Tax Tips |
Tax Tip
Overview
- Claim 1 allowance on your W-4 if you're single, work 1 job and no one can claim you as a dependent.
- You're exempt from withholding if you didn't have any federal tax liability last year, don't expect to have any this year, your total income is $850 or less and you don't expect to receive more than $300 of unearned income.
- If you're working more than 1 part-time job or a full-time job and a part-time job, you may need to withhold more tax on each W-4.
- If you have taxable income other than wages, adjust your withholding to cover the tax on the extra income.
W-4 Allowances
If you're being claimed as a dependent by someone else, working more than 1 job or receiving unearned income, the number of allowances you may claim when filing your W-4 will be affected. Generally, if you're single, work 1 job, and no one can claim you as a dependent, you can claim Single with 1 allowance. The status (Single or Married) is indicated on line 3 of Form W-4. The number of allowances you claim is entered on line 5.Am I exempt from withholding?
You can claim exemption from withholding if you didn't have a federal income tax liability last year and don't expect to have one this year. You can't claim exemption from withholding if:- you can be claimed as a dependent by another person.
- your total income is expected to be more than $900 and is expected to include more than $300 of unearned income (for example, interest and dividends).
Note: Being a student doesn't automatically qualify you to be exempt from withholding. You still must meet the other requirements. If you meet the requirements to file exempt, simply write the word "exempt" on line 7 of Form W-4 and file it with your employer.
Someone Claims You as a Dependent
Your parents or someone else can claim you as a dependent if you didn't provide more than half your support for the year. If someone else will claim you as a dependent, then you're not entitled to claim an allowance on line A of the personal allowances worksheet on Form W-4.Withholding When Working More Than 1 Job
If you're working more than 1 part-time job or a full-time job and a part-time job, you may need to compensate for the extra job by altering your withholding. Tax is withheld from your income from any job based only on the income from that job. The income from the part-time job is commonly low enough that the amount withheld will not be enough to cover the tax on that income. If this is the case,be sure to increase your withholdings at your primary job to compensate.If you have more than one job or you're married and both you and your spouse are working, complete the Two Earner/Multiple Jobs Worksheet on page 2 of Form W-4 to compute what to claim for each job. This can help you avoid a balance due at tax time.
Income Other Than Wages
Perhaps you receive a taxable scholarship, income from investments your grandmother gave you, you won a prize, or you're doing some self-employment work on the side. Your tax liability will include all of these items, so you should factor that in when completing your W-4. For example: You determine that claiming 1 allowance will cover the money you earn from your wages, but some extra income is going to add $200 to your tax liability. The simplest way to compensate for that extra income is have an additional amount withheld from each paycheck. You get paid every other week, and $200 over 26 weeks makes an additional $8 each pay period. Enter $8 on line 6 to cover the tax on that extra income.The worksheets provided with Form W-4 are designed to help you compute the exact amount of withholding you require. Be sure to use them to verify you are on the right track with your withholding. Check with a tax professional for help with your W-4 if you have questions.
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Frequently Asked Questions
Question: Last year I got a very large tax refund and would like to have this money in my check each week rather than getting it back after tax season. Should I increase or decrease the number of allowances on my W-4? I am single homeowner with no dependents and no child care expenses.
Answer: You need to increase the number of allowances that you claim on your W-4. See IRS Publication 919 or a tax professional for help. You don't want to claim too many and have a balance due next year.
Question: Is there a way to have federal income tax withheld from unemployment compensation in lieu of making estimated tax payments?
Answer: You may have 10% federal tax withheld from your unemployment compensation. Use Form W-4V - Voluntary Withholding Request.
Question: How can I get a refund of excess Social Security tax withheld?
Answer: If you worked for 2 or more employers during 2007, enter any Social Security tax in excess of $6,045 on line 67 of Form 1040. If you worked for only 1 employer, you'll have to get any amount that exceeds $6,045 from that employer.
More Withholding FAQs More Employment FAQs
Answer: You need to increase the number of allowances that you claim on your W-4. See IRS Publication 919 or a tax professional for help. You don't want to claim too many and have a balance due next year.
Question: Is there a way to have federal income tax withheld from unemployment compensation in lieu of making estimated tax payments?
Answer: You may have 10% federal tax withheld from your unemployment compensation. Use Form W-4V - Voluntary Withholding Request.
Question: How can I get a refund of excess Social Security tax withheld?
Answer: If you worked for 2 or more employers during 2007, enter any Social Security tax in excess of $6,045 on line 67 of Form 1040. If you worked for only 1 employer, you'll have to get any amount that exceeds $6,045 from that employer.
More Withholding FAQs More Employment FAQs
Related IRS Forms & Publications
- Form W-4 - Employee's Withholding Certificate
- Form 1040-ES - Estimated Tax for Individuals
- Form 1041-ES - Estimated Income Tax for Estates and Trusts
- Form 1120-W - Estimated Tax for Corporations
- Form 2210 - Underpayment of Estimated Tax by Individuals, Estates and Trusts
- Form 2210 Instructions
- Form 2220 - Underpayment of Estimated Tax by Corporations
- Form 2220 Instructions
- Form 945 - Annual Return of Withheld Federal Income Tax
- Form 945 Instructions
- Form W-2 - Wage and Tax Statement (Info Copy Only)
- Form W-2 and W-3 Instructions
- Publication 505 - Tax Withholding and Estimated Tax
- Publication 919 - How Do I Adjust My Tax Withholding?
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