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Free E-file For 2011

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Free E-file For 2011

Free e-file for 2011 1. Free e-file for 2011   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. Free e-file for 2011 Exceptions. Free e-file for 2011 Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. Free e-file for 2011 Identical wagers. Free e-file for 2011 Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. Free e-file for 2011 Underreported interest or dividends. Free e-file for 2011 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. Free e-file for 2011 This chapter explains in detail the rules for withholding tax from each of these types of income. Free e-file for 2011 The discussion of salaries and wages includes an explanation of how to complete Form W-4. Free e-file for 2011 This chapter also covers backup withholding on interest, dividends, and other payments. Free e-file for 2011 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. Free e-file for 2011 Salaries and Wages Income tax is withheld from the pay of most employees. Free e-file for 2011 Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Free e-file for 2011 It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Free e-file for 2011 See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. Free e-file for 2011 If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Free e-file for 2011 This is explained under Exemption From Withholding , later. Free e-file for 2011 You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Free e-file for 2011 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. Free e-file for 2011 Military retirees. Free e-file for 2011   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. Free e-file for 2011 Household workers. Free e-file for 2011   If you are a household worker, you can ask your employer to withhold income tax from your pay. Free e-file for 2011 A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Free e-file for 2011   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Free e-file for 2011 If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. Free e-file for 2011 Farmworkers. Free e-file for 2011   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. Free e-file for 2011 Differential wage payments. Free e-file for 2011   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Free e-file for 2011 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. Free e-file for 2011 The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Free e-file for 2011 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. Free e-file for 2011 The amount you earn in each payroll period. Free e-file for 2011 The information you give your employer on Form W-4. Free e-file for 2011 Form W-4 includes four types of information that your employer will use to figure your withholding. Free e-file for 2011 Whether to withhold at the single rate or at the lower married rate. Free e-file for 2011 How many withholding allowances you claim (each allowance reduces the amount withheld). Free e-file for 2011 Whether you want an additional amount withheld. Free e-file for 2011 Whether you are claiming an exemption from withholding in 2014. Free e-file for 2011 See Exemption From Withholding , later. Free e-file for 2011 Note. Free e-file for 2011 You must specify a filing status and a number of withholding allowances on Form W-4. Free e-file for 2011 You cannot specify only a dollar amount of withholding. Free e-file for 2011 New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. Free e-file for 2011 Your employer should have copies of the form. Free e-file for 2011 If you need to change the information later, you must fill out a new form. Free e-file for 2011 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. Free e-file for 2011 You may be able to avoid overwithholding if your employer agrees to use the part-year method. Free e-file for 2011 See Part-Year Method , later, for more information. Free e-file for 2011 Employee also receiving pension income. Free e-file for 2011   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Free e-file for 2011 However, you can choose to split your withholding allowances between your pension and job in any manner. Free e-file for 2011 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. Free e-file for 2011 When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. Free e-file for 2011 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. Free e-file for 2011 See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. Free e-file for 2011 Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. Free e-file for 2011 See Table 1-1 for examples of personal and financial changes you should consider. Free e-file for 2011 Table 1-1. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Free e-file for 2011 You can get a blank Form W-4 from your employer or print the form from IRS. Free e-file for 2011 gov. Free e-file for 2011 You should try to have your withholding match your actual tax liability. Free e-file for 2011 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. Free e-file for 2011 If too much tax is withheld, you will lose the use of that money until you get your refund. Free e-file for 2011 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. Free e-file for 2011 See Table 1-1 for examples. Free e-file for 2011 Note. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 You should check your withholding when any of the following situations occur. Free e-file for 2011 You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. Free e-file for 2011 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. Free e-file for 2011 There are changes in your life or financial situation that affect your tax liability. Free e-file for 2011 See Table 1-1. Free e-file for 2011 There are changes in the tax law that affect your tax liability. Free e-file for 2011 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. Free e-file for 2011 You can also use the IRS Withholding calculator at www. Free e-file for 2011 irs. Free e-file for 2011 gov/individuals. Free e-file for 2011 If you use the worksheets and tables in this publication, follow these steps. Free e-file for 2011 Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 How Do You Increase Your Withholding? There are two ways to increase your withholding. Free e-file for 2011 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. Free e-file for 2011 Requesting an additional amount withheld. Free e-file for 2011   You can request that an additional amount be withheld from each paycheck by following these steps. Free e-file for 2011 Complete Worksheets 1-5 and 1-7. Free e-file for 2011 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. Free e-file for 2011 Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. Free e-file for 2011 This is the number of allowances you entered on the last Form W-4 you gave your employer. Free e-file for 2011 Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. Free e-file for 2011 Give your newly completed Form W-4 to your employer. Free e-file for 2011   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. Free e-file for 2011 Example. Free e-file for 2011 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). Free e-file for 2011 Steve's tax will be underwithheld by $800 ($4,316 − $3,516). Free e-file for 2011 His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. Free e-file for 2011 Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. Free e-file for 2011 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. Free e-file for 2011 He gives the completed form to his employer. Free e-file for 2011 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. Free e-file for 2011 If this is the case, you can increase your withholding for one or more of the jobs. Free e-file for 2011   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. Free e-file for 2011 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. Free e-file for 2011 This will give you the additional amount to enter on the Form W-4 you will file for that job. Free e-file for 2011 You need to give your employer a new Form W-4 for each job for which you are changing your withholding. Free e-file for 2011 Example. Free e-file for 2011 Meg Green works in a store and earns $46,000 a year. Free e-file for 2011 Her husband, John, works full-time in manufacturing and earns $68,000 a year. Free e-file for 2011 In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. Free e-file for 2011 They expect to file a joint income tax return. Free e-file for 2011 Meg and John complete Worksheets 1-5, 1-6, and 1-7. Free e-file for 2011 Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Free e-file for 2011 They can divide the $4,459 any way they want. Free e-file for 2011 They can enter an additional amount on either of their Forms W-4, or divide it between them. Free e-file for 2011 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. Free e-file for 2011 Both claim the same number of allowances as before. Free e-file for 2011 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. Free e-file for 2011 There are two ways to do this. Free e-file for 2011 You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. Free e-file for 2011 You can claim only the number of allowances to which you are entitled. Free e-file for 2011 To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. Free e-file for 2011 Increasing the number of allowances. Free e-file for 2011   Figure and increase the number of withholding allowances you can claim as follows. Free e-file for 2011 On a new Form W-4, complete the Personal Allowances Worksheet. Free e-file for 2011 If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. Free e-file for 2011 If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. Free e-file for 2011 If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. Free e-file for 2011 Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. Free e-file for 2011 Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. Free e-file for 2011 Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. Free e-file for 2011 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. Free e-file for 2011 If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. Free e-file for 2011 Example. Free e-file for 2011 Brett and Alyssa Davis are married and expect to file a joint return for 2014. Free e-file for 2011 Their expected taxable income from all sources is $68,000. Free e-file for 2011 They expect to have $15,900 of itemized deductions. Free e-file for 2011 Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. Free e-file for 2011 The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. Free e-file for 2011 Line 1, expected child and dependent care credit—$960. Free e-file for 2011 Line 9, expected adoption credit—$1,500. Free e-file for 2011 Line 10, total estimated tax credits—$2,460. Free e-file for 2011 Line 11. Free e-file for 2011 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). Free e-file for 2011 The number to the right of this range is 6. Free e-file for 2011 7. Free e-file for 2011 Line 12, multiply line 10 by line 11—$16,482. Free e-file for 2011 Then the Davis' complete the Form W-4 worksheets. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 If the change is for next year, your new Form W-4 will not take effect until next year. Free e-file for 2011 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). Free e-file for 2011 However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. Free e-file for 2011 You completed either form based on your projected income at that time. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 Start off with the Personal Allowances Worksheet. Free e-file for 2011 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. Free e-file for 2011 The third worksheet is the most important for this situation. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 It is your decision how to divide up your withholding allowances between these sources of income. Free e-file for 2011 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. Free e-file for 2011 ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. Free e-file for 2011 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. Free e-file for 2011 Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. Free e-file for 2011 Contact your pension provider and your employer's payroll department. Free e-file for 2011 And remember, this is not a final decision. Free e-file for 2011 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. Free e-file for 2011 You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. Free e-file for 2011 You may need more tax withheld, or you may need less. Free e-file for 2011 Table 1-2. Free e-file for 2011 Tax Credits for 2014 For more information about the . Free e-file for 2011 . Free e-file for 2011 . Free e-file for 2011 See . Free e-file for 2011 . Free e-file for 2011 . Free e-file for 2011 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. Free e-file for 2011 S. Free e-file for 2011 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. Free e-file for 2011 Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. Free e-file for 2011 Everyone else must have tax withheld at the higher single rate. Free e-file for 2011 Single. Free e-file for 2011   You must check the “Single” box if any of the following applies. Free e-file for 2011 You are single. Free e-file for 2011 If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. Free e-file for 2011 You are married, but neither you nor your spouse is a citizen or resident of the United States. Free e-file for 2011 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. Free e-file for 2011 For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Free e-file for 2011 Married. Free e-file for 2011   You qualify to check the “Married” box if any of the following applies. Free e-file for 2011 You are married and neither you nor your spouse is a nonresident alien. Free e-file for 2011 You are considered married for the whole year even if your spouse died during the year. Free e-file for 2011 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. Free e-file for 2011 For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Free e-file for 2011 You expect to be able to file your return as a qualifying widow or widower. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 Married, but withhold at higher single rate. Free e-file for 2011   Some married people find that they do not have enough tax withheld at the married rate. Free e-file for 2011 This can happen, for example, when both spouses work. Free e-file for 2011 To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). Free e-file for 2011 Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. Free e-file for 2011 Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. Free e-file for 2011 You will have the most tax withheld if you claim “0” allowances. Free e-file for 2011 The number of allowances you can claim depends on the following factors. Free e-file for 2011 How many exemptions you can take on your tax return. Free e-file for 2011 Whether you have income from more than one job. Free e-file for 2011 What deductions, adjustments to income, and credits you expect to have for the year. Free e-file for 2011 Whether you will file as head of household. Free e-file for 2011 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. Free e-file for 2011 Or, if married filing separately, whether or not your spouse also works. Free e-file for 2011 Form W-4 worksheets. Free e-file for 2011    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Free e-file for 2011 The worksheets are for your own records. Free e-file for 2011 Do not give them to your employer. Free e-file for 2011   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. Free e-file for 2011 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. Free e-file for 2011 Complete separate sets of worksheets only if you and your spouse will file separate returns. Free e-file for 2011   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011   Complete all worksheets that apply to your situation. Free e-file for 2011 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. Free e-file for 2011 Multiple jobs. Free e-file for 2011   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Free e-file for 2011 Then split your allowances between the Forms W-4 for each job. Free e-file for 2011 You cannot claim the same allowances with more than one employer at the same time. Free e-file for 2011 You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Free e-file for 2011 Married individuals. Free e-file for 2011   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. Free e-file for 2011 Use only one set of worksheets. Free e-file for 2011 You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Free e-file for 2011   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. Free e-file for 2011 Alternative method of figuring withholding allowances. Free e-file for 2011   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. Free e-file for 2011   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. Free e-file for 2011 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. Free e-file for 2011   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. Free e-file for 2011 You still must give your employer a Form W-4 claiming your withholding allowances. Free e-file for 2011 Employees who are not citizens or residents. Free e-file for 2011   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. Free e-file for 2011 However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. Free e-file for 2011 S. Free e-file for 2011 national. Free e-file for 2011 It also does not apply if your spouse is a U. Free e-file for 2011 S. Free e-file for 2011 citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Free e-file for 2011 Special rules apply to residents of South Korea and India. Free e-file for 2011 For more information, see Withholding From Compensation in chapter 8 of Publication 519. Free e-file for 2011 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. Free e-file for 2011 Exemptions. Free e-file for 2011 Only one job. Free e-file for 2011 Head of household filing status. Free e-file for 2011 Child and dependent care credit. Free e-file for 2011 Child tax credit. Free e-file for 2011 Exemptions (worksheet lines A, C, and D). Free e-file for 2011   You can claim one withholding allowance for each exemption you expect to claim on your tax return. Free e-file for 2011 Self. Free e-file for 2011   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. Free e-file for 2011 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. Free e-file for 2011 Spouse. Free e-file for 2011   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. Free e-file for 2011 Do not claim this allowance if you and your spouse expect to file separate returns. Free e-file for 2011 Dependents. Free e-file for 2011   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. Free e-file for 2011 Only one job (worksheet line B). Free e-file for 2011    You can claim an additional withholding allowance if any of the following apply for 2014. Free e-file for 2011 You are single and you have only one job at a time. Free e-file for 2011 You are married, you have only one job at a time, and your spouse does not work. Free e-file for 2011 Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. Free e-file for 2011 If you qualify for this allowance, enter “1” on line B of the worksheet. Free e-file for 2011 Head of household filing status (worksheet line E). Free e-file for 2011   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. Free e-file for 2011 For more information, see Publication 501. Free e-file for 2011   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. Free e-file for 2011 Reduction of personal allowances. Free e-file for 2011   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. Free e-file for 2011 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. Free e-file for 2011 Worksheet 1-1. Free e-file for 2011 Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. Free e-file for 2011 Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. Free e-file for 2011   2. Free e-file for 2011 Enter your expected AGI 2. Free e-file for 2011       3. Free e-file for 2011 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. Free e-file for 2011       4. Free e-file for 2011 Subtract line 3 from line 2 4. Free e-file for 2011       5. Free e-file for 2011 Divide line 4 by $125,000 ($62,500 if married filing separately). Free e-file for 2011 Enter the result as a decimal 5. Free e-file for 2011   6. Free e-file for 2011 Multiply line 1 by line 5. Free e-file for 2011 If the result is not a whole number, increase it to the next higher whole number 6. Free e-file for 2011   7. Free e-file for 2011 Subtract line 6 from line 1. Free e-file for 2011 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. Free e-file for 2011     Child and dependent care credit (worksheet line F). Free e-file for 2011   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. Free e-file for 2011 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. Free e-file for 2011 For more information, see Publication 503, Child and Dependent Care Expenses. Free e-file for 2011   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. Free e-file for 2011 Child tax credit (worksheet line G). Free e-file for 2011   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. Free e-file for 2011 Subtract “1” from that amount if you have three to six eligible children. Free e-file for 2011 Subtract “2” from that amount if you have seven or more eligible children. Free e-file for 2011   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. Free e-file for 2011   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. Free e-file for 2011 S. Free e-file for 2011 citizen, U. Free e-file for 2011 S. Free e-file for 2011 national, or U. Free e-file for 2011 S. Free e-file for 2011 resident alien, and Who will be claimed as a dependent on your return. Free e-file for 2011 If you are a U. Free e-file for 2011 S. Free e-file for 2011 citizen or U. Free e-file for 2011 S. Free e-file for 2011 national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. Free e-file for 2011   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. Free e-file for 2011   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. Free e-file for 2011   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. Free e-file for 2011 Total personal allowances (worksheet line H). Free e-file for 2011    Add lines A through G and enter the total on line H. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. Free e-file for 2011 Use the amount of each item you reasonably can expect to show on your return. Free e-file for 2011 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. Free e-file for 2011 Do not include any amount shown on your last tax return that has been disallowed by the IRS. Free e-file for 2011 Example. Free e-file for 2011 On June 30, 2013, you bought your first home. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 You can use $13,200 to figure the number of your withholding allowances for itemized deductions. Free e-file for 2011 Not itemizing deductions. Free e-file for 2011   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. Free e-file for 2011 Itemized deductions (worksheet line 1). Free e-file for 2011   Enter your estimated total itemized deductions on line 1 of the worksheet. Free e-file for 2011   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. Free e-file for 2011 You normally claim these deductions on Schedule A of Form 1040. Free e-file for 2011 Medical and dental expenses that are more than 10% (7. Free e-file for 2011 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). Free e-file for 2011 State and local income or property taxes. Free e-file for 2011 Deductible home mortgage interest. Free e-file for 2011 Investment interest up to net investment income. Free e-file for 2011 Charitable contributions. Free e-file for 2011 Casualty and theft losses that are more than $100 and 10% of your AGI. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 AGI. Free e-file for 2011   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. Free e-file for 2011 Phaseout of itemized deductions. Free e-file for 2011   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. Free e-file for 2011    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. Free e-file for 2011 Worksheet 1-2. Free e-file for 2011 Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. Free e-file for 2011 Enter the estimated total of your itemized deductions 1. Free e-file for 2011   2. Free e-file for 2011 Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. Free e-file for 2011   3. Free e-file for 2011 Is the amount on line 2 less than the amount on line 1? ❑ No. Free e-file for 2011 Stop here. Free e-file for 2011 Your deduction is not limited. Free e-file for 2011 Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Free e-file for 2011  ❑ Yes. Free e-file for 2011 Subtract line 2 from line 1. Free e-file for 2011 3. Free e-file for 2011       4. Free e-file for 2011 Multiply line 3 by 80% (. Free e-file for 2011 80) 4. Free e-file for 2011       5. Free e-file for 2011 Enter your expected AGI 5. Free e-file for 2011       6. Free e-file for 2011 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. Free e-file for 2011   7. Free e-file for 2011 Is the amount on line 6 less than the amount on line 5? ❑ No. Free e-file for 2011 Stop here. Free e-file for 2011 Your deduction is not limited. Free e-file for 2011 Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Free e-file for 2011  ❑ Yes. Free e-file for 2011 Subtract line 6 from line 5. Free e-file for 2011 7. Free e-file for 2011       8. Free e-file for 2011 Multiply line 7 by 3% (. Free e-file for 2011 03) 8. Free e-file for 2011       9. Free e-file for 2011 Enter the smaller of line 4 or line 8 9. Free e-file for 2011     10. Free e-file for 2011 Subtract line 9 from line 1. Free e-file for 2011 Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. Free e-file for 2011     Adjustments to income (worksheet line 4). Free e-file for 2011   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. Free e-file for 2011   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. Free e-file for 2011 These adjustments appear on page 1 of your Form 1040 or 1040A. Free e-file for 2011 Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. Free e-file for 2011 Net operating loss carryovers. Free e-file for 2011 Certain business expenses of reservists, performing artists, and fee-based government officials. Free e-file for 2011 Health savings account or medical savings account deduction. Free e-file for 2011 Certain moving expenses. Free e-file for 2011 Deduction for self-employment tax. Free e-file for 2011 Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. Free e-file for 2011 Self-employed health insurance deduction. Free e-file for 2011 Penalty on early withdrawal of savings. Free e-file for 2011 Alimony paid. Free e-file for 2011 IRA deduction. Free e-file for 2011 Student loan interest deduction. Free e-file for 2011 Jury duty pay given to your employer. Free e-file for 2011 Reforestation amortization and expenses. Free e-file for 2011 Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Free e-file for 2011 Repayment of certain supplemental unemployment benefits. Free e-file for 2011 Contributions to IRC 501(c)(18)(D) pension plans. Free e-file for 2011 Contributions by certain chaplains to IRC 403(b) plans. Free e-file for 2011 Attorney fees and court costs for certain unlawful discrimination claims. Free e-file for 2011 Attorney fees and court costs for certain whistleblower awards. Free e-file for 2011 Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). Free e-file for 2011 Tax credits (worksheet line 5). Free e-file for 2011   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). Free e-file for 2011 But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. Free e-file for 2011   If you take the child and dependent care credit into account on line 5, do not use line F. Free e-file for 2011 If you take the child tax credit into account on line 5, do not use line G. Free e-file for 2011   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. Free e-file for 2011 See the individual tax form instructions for more details. Free e-file for 2011 Foreign tax credit, except any credit that applies to wages not subject to U. Free e-file for 2011 S. Free e-file for 2011 income tax withholding because they are subject to income tax withholding by a foreign country. Free e-file for 2011 See Publication 514, Foreign Tax Credit for Individuals. Free e-file for 2011 Credit for the elderly or the disabled. Free e-file for 2011 See Publication 524, Credit for the Elderly or the Disabled. Free e-file for 2011 Education credits. Free e-file for 2011 See Publication 970, Tax Benefits for Education. Free e-file for 2011 Retirement savings contributions credit (saver's credit). Free e-file for 2011 See Publication 590. Free e-file for 2011 Mortgage interest credit. Free e-file for 2011 See Publication 530, Tax Information for Homeowners. Free e-file for 2011 Adoption credit. Free e-file for 2011 See the Instructions for Form 8839. Free e-file for 2011 Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. Free e-file for 2011 See the Instructions for Form 8801. Free e-file for 2011 General business credit. Free e-file for 2011 See the Instructions for Form 3800. Free e-file for 2011 Earned income credit. Free e-file for 2011 See Publication 596. Free e-file for 2011 Figuring line 5 entry. Free e-file for 2011   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 . Free e-file for 2011 Example. Free e-file for 2011 You are married and expect to file a joint return for 2014. Free e-file for 2011 Your combined estimated wages are $68,000. Free e-file for 2011 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). Free e-file for 2011 In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. Free e-file for 2011 7. Free e-file for 2011 Multiply your total estimated tax credits of $2,660 by 6. Free e-file for 2011 7. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 Nonwage income (worksheet line 6). Free e-file for 2011   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Free e-file for 2011 Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. Free e-file for 2011   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. Free e-file for 2011 See Getting the Right Amount of Tax Withheld , later. Free e-file for 2011 Net deductions and adjustments (worksheet line 8). Free e-file for 2011    If line 7 is less than $3,950, enter “0” on line 8. Free e-file for 2011 If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. Free e-file for 2011 Example. Free e-file for 2011 If line 7 is $5,200, $5,200 ÷ $3,950 = 1. Free e-file for 2011 32. Free e-file for 2011 Drop the fraction (. Free e-file for 2011 32) and enter “1” on line 8. Free e-file for 2011 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). Free e-file for 2011 Reducing your allowances (worksheet lines 1-3). Free e-file for 2011   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). Free e-file for 2011 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). Free e-file for 2011 Enter that number on line 2. Free e-file for 2011 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. Free e-file for 2011 ”    Table 1-3. Free e-file for 2011 Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. Free e-file for 2011  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. Free e-file for 2011 0 $42,001 – 98,000 6. Free e-file for 2011 7 $98,001 – 180,000 4. Free e-file for 2011 0 $180,001 – 270,000 3. Free e-file for 2011 6 $270,001 – 440,000 3. Free e-file for 2011 0 $440,001 – 490,000. Free e-file for 2011 . Free e-file for 2011 . Free e-file for 2011 . Free e-file for 2011 2. Free e-file for 2011 9 $490,001 and over 2. Free e-file for 2011 5 b. Free e-file for 2011  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. Free e-file for 2011 0 $19,001 – 47,000 6. Free e-file for 2011 7 $47,001 – 104,000 4. Free e-file for 2011 0 $104,001 – 205,000 3. Free e-file for 2011 6 $205,001 – 430,000 3. Free e-file for 2011 0 $430,001 and over 2. Free e-file for 2011 5 c. Free e-file for 2011  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. Free e-file for 2011 0 $30,001 – 66,000 6. Free e-file for 2011 7 $66,001 – 150,000 4. Free e-file for 2011 0 $150,001 – 235,000 3. Free e-file for 2011 6 $235,001 – 430,000 3. Free e-file for 2011 0 $430,001 – 460,000 2. Free e-file for 2011 9 $460,001 and over 2. Free e-file for 2011 5 d. Free e-file for 2011  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. Free e-file for 2011 0 $21,001 – 49,000 6. Free e-file for 2011 7 $49,001 – 90,000 4. Free e-file for 2011 0 $90,001 – 135,000 3. Free e-file for 2011 6 $135,001 – 220,000 3. Free e-file for 2011 0 $220,001 – 245,000 2. Free e-file for 2011 9 $245,001 and over 2. Free e-file for 2011 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. Free e-file for 2011 If line 1 is more than or equal to line 2, do not use the rest of the worksheet. Free e-file for 2011   If line 1 is less than line 2, enter “0” on Form W-4, line 5. Free e-file for 2011 Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. Free e-file for 2011 Other amounts owed. Free e-file for 2011   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. Free e-file for 2011 The total is the additional withholding needed for the year. Free e-file for 2011 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. Free e-file for 2011 You accurately complete all the Form W-4 worksheets that apply to you. Free e-file for 2011 You give your employer a new Form W-4 when changes occur. Free e-file for 2011 But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Free e-file for 2011 This is most likely to happen in the following situations. Free e-file for 2011 You are married and both you and your spouse work. Free e-file for 2011 You have more than one job at a time. Free e-file for 2011 You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Free e-file for 2011 You will owe additional amounts with your return, such as self-employment tax. Free e-file for 2011 Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Free e-file for 2011 Your earnings are more than $130,000 if you are single or $180,000 if you are married. Free e-file for 2011 You work only part of the year. Free e-file for 2011 You change the number of your withholding allowances during the year. Free e-file for 2011 You are subject to Additional Medicare Tax or Net Investment Income Tax. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 To be eligible for the part-year method, you must meet both of the following requirements. Free e-file for 2011 You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. Free e-file for 2011 You cannot use a fiscal year. Free e-file for 2011 You must not expect to be employed for more than 245 days during the year. Free e-file for 2011 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. Free e-file for 2011 If you are temporarily laid off for 30 days or less, count those days too. Free e-file for 2011 If you are laid off for more than 30 days, do not count those days. Free e-file for 2011 You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. Free e-file for 2011 How to apply for the part-year method. Free e-file for 2011   You must ask your employer in writing to use this method. Free e-file for 2011 The request must state all three of the following. Free e-file for 2011 The date of your last day of work for any prior employer during the current calendar year. Free e-file for 2011 That you do not expect to be employed more than 245 days during the current calendar year. Free e-file for 2011 That you use the calendar year as your tax year. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011 You must ask your employer in writing to use this method. Free e-file for 2011 To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Free e-file for 2011 ) since the beginning of the year. Free e-file for 2011 Aids for Figuring Your Withholding IRS Withholding Calculator. Free e-file for 2011   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Free e-file for 2011 Go to www. Free e-file for 2011 irs. Free e-file for 2011 gov/Individuals/IRS-Withholding-Calculator. Free e-file for 2011 It can help you determine the correct amount to be withheld any time during the year. Free e-file for 2011 Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Free e-file for 2011 These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Free e-file for 2011 New Form W-4. Free e-file for 2011   When you start a new job, your employer should give you a Form W-4 to fill out. Free e-file for 2011 Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Free e-file for 2011   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Free e-file for 2011 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. Free e-file for 2011 No Form W-4. Free e-file for 2011   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. Free e-file for 2011 Repaying withheld tax. Free e-file for 2011   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. Free e-file for 2011 Your employer cannot repay any of the tax previously withheld. Free e-file for 2011 Instead, claim the full amount withheld when you file your tax return. Free e-file for 2011   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. Free e-file for 2011 Your employer can repay the amount that was withheld incorrectly. Free e-file for 2011 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. Free e-file for 2011 IRS review of your withholding. Free e-file for 2011   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Free e-file for 2011 Your employer may be required to send a copy of the Form W-4 to the IRS. Free e-file for 2011 There is a penalty for supplying false information on Form W-4. Free e-file for 2011 See Penalties , later. Free e-file for 2011   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. Free e-file for 2011   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Free e-file for 2011 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. Free e-file for 2011 Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. Free e-file for 2011 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. Free e-file for 2011   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. Free e-file for 2011   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. Free e-file for 2011 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. Free e-file for 2011   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. Free e-file for 2011 Your employer must then withhold tax based on this new Form W-4. Free e-file for 2011   Additional information is available at IRS. Free e-file for 2011 gov. Free e-file for 2011 Enter “withholding compliance questions” in the search box. Free e-file for 2011 Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Free e-file for 2011 The exemption applies only to income tax, not to social security or Medicare tax. Free e-file for 2011 You can claim exemption from withholding for 2014 only if both of the following situations apply. Free e-file for 2011 For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Free e-file for 2011 For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Free e-file for 2011 Use Figure 1-A to help you decide whether you can claim exemption from withholding. Free e-file for 2011 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. Free e-file for 2011 These situations are discussed later. Free e-file for 2011 Students. Free e-file for 2011   If you are a student, you are not automatically exempt. Free e-file for 2011 If you work only part time or during the summer, you may qualify for exemption from withholding. Free e-file for 2011 Example 1. Free e-file for 2011 You are a high school student and expect to earn $2,500 from a summer job. Free e-file for 2011 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. Free e-file for 2011 You worked last summer and had $375 federal income tax withheld from your pay. Free e-file for 2011 The entire $375 was refunded when you filed your 2013 return. Free e-file for 2011 Using Figure 1-A, you find that you can claim exemption from withholding. Free e-file for 2011 Please click here for the text description of the image. Free e-file for 2011 Figure 1-A: Exemption From Withholding on Form W-4 Example 2. Free e-file for 2011 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. Free e-file for 2011 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. Free e-file for 2011    You may have to file a tax return, even if you are exempt from withholding. Free e-file for 2011 See Publication 501 to see whether you must file a return. Free e-file for 2011    Age 65 or older or blind. Free e-file for 2011 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. Free e-file for 2011 Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Free e-file for 2011 Instead, see Itemizing deductions or claiming exemptions or credits, next. Free e-file for 2011 Itemizing deductions or claiming exemptions or credits. Free e-file for 2011   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. Free e-file for 2011 You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. Free e-file for 2011 Claiming exemption from withholding. Free e-file for 2011   To claim exemption, you must give your employer a Form W-4. Free e-file for 2011 Do not complete lines 5 and 6. Free e-file for 2011 Enter “Exempt” on line 7. Free e-file for 2011   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. Free e-file for 2011 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. Free e-file for 2011   Your claim of exempt status may be reviewed by the IRS. Free e-file for 2011 See IRS review of your withholding , earlier. Free e-file for 2011 An exemption is good for only 1 year. Free e-file for 2011   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Free e-file for 2011 Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Free e-file for 2011 The payer can figure withholding on supplemental wages using the same method used for your regular wages. Free e-file for 2011 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. Free e-file for 2011 Expense allowances. Free e-file for 2011   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Free e-file for 2011 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. Free e-file for 2011   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. Free e-file for 2011 Accountable plan. Free e-file for 2011   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. Free e-file for 2011 Your expenses must have a business connection. Free e-file for 2011 That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Free e-file for 2011 You must adequately account to your employer for these expenses within a reasonable period of time. Free e-file for 2011 You must return any excess reimbursement or allowance within a reasonable period of time. Free e-file for 2011    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. Free e-file for 2011   The definition of reasonable period of time depends on the facts and circumstances of your situation. Free e-file for 2011 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. Free e-file for 2011 You receive an advance within 30 days of the time you have an expense. Free e-file for 2011 You adequately account for your expenses within 60 days after they were paid or incurred. Free e-file for 2011 You return any excess reimbursement within 120 days after the expense was paid or incurred. Free e-file for 2011 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. Free e-file for 2011 Nonaccountable plan. Free e-file for 2011   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. Free e-file for 2011 For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Free e-file for 2011 Penalties You may have to pay a penalty of $500 if both of the following apply. Free e-file for 2011 You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Free e-file for 2011 You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Free e-file for 2011 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. Free e-file for 2011 The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Free e-file for 2011 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. Free e-file for 2011 A simple error or an honest mistake will not result in one of these penalties. Free e-file for 2011 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. Free e-file for 2011 However, see chapter 4 for information on the penalty for underpaying your tax. Free e-file for 2011 Tips The tips you receive while working on your job are considered part of your pay. Free e-file for 2011 You must include your tips on your tax return on the same line as your regular pay. Free e-file for 2011 However, tax is not withheld directly from tip income, as it is from your regular pay. Free e-file for 2011 Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Free e-file for 2011 Reporting tips to your employer. Free e-file for 2011   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. Free e-file for 2011 The report is due by the 10th day of the following month. Free e-file for 2011   If you have more than one job, make a separate report to each employer. Free e-file for 2011 Report only the tips you received while working for that employer, and only if they total $20 or more for the month. Free e-file for 2011 How employer figures amount to withhold. Free e-file for 2011   The tips you report to your employer are counted as part of your income for the month you report them. Free e-file for 2011 Your employer can figure your withholding in either of two ways. Free e-file for 2011 By withholding at the regular rate on the sum of your pay plus your reported tips. Free e-file for 2011 By withholding at the regular rate on your pay plus a percentage of your reported tips. Free e-file for 2011 Not enough pay to cover taxes. Free e-file for 2011   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. Free e-file for 2011   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. Free e-file for 2011 If not enough tax is withheld, you may have to pay estimated tax. Free e-file for 2011 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. Free e-file for 2011 Tips not reported to your employer. Free e-file for 2011   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). Free e-file for 2011 Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. Free e-file for 2011 Allocated tips. Free e-file for 2011   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. Free e-file for 2011   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. Free e-file for 2011 Withholding is based only on your pay plus your reported tips. Free e-file for 2011 Your employer should refund to you any incorrectly withheld tax. Free e-file for 2011 More information. Free e-file for 2011   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi
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Funded by the insurance premiums it collects and other investments, the Pension Benefit Guaranty Corporation insures and guarantees private sector workers' pensions. The contact information below is primarily for workers or retirees. If you are a plan sponsor or administrator, use the contact link below to find the appropriate information.

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The Free E-file For 2011

Free e-file for 2011 18. Free e-file for 2011   Alimony Table of Contents IntroductionSpouse or former spouse. Free e-file for 2011 Divorce or separation instrument. Free e-file for 2011 Useful Items - You may want to see: General RulesMortgage payments. Free e-file for 2011 Taxes and insurance. Free e-file for 2011 Other payments to a third party. Free e-file for 2011 Instruments Executed After 1984Payments to a third party. Free e-file for 2011 Exception. Free e-file for 2011 Substitute payments. Free e-file for 2011 Specifically designated as child support. Free e-file for 2011 Contingency relating to your child. Free e-file for 2011 Clearly associated with a contingency. Free e-file for 2011 How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule Introduction This chapter discusses the rules that apply if you pay or receive alimony. Free e-file for 2011 It covers the following topics. Free e-file for 2011 What payments are alimony. Free e-file for 2011 What payments are not alimony, such as child support. Free e-file for 2011 How to deduct alimony you paid. Free e-file for 2011 How to report alimony you received as income. Free e-file for 2011 Whether you must recapture the tax benefits of alimony. Free e-file for 2011 Recapture means adding back in your income all or part of a deduction you took in a prior year. Free e-file for 2011 Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Free e-file for 2011 It does not include voluntary payments that are not made under a divorce or separation instrument. Free e-file for 2011 Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Free e-file for 2011 Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Free e-file for 2011 To be alimony, a payment must meet certain requirements. Free e-file for 2011 Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Free e-file for 2011 This chapter discusses the rules for payments under instruments executed after 1984. Free e-file for 2011 If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. Free e-file for 2011 That was the last year the information on pre-1985 instruments was included in Publication 504. Free e-file for 2011 Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony. Free e-file for 2011 Definitions. Free e-file for 2011   The following definitions apply throughout this chapter. Free e-file for 2011 Spouse or former spouse. Free e-file for 2011   Unless otherwise stated, the term “spouse” includes former spouse. Free e-file for 2011 Divorce or separation instrument. Free e-file for 2011   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Free e-file for 2011 This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Free e-file for 2011 Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Free e-file for 2011 Payments not alimony. Free e-file for 2011   Not all payments under a divorce or separation instrument are alimony. Free e-file for 2011 Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained under Community Property in Publication 504, Payments to keep up the payer's property, or Use of the payer's property. Free e-file for 2011 Payments to a third party. Free e-file for 2011   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Free e-file for 2011 These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Free e-file for 2011 ), taxes, tuition, etc. Free e-file for 2011 The payments are treated as received by your spouse and then paid to the third party. Free e-file for 2011 Life insurance premiums. Free e-file for 2011   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Free e-file for 2011 Payments for jointly-owned home. Free e-file for 2011   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony. Free e-file for 2011 Mortgage payments. Free e-file for 2011   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify as alimony, you can deduct one-half of the total payments as alimony. Free e-file for 2011 If you itemize deductions and the home is a qualified home, you can claim one-half of the interest in figuring your deductible interest. Free e-file for 2011 Your spouse must report one-half of the payments as alimony received. Free e-file for 2011 If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest. Free e-file for 2011 Taxes and insurance. Free e-file for 2011   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. Free e-file for 2011 Your spouse must report one-half of these payments as alimony received. Free e-file for 2011 If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance. Free e-file for 2011    If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. Free e-file for 2011 But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance. Free e-file for 2011 Other payments to a third party. Free e-file for 2011   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony. Free e-file for 2011 Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Free e-file for 2011 Exception for instruments executed before 1985. Free e-file for 2011   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Free e-file for 2011 A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Free e-file for 2011 A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Free e-file for 2011   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Publication 504 at www. Free e-file for 2011 irs. Free e-file for 2011 gov/pub504. Free e-file for 2011 Example 1. Free e-file for 2011 In November 1984, you and your former spouse executed a written separation agreement. Free e-file for 2011 In February 1985, a decree of divorce was substituted for the written separation agreement. Free e-file for 2011 The decree of divorce did not change the terms for the alimony you pay your former spouse. Free e-file for 2011 The decree of divorce is treated as executed before 1985. Free e-file for 2011 Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Free e-file for 2011 Example 2. Free e-file for 2011 Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. Free e-file for 2011 In this example, the decree of divorce is not treated as executed before 1985. Free e-file for 2011 The alimony payments are subject to the rules for payments under instruments executed after 1984. Free e-file for 2011 Alimony requirements. Free e-file for 2011   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Free e-file for 2011 The payment is in cash. Free e-file for 2011 The instrument does not designate the payment as not alimony. Free e-file for 2011 Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Free e-file for 2011 There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Free e-file for 2011 The payment is not treated as child support. Free e-file for 2011 Each of these requirements is discussed below. Free e-file for 2011 Cash payment requirement. Free e-file for 2011   Only cash payments, including checks and money orders, qualify as alimony. Free e-file for 2011 The following do not qualify as alimony. Free e-file for 2011 Transfers of services or property (including a debt instrument of a third party or an annuity contract). Free e-file for 2011 Execution of a debt instrument by the payer. Free e-file for 2011 The use of the payer's property. Free e-file for 2011 Payments to a third party. Free e-file for 2011   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Free e-file for 2011 See Payments to a third party under General Rules, earlier. Free e-file for 2011   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Free e-file for 2011 The payments are in lieu of payments of alimony directly to your spouse. Free e-file for 2011 The written request states that both spouses intend the payments to be treated as alimony. Free e-file for 2011 You receive the written request from your spouse before you file your return for the year you made the payments. Free e-file for 2011 Payments designated as not alimony. Free e-file for 2011   You and your spouse can designate that otherwise qualifying payments are not alimony. Free e-file for 2011 You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Free e-file for 2011 For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Free e-file for 2011 If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Free e-file for 2011   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Free e-file for 2011 The copy must be attached each year the designation applies. Free e-file for 2011 Spouses cannot be members of the same household. Free e-file for 2011    Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Free e-file for 2011 A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Free e-file for 2011   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Free e-file for 2011 Exception. Free e-file for 2011   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Free e-file for 2011 Table 18-1. Free e-file for 2011 Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments are NOT alimony if any of the following are true: Payments are required by a divorce or separation instrument. Free e-file for 2011 Payments are not required by a divorce or separation instrument. Free e-file for 2011 Payer and recipient spouse do not file a joint return with each other. Free e-file for 2011 Payer and recipient spouse file a joint return with each other. Free e-file for 2011 Payment is in cash (including checks or money orders). Free e-file for 2011 Payment is: Not in cash, A noncash property settlement, Spouse's part of community income, or To keep up the payer's property. Free e-file for 2011 Payment is not designated in the instrument as not alimony. Free e-file for 2011 Payment is designated in the instrument as not alimony. Free e-file for 2011 Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Free e-file for 2011 Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. Free e-file for 2011 Payments are not required after death of the recipient spouse. Free e-file for 2011 Payments are required after death of the recipient spouse. Free e-file for 2011 Payment is not treated as child support. Free e-file for 2011 Payment is treated as child support. Free e-file for 2011 These payments are deductible by the payer and includible in income by the recipient. Free e-file for 2011 These payments are neither deductible by the payer nor includible in income by the recipient. Free e-file for 2011 Liability for payments after death of recipient spouse. Free e-file for 2011   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony, whether made before or after the death. Free e-file for 2011 If all of the payments would continue, then none of the payments made before or after the death are alimony. Free e-file for 2011   The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law. Free e-file for 2011 Example. Free e-file for 2011 You must pay your former spouse $10,000 in cash each year for 10 years. Free e-file for 2011 Your divorce decree states that the payments will end upon your former spouse's death. Free e-file for 2011 You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. Free e-file for 2011 The death of your spouse would not terminate these payments under state law. Free e-file for 2011 The $10,000 annual payments may qualify as alimony. Free e-file for 2011 The $20,000 annual payments that do not end upon your former spouse's death are not alimony. Free e-file for 2011 Substitute payments. Free e-file for 2011   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. Free e-file for 2011 To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Free e-file for 2011 Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. Free e-file for 2011 Example 1. Free e-file for 2011 Under your divorce decree, you must pay your former spouse $30,000 annually. Free e-file for 2011 The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. Free e-file for 2011 Your former spouse has custody of your minor children. Free e-file for 2011 The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. Free e-file for 2011 The trust income and corpus (principal) are to be used for your children's benefit. Free e-file for 2011 These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Free e-file for 2011 Of each of the $30,000 annual payments, $10,000 is not alimony. Free e-file for 2011 Example 2. Free e-file for 2011 Under your divorce decree, you must pay your former spouse $30,000 annually. Free e-file for 2011 The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. Free e-file for 2011 The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. Free e-file for 2011 For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000). Free e-file for 2011 These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. Free e-file for 2011 None of the annual payments are alimony. Free e-file for 2011 The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. Free e-file for 2011 Child support. Free e-file for 2011   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. Free e-file for 2011 The amount of child support may vary over time. Free e-file for 2011 Child support payments are not deductible by the payer and are not taxable to the recipient. Free e-file for 2011 Specifically designated as child support. Free e-file for 2011   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either: On the happening of a contingency relating to your child, or At a time that can be clearly associated with the contingency. Free e-file for 2011 A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support. Free e-file for 2011 Contingency relating to your child. Free e-file for 2011   A contingency relates to your child if it depends on any event relating to that child. Free e-file for 2011 It does not matter whether the event is certain or likely to occur. Free e-file for 2011 Events relating to your child include the child's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. Free e-file for 2011 Clearly associated with a contingency. Free e-file for 2011   Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. Free e-file for 2011 The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority. Free e-file for 2011 The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. Free e-file for 2011 This certain age must be the same for each child, but need not be a whole number of years. Free e-file for 2011 In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child. Free e-file for 2011   Either you or the IRS can overcome the presumption in the two situations above. Free e-file for 2011 This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. Free e-file for 2011 For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony. Free e-file for 2011 How To Deduct Alimony Paid You can deduct alimony you paid, whether or not you itemize deductions on your return. Free e-file for 2011 You must file Form 1040. Free e-file for 2011 You cannot use Form 1040A or Form 1040EZ. Free e-file for 2011 Enter the amount of alimony you paid on Form 1040, line 31a. Free e-file for 2011 In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN). Free e-file for 2011 If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Free e-file for 2011 Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Free e-file for 2011 Enter your total payments on line 31a. Free e-file for 2011 You must provide your spouse's SSN or ITIN. Free e-file for 2011 If you do not, you may have to pay a $50 penalty and your deduction may be disallowed. Free e-file for 2011 For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Free e-file for 2011 How To Report Alimony Received Report alimony you received as income on Form 1040, line 11. Free e-file for 2011 You cannot use Form 1040A or Form 1040EZ. Free e-file for 2011 You must give the person who paid the alimony your SSN or ITIN. Free e-file for 2011 If you do not, you may have to pay a $50 penalty. Free e-file for 2011 Recapture Rule If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. Free e-file for 2011 If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Free e-file for 2011 Your spouse can deduct in the third year part of the alimony payments he or she previously included in income. Free e-file for 2011 The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Free e-file for 2011 Do not include any time in which payments were being made under temporary support orders. Free e-file for 2011 The second and third years are the next 2 calendar years, whether or not payments are made during those years. Free e-file for 2011 The reasons for a reduction or end of alimony payments that can require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. Free e-file for 2011 When to apply the recapture rule. Free e-file for 2011   You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. Free e-file for 2011   When you figure a decrease in alimony, do not include the following amounts. Free e-file for 2011 Payments made under a temporary support order. Free e-file for 2011 Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. Free e-file for 2011 Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year. Free e-file for 2011 Figuring the recapture. Free e-file for 2011   You can use Worksheet 1 in Publication 504 to figure recaptured alimony. Free e-file for 2011 Including the recapture in income. Free e-file for 2011   If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). Free e-file for 2011 Cross out “received” and enter “recapture. Free e-file for 2011 ” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. Free e-file for 2011 Deducting the recapture. Free e-file for 2011   If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). Free e-file for 2011 Cross out “paid” and enter “recapture. Free e-file for 2011 ” In the space provided, enter your spouse's SSN or ITIN. Free e-file for 2011 Prev  Up  Next   Home   More Online Publications