheets are for your own records. Filing tax extension 2012 Do not give them to your employer. Filing tax extension 2012   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. Filing tax extension 2012 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. Filing tax extension 2012 Complete separate sets of worksheets only if you and your spouse will file separate returns. Filing tax extension 2012   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. Filing tax extension 2012 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. Filing tax extension 2012 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. Filing tax extension 2012   Complete all worksheets that apply to your situation. Filing tax extension 2012 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. Filing tax extension 2012 Multiple jobs. Filing tax extension 2012   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Filing tax extension 2012 Then split your allowances between the Forms W-4 for each job. Filing tax extension 2012 You cannot claim the same allowances with more than one employer at the same time. Filing tax extension 2012 You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Filing tax extension 2012 Married individuals. Filing tax extension 2012   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. Filing tax extension 2012 Use only one set of worksheets. Filing tax extension 2012 You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Filing tax extension 2012   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. Filing tax extension 2012 Alternative method of figuring withholding allowances. Filing tax extension 2012   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. Filing tax extension 2012   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. Filing tax extension 2012 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. Filing tax extension 2012   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. Filing tax extension 2012 You still must give your employer a Form W-4 claiming your withholding allowances. Filing tax extension 2012 Employees who are not citizens or residents. Filing tax extension 2012   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. Filing tax extension 2012 However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. Filing tax extension 2012 S. Filing tax extension 2012 national. Filing tax extension 2012 It also does not apply if your spouse is a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Filing tax extension 2012 Special rules apply to residents of South Korea and India. Filing tax extension 2012 For more information, see Withholding From Compensation in chapter 8 of Publication 519. Filing tax extension 2012 Personal Allowances Worksheet Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on all of the following that apply. Filing tax extension 2012 Exemptions. Filing tax extension 2012 Only one job. Filing tax extension 2012 Head of household filing status. Filing tax extension 2012 Child and dependent care credit. Filing tax extension 2012 Child tax credit. Filing tax extension 2012 Exemptions (worksheet lines A, C, and D). Filing tax extension 2012   You can claim one withholding allowance for each exemption you expect to claim on your tax return. Filing tax extension 2012 Self. Filing tax extension 2012   You can claim an allowance for your exemption on line A unless another person can claim an exemption for you on his or her tax return. Filing tax extension 2012 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. Filing tax extension 2012 Spouse. Filing tax extension 2012   You can claim an allowance for your spouse's exemption on line C unless your spouse is claiming his or her own exemption or another person can claim an exemption for your spouse. Filing tax extension 2012 Do not claim this allowance if you and your spouse expect to file separate returns. Filing tax extension 2012 Dependents. Filing tax extension 2012   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. Filing tax extension 2012 Only one job (worksheet line B). Filing tax extension 2012    You can claim an additional withholding allowance if any of the following apply for 2014. Filing tax extension 2012 You are single and you have only one job at a time. Filing tax extension 2012 You are married, you have only one job at a time, and your spouse does not work. Filing tax extension 2012 Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. Filing tax extension 2012 If you qualify for this allowance, enter “1” on line B of the worksheet. Filing tax extension 2012 Head of household filing status (worksheet line E). Filing tax extension 2012   Generally, you can file as head of household if you are unmarried and pay more than half the cost of keeping up a home that: Was the main home for all of 2014 of your parent whom you can claim as a dependent, or You lived in for more than half the year with your qualifying child or any other person you can claim as a dependent. Filing tax extension 2012 For more information, see Publication 501. Filing tax extension 2012   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. Filing tax extension 2012 Reduction of personal allowances. Filing tax extension 2012   For 2014, your deduction for personal exemptions on your tax return is reduced if your adjusted gross income (AGI) is more than the AGI shown next for your filing status. Filing tax extension 2012 Personal Allowance Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1-1 to figure your reduced number of personal allowances on lines A, C, and D of the Personal Allowances Worksheet. Filing tax extension 2012 Worksheet 1-1. Filing tax extension 2012 Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. Filing tax extension 2012 Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. Filing tax extension 2012   2. Filing tax extension 2012 Enter your expected AGI 2. Filing tax extension 2012       3. Filing tax extension 2012 Enter $254,200 if single $305,050 if married filing jointly or qualifying widow(er) $152,525 if married filing separately $279,650 if head of household 3. Filing tax extension 2012       4. Filing tax extension 2012 Subtract line 3 from line 2 4. Filing tax extension 2012       5. Filing tax extension 2012 Divide line 4 by $125,000 ($62,500 if married filing separately). Filing tax extension 2012 Enter the result as a decimal 5. Filing tax extension 2012   6. Filing tax extension 2012 Multiply line 1 by line 5. Filing tax extension 2012 If the result is not a whole number, increase it to the next higher whole number 6. Filing tax extension 2012   7. Filing tax extension 2012 Subtract line 6 from line 1. Filing tax extension 2012 The total of the numbers you enter on A, C, and D of the Personal Allowances Worksheet can not be more than this amount 7. Filing tax extension 2012     Child and dependent care credit (worksheet line F). Filing tax extension 2012   Enter “1” on line F if you expect to claim a credit for at least $2,000 of qualifying child or dependent care expenses on your 2014 return. Filing tax extension 2012 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. Filing tax extension 2012 For more information, see Publication 503, Child and Dependent Care Expenses. Filing tax extension 2012   Instead of using line F, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Filing tax extension 2012 Child tax credit (worksheet line G). Filing tax extension 2012   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. Filing tax extension 2012 Subtract “1” from that amount if you have three to six eligible children. Filing tax extension 2012 Subtract “2” from that amount if you have seven or more eligible children. Filing tax extension 2012   If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” on line G for each eligible child. Filing tax extension 2012   An eligible child is any child: Who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Who will be under age 17 at the end of 2014, Who is younger than you (or your spouse if filing jointly) or permanently and totally disabled, Who will not provide over half of his or her own support for 2014, Who will not file a joint return, unless the return is filed only as a claim for refund, Who will live with you for more than half of 2014, Who is a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen, U. Filing tax extension 2012 S. Filing tax extension 2012 national, or U. Filing tax extension 2012 S. Filing tax extension 2012 resident alien, and Who will be claimed as a dependent on your return. Filing tax extension 2012 If you are a U. Filing tax extension 2012 S. Filing tax extension 2012 citizen or U. Filing tax extension 2012 S. Filing tax extension 2012 national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. Filing tax extension 2012   Also, if any other person can claim the child as an eligible child, see Qualifying child of more than one person in the 2013 instructions for Form 1040 or 1040A, line 6c. Filing tax extension 2012   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. Filing tax extension 2012   Instead of using line G, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Filing tax extension 2012 Total personal allowances (worksheet line H). Filing tax extension 2012    Add lines A through G and enter the total on line H. Filing tax extension 2012 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. Filing tax extension 2012 Deductions and Adjustments Worksheet Use the Deductions and Adjustments Worksheet on page 2 of Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Filing tax extension 2012 Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. Filing tax extension 2012 Use the amount of each item you reasonably can expect to show on your return. Filing tax extension 2012 However, do not use more than: The amount shown for that item on your 2013 return (or your 2012 return if you have not yet filed your 2013 return), plus Any additional amount related to a transaction or occurrence (such as payments already made, the signing of an agreement, or the sale of property) that you can prove has happened or will happen during 2013 or 2014. Filing tax extension 2012 Do not include any amount shown on your last tax return that has been disallowed by the IRS. Filing tax extension 2012 Example. Filing tax extension 2012 On June 30, 2013, you bought your first home. Filing tax extension 2012 On your 2013 tax return, you claimed itemized deductions of $6,600, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. Filing tax extension 2012 Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $13,200 for those items on your 2014 return. Filing tax extension 2012 You can use $13,200 to figure the number of your withholding allowances for itemized deductions. Filing tax extension 2012 Not itemizing deductions. Filing tax extension 2012   If you expect to claim the standard deduction on your tax return, skip lines 1 and 2, and enter “0” on line 3 of the worksheet. Filing tax extension 2012 Itemized deductions (worksheet line 1). Filing tax extension 2012   Enter your estimated total itemized deductions on line 1 of the worksheet. Filing tax extension 2012   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. Filing tax extension 2012 You normally claim these deductions on Schedule A of Form 1040. Filing tax extension 2012 Medical and dental expenses that are more than 10% (7. Filing tax extension 2012 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). Filing tax extension 2012 State and local income or property taxes. Filing tax extension 2012 Deductible home mortgage interest. Filing tax extension 2012 Investment interest up to net investment income. Filing tax extension 2012 Charitable contributions. Filing tax extension 2012 Casualty and theft losses that are more than $100 and 10% of your AGI. Filing tax extension 2012 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. Filing tax extension 2012 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. Filing tax extension 2012 AGI. Filing tax extension 2012   For the purpose of estimating your itemized deductions, your AGI is your estimated total income for 2014 minus any estimated adjustments to income (discussed later) that you include on line 4 of the Deductions and Adjustments Worksheet. Filing tax extension 2012 Phaseout of itemized deductions. Filing tax extension 2012   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. Filing tax extension 2012    Itemized Deduction Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1–2 to figure your reduction in itemized deductions. Filing tax extension 2012 Worksheet 1-2. Filing tax extension 2012 Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. Filing tax extension 2012 Enter the estimated total of your itemized deductions 1. Filing tax extension 2012   2. Filing tax extension 2012 Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. Filing tax extension 2012   3. Filing tax extension 2012 Is the amount on line 2 less than the amount on line 1? ❑ No. Filing tax extension 2012 Stop here. Filing tax extension 2012 Your deduction is not limited. Filing tax extension 2012 Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Filing tax extension 2012  ❑ Yes. Filing tax extension 2012 Subtract line 2 from line 1. Filing tax extension 2012 3. Filing tax extension 2012       4. Filing tax extension 2012 Multiply line 3 by 80% (. Filing tax extension 2012 80) 4. Filing tax extension 2012       5. Filing tax extension 2012 Enter your expected AGI 5. Filing tax extension 2012       6. Filing tax extension 2012 Enter $305,050 If married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately 6. Filing tax extension 2012   7. Filing tax extension 2012 Is the amount on line 6 less than the amount on line 5? ❑ No. Filing tax extension 2012 Stop here. Filing tax extension 2012 Your deduction is not limited. Filing tax extension 2012 Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Filing tax extension 2012  ❑ Yes. Filing tax extension 2012 Subtract line 6 from line 5. Filing tax extension 2012 7. Filing tax extension 2012       8. Filing tax extension 2012 Multiply line 7 by 3% (. Filing tax extension 2012 03) 8. Filing tax extension 2012       9. Filing tax extension 2012 Enter the smaller of line 4 or line 8 9. Filing tax extension 2012     10. Filing tax extension 2012 Subtract line 9 from line 1. Filing tax extension 2012 Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. Filing tax extension 2012     Adjustments to income (worksheet line 4). Filing tax extension 2012   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. Filing tax extension 2012   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. Filing tax extension 2012 These adjustments appear on page 1 of your Form 1040 or 1040A. Filing tax extension 2012 Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. Filing tax extension 2012 Net operating loss carryovers. Filing tax extension 2012 Certain business expenses of reservists, performing artists, and fee-based government officials. Filing tax extension 2012 Health savings account or medical savings account deduction. Filing tax extension 2012 Certain moving expenses. Filing tax extension 2012 Deduction for self-employment tax. Filing tax extension 2012 Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. Filing tax extension 2012 Self-employed health insurance deduction. Filing tax extension 2012 Penalty on early withdrawal of savings. Filing tax extension 2012 Alimony paid. Filing tax extension 2012 IRA deduction. Filing tax extension 2012 Student loan interest deduction. Filing tax extension 2012 Jury duty pay given to your employer. Filing tax extension 2012 Reforestation amortization and expenses. Filing tax extension 2012 Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Filing tax extension 2012 Repayment of certain supplemental unemployment benefits. Filing tax extension 2012 Contributions to IRC 501(c)(18)(D) pension plans. Filing tax extension 2012 Contributions by certain chaplains to IRC 403(b) plans. Filing tax extension 2012 Attorney fees and court costs for certain unlawful discrimination claims. Filing tax extension 2012 Attorney fees and court costs for certain whistleblower awards. Filing tax extension 2012 Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). Filing tax extension 2012 Tax credits (worksheet line 5). Filing tax extension 2012   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). Filing tax extension 2012 But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. Filing tax extension 2012   If you take the child and dependent care credit into account on line 5, do not use line F. Filing tax extension 2012 If you take the child tax credit into account on line 5, do not use line G. Filing tax extension 2012   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. Filing tax extension 2012 See the individual tax form instructions for more details. Filing tax extension 2012 Foreign tax credit, except any credit that applies to wages not subject to U. Filing tax extension 2012 S. Filing tax extension 2012 income tax withholding because they are subject to income tax withholding by a foreign country. Filing tax extension 2012 See Publication 514, Foreign Tax Credit for Individuals. Filing tax extension 2012 Credit for the elderly or the disabled. Filing tax extension 2012 See Publication 524, Credit for the Elderly or the Disabled. Filing tax extension 2012 Education credits. Filing tax extension 2012 See Publication 970, Tax Benefits for Education. Filing tax extension 2012 Retirement savings contributions credit (saver's credit). Filing tax extension 2012 See Publication 590. Filing tax extension 2012 Mortgage interest credit. Filing tax extension 2012 See Publication 530, Tax Information for Homeowners. Filing tax extension 2012 Adoption credit. Filing tax extension 2012 See the Instructions for Form 8839. Filing tax extension 2012 Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. Filing tax extension 2012 See the Instructions for Form 8801. Filing tax extension 2012 General business credit. Filing tax extension 2012 See the Instructions for Form 3800. Filing tax extension 2012 Earned income credit. Filing tax extension 2012 See Publication 596. Filing tax extension 2012 Figuring line 5 entry. Filing tax extension 2012   To figure the amount to add on line 5 for tax credits, multiply your estimated total credits by the appropriate number from Table 1-3 . Filing tax extension 2012 Example. Filing tax extension 2012 You are married and expect to file a joint return for 2014. Filing tax extension 2012 Your combined estimated wages are $68,000. Filing tax extension 2012 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). Filing tax extension 2012 In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. Filing tax extension 2012 7. Filing tax extension 2012 Multiply your total estimated tax credits of $2,660 by 6. Filing tax extension 2012 7. Filing tax extension 2012 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. Filing tax extension 2012 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. Filing tax extension 2012 Nonwage income (worksheet line 6). Filing tax extension 2012   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Filing tax extension 2012 Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. Filing tax extension 2012   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. Filing tax extension 2012 See Getting the Right Amount of Tax Withheld , later. Filing tax extension 2012 Net deductions and adjustments (worksheet line 8). Filing tax extension 2012    If line 7 is less than $3,950, enter “0” on line 8. Filing tax extension 2012 If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. Filing tax extension 2012 Example. Filing tax extension 2012 If line 7 is $5,200, $5,200 ÷ $3,950 = 1. Filing tax extension 2012 32. Filing tax extension 2012 Drop the fraction (. Filing tax extension 2012 32) and enter “1” on line 8. Filing tax extension 2012 Two-Earners/Multiple Jobs Worksheet Complete the Two-Earners/Multiple Jobs Worksheet on page 2 of Form W-4 if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $50,000 ($20,000 if married). Filing tax extension 2012 Reducing your allowances (worksheet lines 1-3). Filing tax extension 2012   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). Filing tax extension 2012 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). Filing tax extension 2012 Enter that number on line 2. Filing tax extension 2012 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. Filing tax extension 2012 ”    Table 1-3. Filing tax extension 2012 Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. Filing tax extension 2012  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. Filing tax extension 2012 0 $42,001 – 98,000 6. Filing tax extension 2012 7 $98,001 – 180,000 4. Filing tax extension 2012 0 $180,001 – 270,000 3. Filing tax extension 2012 6 $270,001 – 440,000 3. Filing tax extension 2012 0 $440,001 – 490,000. Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012 . Filing tax extension 2012 2. Filing tax extension 2012 9 $490,001 and over 2. Filing tax extension 2012 5 b. Filing tax extension 2012  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. Filing tax extension 2012 0 $19,001 – 47,000 6. Filing tax extension 2012 7 $47,001 – 104,000 4. Filing tax extension 2012 0 $104,001 – 205,000 3. Filing tax extension 2012 6 $205,001 – 430,000 3. Filing tax extension 2012 0 $430,001 and over 2. Filing tax extension 2012 5 c. Filing tax extension 2012  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. Filing tax extension 2012 0 $30,001 – 66,000 6. Filing tax extension 2012 7 $66,001 – 150,000 4. Filing tax extension 2012 0 $150,001 – 235,000 3. Filing tax extension 2012 6 $235,001 – 430,000 3. Filing tax extension 2012 0 $430,001 – 460,000 2. Filing tax extension 2012 9 $460,001 and over 2. Filing tax extension 2012 5 d. Filing tax extension 2012  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. Filing tax extension 2012 0 $21,001 – 49,000 6. Filing tax extension 2012 7 $49,001 – 90,000 4. Filing tax extension 2012 0 $90,001 – 135,000 3. Filing tax extension 2012 6 $135,001 – 220,000 3. Filing tax extension 2012 0 $220,001 – 245,000 2. Filing tax extension 2012 9 $245,001 and over 2. Filing tax extension 2012 5   Subtract line 2 from line 1 and enter the result (but not less than zero) on line 3 and on Form W-4, line 5. Filing tax extension 2012 If line 1 is more than or equal to line 2, do not use the rest of the worksheet. Filing tax extension 2012   If line 1 is less than line 2, enter “0” on Form W-4, line 5. Filing tax extension 2012 Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. Filing tax extension 2012 Other amounts owed. Filing tax extension 2012   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. Filing tax extension 2012 The total is the additional withholding needed for the year. Filing tax extension 2012 Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Filing tax extension 2012 You accurately complete all the Form W-4 worksheets that apply to you. Filing tax extension 2012 You give your employer a new Form W-4 when changes occur. Filing tax extension 2012 But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Filing tax extension 2012 This is most likely to happen in the following situations. Filing tax extension 2012 You are married and both you and your spouse work. Filing tax extension 2012 You have more than one job at a time. Filing tax extension 2012 You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Filing tax extension 2012 You will owe additional amounts with your return, such as self-employment tax. Filing tax extension 2012 Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Filing tax extension 2012 Your earnings are more than $130,000 if you are single or $180,000 if you are married. Filing tax extension 2012 You work only part of the year. Filing tax extension 2012 You change the number of your withholding allowances during the year. Filing tax extension 2012 You are subject to Additional Medicare Tax or Net Investment Income Tax. Filing tax extension 2012 If you anticipate liability for Additional Medicare Tax or Net Investment Income Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. Filing tax extension 2012 Part-Year Method If you work only part of the year and your employer agrees to use the part-year withholding method, less tax will be withheld from each wage payment than would be withheld if you worked all year. Filing tax extension 2012 To be eligible for the part-year method, you must meet both of the following requirements. Filing tax extension 2012 You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. Filing tax extension 2012 You cannot use a fiscal year. Filing tax extension 2012 You must not expect to be employed for more than 245 days during the year. Filing tax extension 2012 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. Filing tax extension 2012 If you are temporarily laid off for 30 days or less, count those days too. Filing tax extension 2012 If you are laid off for more than 30 days, do not count those days. Filing tax extension 2012 You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. Filing tax extension 2012 How to apply for the part-year method. Filing tax extension 2012   You must ask your employer in writing to use this method. Filing tax extension 2012 The request must state all three of the following. Filing tax extension 2012 The date of your last day of work for any prior employer during the current calendar year. Filing tax extension 2012 That you do not expect to be employed more than 245 days during the current calendar year. Filing tax extension 2012 That you use the calendar year as your tax year. Filing tax extension 2012 Cumulative Wage Method If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Filing tax extension 2012 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. Filing tax extension 2012 You must ask your employer in writing to use this method. Filing tax extension 2012 To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Filing tax extension 2012 ) since the beginning of the year. Filing tax extension 2012 Aids for Figuring Your Withholding IRS Withholding Calculator. Filing tax extension 2012   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Filing tax extension 2012 Go to www. Filing tax extension 2012 irs. Filing tax extension 2012 gov/Individuals/IRS-Withholding-Calculator. Filing tax extension 2012 It can help you determine the correct amount to be withheld any time during the year. Filing tax extension 2012 Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Filing tax extension 2012 These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Filing tax extension 2012 New Form W-4. Filing tax extension 2012   When you start a new job, your employer should give you a Form W-4 to fill out. Filing tax extension 2012 Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Filing tax extension 2012   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Filing tax extension 2012 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. Filing tax extension 2012 No Form W-4. Filing tax extension 2012   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. Filing tax extension 2012 Repaying withheld tax. Filing tax extension 2012   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. Filing tax extension 2012 Your employer cannot repay any of the tax previously withheld. Filing tax extension 2012 Instead, claim the full amount withheld when you file your tax return. Filing tax extension 2012   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. Filing tax extension 2012 Your employer can repay the amount that was withheld incorrectly. Filing tax extension 2012 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. Filing tax extension 2012 IRS review of your withholding. Filing tax extension 2012   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Filing tax extension 2012 Your employer may be required to send a copy of the Form W-4 to the IRS. Filing tax extension 2012 There is a penalty for supplying false information on Form W-4. Filing tax extension 2012 See Penalties , later. Filing tax extension 2012   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. Filing tax extension 2012   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Filing tax extension 2012 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. Filing tax extension 2012 Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. Filing tax extension 2012 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. Filing tax extension 2012   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. Filing tax extension 2012   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. Filing tax extension 2012 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. Filing tax extension 2012   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. Filing tax extension 2012 Your employer must then withhold tax based on this new Form W-4. Filing tax extension 2012   Additional information is available at IRS. Filing tax extension 2012 gov. Filing tax extension 2012 Enter “withholding compliance questions” in the search box. Filing tax extension 2012 Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Filing tax extension 2012 The exemption applies only to income tax, not to social security or Medicare tax. Filing tax extension 2012 You can claim exemption from withholding for 2014 only if both of the following situations apply. Filing tax extension 2012 For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Filing tax extension 2012 For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Filing tax extension 2012 Use Figure 1-A to help you decide whether you can claim exemption from withholding. Filing tax extension 2012 Do not use Figure 1-A if you: Are 65 or older, Are blind, Will itemize deductions on your 2014 return, Will claim an exemption for a dependent on your 2014 return, or Will claim any tax credits on your 2014 return. Filing tax extension 2012 These situations are discussed later. Filing tax extension 2012 Students. Filing tax extension 2012   If you are a student, you are not automatically exempt. Filing tax extension 2012 If you work only part time or during the summer, you may qualify for exemption from withholding. Filing tax extension 2012 Example 1. Filing tax extension 2012 You are a high school student and expect to earn $2,500 from a summer job. Filing tax extension 2012 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. Filing tax extension 2012 You worked last summer and had $375 federal income tax withheld from your pay. Filing tax extension 2012 The entire $375 was refunded when you filed your 2013 return. Filing tax extension 2012 Using Figure 1-A, you find that you can claim exemption from withholding. Filing tax extension 2012 Please click here for the text description of the image. Filing tax extension 2012 Figure 1-A: Exemption From Withholding on Form W-4 Example 2. Filing tax extension 2012 The facts are the same as in Example 1, except that you also have a savings account and expect to have $400 interest income during the year. Filing tax extension 2012 Using Figure 1-A, you find that you cannot claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,000. Filing tax extension 2012    You may have to file a tax return, even if you are exempt from withholding. Filing tax extension 2012 See Publication 501 to see whether you must file a return. Filing tax extension 2012    Age 65 or older or blind. Filing tax extension 2012 If you are 65 or older or blind, use Worksheet 1-3 or Worksheet 1-4, to help you decide whether you can claim exemption from withholding. Filing tax extension 2012 Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Filing tax extension 2012 Instead, see Itemizing deductions or claiming exemptions or credits, next. Filing tax extension 2012 Itemizing deductions or claiming exemptions or credits. Filing tax extension 2012   If you had no tax liability for 2013, and you will: Itemize deductions, Claim an exemption for a dependent, or Claim a tax credit, use the 2014 Estimated Tax Worksheet (also see chapter 2), to figure your 2014 expected tax liability. Filing tax extension 2012 You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. Filing tax extension 2012 Claiming exemption from withholding. Filing tax extension 2012   To claim exemption, you must give your employer a Form W-4. Filing tax extension 2012 Do not complete lines 5 and 6. Filing tax extension 2012 Enter “Exempt” on line 7. Filing tax extension 2012   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. Filing tax extension 2012 If you claim exemption in 2014 but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Filing tax extension 2012   Your claim of exempt status may be reviewed by the IRS. Filing tax extension 2012 See IRS review of your withholding , earlier. Filing tax extension 2012 An exemption is good for only 1 year. Filing tax extension 2012   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Filing tax extension 2012 Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Filing tax extension 2012 The payer can figure withholding on supplemental wages using the same method used for your regular wages. Filing tax extension 2012 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. Filing tax extension 2012 Expense allowances. Filing tax extension 2012   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Filing tax extension 2012 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. Filing tax extension 2012   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. Filing tax extension 2012 Accountable plan. Filing tax extension 2012   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. Filing tax extension 2012 Your expenses must have a business connection. Filing tax extension 2012 That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Filing tax extension 2012 You must adequately account to your employer for these expenses within a reasonable period of time. Filing tax extension 2012 You must return any excess reimbursement or allowance within a reasonable period of time. Filing tax extension 2012    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. Filing tax extension 2012   The definition of reasonable period of time depends on the facts and circumstances of your situation. Filing tax extension 2012 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. Filing tax extension 2012 You receive an advance within 30 days of the time you have an expense. Filing tax extension 2012 You adequately account for your expenses within 60 days after they were paid or incurred. Filing tax extension 2012 You return any excess reimbursement within 120 days after the expense was paid or incurred. Filing tax extension 2012 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. Filing tax extension 2012 Nonaccountable plan. Filing tax extension 2012   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. Filing tax extension 2012 For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Filing tax extension 2012 Penalties You may have to pay a penalty of $500 if both of the following apply. Filing tax extension 2012 You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Filing tax extension 2012 You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Filing tax extension 2012 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. Filing tax extension 2012 The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Filing tax extension 2012 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. Filing tax extension 2012 A simple error or an honest mistake will not result in one of these penalties. Filing tax extension 2012 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. Filing tax extension 2012 However, see chapter 4 for information on the penalty for underpaying your tax. Filing tax extension 2012 Tips The tips you receive while working on your job are considered part of your pay. Filing tax extension 2012 You must include your tips on your tax return on the same line as your regular pay. Filing tax extension 2012 However, tax is not withheld directly from tip income, as it is from your regular pay. Filing tax extension 2012 Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Filing tax extension 2012 Reporting tips to your employer. Filing tax extension 2012   If you receive tips of $20 or more in a month while working for any one employer, you must report to your employer the total amount of tips you receive on the job during the month. Filing tax extension 2012 The report is due by the 10th day of the following month. Filing tax extension 2012   If you have more than one job, make a separate report to each employer. Filing tax extension 2012 Report only the tips you received while working for that employer, and only if they total $20 or more for the month. Filing tax extension 2012 How employer figures amount to withhold. Filing tax extension 2012   The tips you report to your employer are counted as part of your income for the month you report them. Filing tax extension 2012 Your employer can figure your withholding in either of two ways. Filing tax extension 2012 By withholding at the regular rate on the sum of your pay plus your reported tips. Filing tax extension 2012 By withholding at the regular rate on your pay plus a percentage of your reported tips. Filing tax extension 2012 Not enough pay to cover taxes. Filing tax extension 2012   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Filing tax extension 2012   If you do not give your employer money to cover the shortage, your employer first withholds as much Medicare tax and social security or railroad retirement tax as possible, up to the proper amount, and then withholds income tax up to the full amount of your pay. Filing tax extension 2012 If not enough tax is withheld, you may have to pay estimated tax. Filing tax extension 2012 When you file your return, you also may have to pay any Medicare and social security tax or railroad retirement tax your employer could not withhold. Filing tax extension 2012 Tips not reported to your employer. Filing tax extension 2012   On your tax return, you must report all the tips you receive during the year, even tips you do not report to your employer (this includes the value of any noncash tips you received, such as tickets, passes, or other items of value). Filing tax extension 2012 Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. Filing tax extension 2012 Allocated tips. Filing tax extension 2012   If you work in a large food or beverage establishment, your employer may have to report an allocated amount of tips on your Form W-2. Filing tax extension 2012   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. Filing tax extension 2012 Withholding is based only on your pay plus your reported tips. Filing tax extension 2012 Your employer should refund to you any incorrectly withheld tax. Filing tax extension 2012 More information. Filing tax extension 2012   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi