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2011 Free Tax Software

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2011 free tax software 24. 2011 free tax software   Contributions Table of Contents Introduction Useful Items - You may want to see: Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions of PropertyException. 2011 free tax software Household items. 2011 free tax software Deduction more than $500. 2011 free tax software Form 1098-C. 2011 free tax software Filing deadline approaching and still no Form 1098-C. 2011 free tax software Exception 1—vehicle used or improved by organization. 2011 free tax software Exception 2—vehicle given or sold to needy individual. 2011 free tax software Deduction $500 or less. 2011 free tax software Right to use property. 2011 free tax software Tangible personal property. 2011 free tax software Future interest. 2011 free tax software Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value When To DeductChecks. 2011 free tax software Text message. 2011 free tax software Credit card. 2011 free tax software Pay-by-phone account. 2011 free tax software Stock certificate. 2011 free tax software Promissory note. 2011 free tax software Option. 2011 free tax software Borrowed funds. 2011 free tax software Limits on DeductionsCarryovers Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To Report Introduction This chapter explains how to claim a deduction for your charitable contributions. 2011 free tax software It discusses the following topics. 2011 free tax software The types of organizations to which you can make deductible charitable contributions. 2011 free tax software The types of contributions you can deduct. 2011 free tax software How much you can deduct. 2011 free tax software What records you must keep. 2011 free tax software How to report your charitable contributions. 2011 free tax software A charitable contribution is a donation or gift to, or for the use of, a qualified organization. 2011 free tax software It is voluntary and is made without getting, or expecting to get, anything of equal value. 2011 free tax software Form 1040 required. 2011 free tax software    To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. 2011 free tax software The amount of your deduction may be limited if certain rules and limits explained in this chapter apply to you. 2011 free tax software The limits are explained in detail in Publication 526. 2011 free tax software Useful Items - You may want to see: Publication 526 Charitable Contributions 561 Determining the Value of Donated Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 8283 Noncash Charitable Contributions Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. 2011 free tax software Most organizations other than churches and governments must apply to the IRS to become a qualified organization. 2011 free tax software How to check whether an organization can receive deductible charitable contributions. 2011 free tax software   You can ask any organization whether it is a qualified organization, and most will be able to tell you. 2011 free tax software Or go to IRS. 2011 free tax software gov. 2011 free tax software Click on “Tools” and then on “Exempt Organizations Select Check” (www. 2011 free tax software irs. 2011 free tax software gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). 2011 free tax software This online tool will enable you to search for qualified organizations. 2011 free tax software You can also call the IRS to find out if an organization is qualified. 2011 free tax software Call 1-877-829-5500. 2011 free tax software People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. 2011 free tax software Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. 2011 free tax software gsa. 2011 free tax software gov/fedrelay. 2011 free tax software Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. 2011 free tax software A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). 2011 free tax software It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. 2011 free tax software Certain organizations that foster national or international amateur sports competition also qualify. 2011 free tax software War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). 2011 free tax software Domestic fraternal societies, orders, and associations operating under the lodge system. 2011 free tax software (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. 2011 free tax software ) Certain nonprofit cemetery companies or corporations. 2011 free tax software (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. 2011 free tax software ) The United States or any state, the District of Columbia, a U. 2011 free tax software S. 2011 free tax software possession (including Puerto Rico), a political subdivision of a state or U. 2011 free tax software S. 2011 free tax software possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. 2011 free tax software (Your contribution to this type of organization is only deductible if it is to be used solely for public purposes. 2011 free tax software ) Examples. 2011 free tax software    The following list gives some examples of qualified organizations. 2011 free tax software Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. 2011 free tax software Most nonprofit charitable organizations such as the American Red Cross and the United Way. 2011 free tax software Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. 2011 free tax software This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. 2011 free tax software However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . 2011 free tax software Nonprofit hospitals and medical research organizations. 2011 free tax software Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. 2011 free tax software Nonprofit volunteer fire companies. 2011 free tax software Nonprofit organizations that develop and maintain public parks and recreation facilities. 2011 free tax software Civil defense organizations. 2011 free tax software Certain foreign charitable organizations. 2011 free tax software   Under income tax treaties with Canada, Israel, and Mexico, you may be able to deduct contributions to certain Canadian, Israeli, or Mexican charitable organizations. 2011 free tax software Generally, you must have income from sources in that country. 2011 free tax software For additional information on the deduction of contributions to Canadian charities, see Publication 597, Information on the United States–Canada Income Tax Treaty. 2011 free tax software If you need more information on how to figure your contribution to Mexican and Israeli charities, see Publication 526. 2011 free tax software Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. 2011 free tax software A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. 2011 free tax software The contributions must be made to a qualified organization and not set aside for use by a specific person. 2011 free tax software If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. 2011 free tax software See Contributions of Property , later in this chapter. 2011 free tax software Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. 2011 free tax software See Limits on Deductions , later. 2011 free tax software In addition, the total of your charitable contribution deduction and certain other itemized deductions may be limited. 2011 free tax software See chapter 29. 2011 free tax software Table 24-1 gives examples of contributions you can and cannot deduct. 2011 free tax software Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. 2011 free tax software Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. 2011 free tax software If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. 2011 free tax software For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. 2011 free tax software Example 1. 2011 free tax software You pay $65 for a ticket to a dinner-dance at a church. 2011 free tax software Your entire $65 payment goes to the church. 2011 free tax software The ticket to the dinner-dance has a fair market value of $25. 2011 free tax software When you buy your ticket, you know that its value is less than your payment. 2011 free tax software To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). 2011 free tax software You can deduct $40 as a contribution to the church. 2011 free tax software Example 2. 2011 free tax software At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. 2011 free tax software The amount you pay is no more than the fair rental value. 2011 free tax software You have not made a deductible charitable contribution. 2011 free tax software Athletic events. 2011 free tax software   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. 2011 free tax software   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. 2011 free tax software Subtract the price of the tickets from your payment. 2011 free tax software You can deduct 80% of the remaining amount as a charitable contribution. 2011 free tax software Example 1. 2011 free tax software You pay $300 a year for membership in a university's athletic scholarship program. 2011 free tax software The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. 2011 free tax software You can deduct $240 (80% of $300) as a charitable contribution. 2011 free tax software Table 24-1. 2011 free tax software Examples of Charitable Contributions—A Quick Check Use the following lists for a quick check of whether you can deduct a contribution. 2011 free tax software See the rest of this chapter for more information and additional rules and limits that may apply. 2011 free tax software Deductible As  Charitable Contributions Not Deductible  As Charitable Contributions Money or property you give to:  Churches, synagogues, temples, mosques, and other religious organizations Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park) Nonprofit schools and hospitals The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. 2011 free tax software War veterans groups   Expenses paid for a student living with you, sponsored by a qualified organization  Out-of-pocket expenses when you serve a qualified organization as a volunteer Money or property you give to:  Civic leagues, social and sports clubs, labor unions, and chambers of commerce Foreign organizations (except certain Canadian, Israeli, and Mexican charities) Groups that are run for personal profit Groups whose purpose is to lobby for law changes Homeowners' associations Individuals Political groups or candidates for public office   Cost of raffle, bingo, or lottery tickets  Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups  Tuition  Value of your time or services  Value of blood given to a blood bank    Example 2. 2011 free tax software The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. 2011 free tax software You must subtract the usual price of a ticket ($120) from your $300 payment. 2011 free tax software The result is $180. 2011 free tax software Your deductible charitable contribution is $144 (80% of $180). 2011 free tax software Charity benefit events. 2011 free tax software   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. 2011 free tax software   If there is an established charge for the event, that charge is the value of your benefit. 2011 free tax software If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. 2011 free tax software Whether you use the tickets or other privileges has no effect on the amount you can deduct. 2011 free tax software However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. 2011 free tax software    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. 2011 free tax software If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. 2011 free tax software Example. 2011 free tax software You pay $40 to see a special showing of a movie for the benefit of a qualified organization. 2011 free tax software Printed on the ticket is “Contribution—$40. 2011 free tax software ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). 2011 free tax software Membership fees or dues. 2011 free tax software    You may be able to deduct membership fees or dues you pay to a qualified organization. 2011 free tax software However, you can deduct only the amount that is more than the value of the benefits you receive. 2011 free tax software    You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. 2011 free tax software They are not qualified organizations. 2011 free tax software Certain membership benefits can be disregarded. 2011 free tax software   Both you and the organization can disregard the following membership benefits if you receive them in return for an annual payment of $75 or less. 2011 free tax software Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. 2011 free tax software Admission, while you are a member, to events open only to members of the organization, if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. 2011 free tax software 20. 2011 free tax software Token items. 2011 free tax software   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. 2011 free tax software You receive only a small item or other benefit of token value. 2011 free tax software The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. 2011 free tax software Written statement. 2011 free tax software   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. 2011 free tax software The statement must say that you can deduct only the amount of your payment that is more than the value of the goods or services you received. 2011 free tax software It must also give you a good faith estimate of the value of those goods or services. 2011 free tax software   The organization can give you the statement either when it solicits or when it receives the payment from you. 2011 free tax software Exception. 2011 free tax software   An organization will not have to give you this statement if one of the following is true. 2011 free tax software The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. 2011 free tax software You receive only items whose value is not substantial as described under Token items , earlier. 2011 free tax software You receive only membership benefits that can be disregarded, as described earlier. 2011 free tax software Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. 2011 free tax software You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student, Is not your relative or dependent, and Is a full-time student in the twelfth or any lower grade at a school in the United States. 2011 free tax software You can deduct up to $50 a month for each full calendar month the student lives with you. 2011 free tax software Any month when conditions (1) through (3) are met for 15 days or more counts as a full month. 2011 free tax software For additional information, see Expenses Paid for Student Living With You in Publication 526. 2011 free tax software Mutual exchange program. 2011 free tax software   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. 2011 free tax software Table 24-2. 2011 free tax software Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. 2011 free tax software All of the rules explained in this chapter also apply. 2011 free tax software See, in particular, Out-of-Pocket Expenses in Giving Services . 2011 free tax software Question Answer I volunteer 6 hours a week in the office of a qualified organization. 2011 free tax software The receptionist is paid $10 an hour for the same work. 2011 free tax software Can I deduct $60 a week for my time?    No, you cannot deduct the value of your time or services. 2011 free tax software The office is 30 miles from my home. 2011 free tax software Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. 2011 free tax software If you don't want to figure your actual costs, you can deduct 14 cents for each mile. 2011 free tax software I volunteer as a Red Cross nurse's aide at a hospital. 2011 free tax software Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. 2011 free tax software I pay a babysitter to watch my children while I volunteer for a qualified organization. 2011 free tax software Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. 2011 free tax software (If you have childcare expenses so you can work for pay, see chapter 32. 2011 free tax software ) Out-of-Pocket Expenses in Giving Services Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. 2011 free tax software The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. 2011 free tax software Table 24-2 contains questions and answers that apply to some individuals who volunteer their services. 2011 free tax software Conventions. 2011 free tax software   If a qualified organization selects you to attend a convention as its representative, you can deduct unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight in connection with the convention. 2011 free tax software However, see Travel , later. 2011 free tax software   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. 2011 free tax software You also cannot deduct transportation, meals and lodging, and other expenses for your spouse or children. 2011 free tax software    You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. 2011 free tax software You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. 2011 free tax software Uniforms. 2011 free tax software   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. 2011 free tax software Foster parents. 2011 free tax software   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. 2011 free tax software A qualified organization must select the individuals you take into your home for foster care. 2011 free tax software    You can deduct expenses that meet both of the following requirements. 2011 free tax software They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. 2011 free tax software They are incurred primarily to benefit the qualified organization. 2011 free tax software   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. 2011 free tax software For details, see chapter 3. 2011 free tax software Example. 2011 free tax software You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. 2011 free tax software Your unreimbursed expenses are not deductible as charitable contributions. 2011 free tax software Car expenses. 2011 free tax software   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. 2011 free tax software You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. 2011 free tax software    If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. 2011 free tax software   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. 2011 free tax software   You must keep reliable written records of your car expenses. 2011 free tax software For more information, see Car expenses under Records To Keep, later. 2011 free tax software Travel. 2011 free tax software   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. 2011 free tax software This applies whether you pay the expenses directly or indirectly. 2011 free tax software You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. 2011 free tax software   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. 2011 free tax software Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. 2011 free tax software However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. 2011 free tax software Example 1. 2011 free tax software You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. 2011 free tax software You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. 2011 free tax software You participate in the activities of the group and enjoy your time with them. 2011 free tax software You oversee the breaking of camp and you transport the group home. 2011 free tax software You can deduct your travel expenses. 2011 free tax software Example 2. 2011 free tax software You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. 2011 free tax software The project is sponsored by a charitable organization. 2011 free tax software In most circumstances, you cannot deduct your expenses. 2011 free tax software Example 3. 2011 free tax software You work for several hours each morning on an archaeological dig sponsored by a charitable organization. 2011 free tax software The rest of the day is free for recreation and sightseeing. 2011 free tax software You cannot take a charitable contribution deduction even though you work very hard during those few hours. 2011 free tax software Example 4. 2011 free tax software You spend the entire day attending a charitable organization's regional meeting as a chosen representative. 2011 free tax software In the evening you go to the theater. 2011 free tax software You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. 2011 free tax software Daily allowance (per diem). 2011 free tax software   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. 2011 free tax software You may be able to deduct any necessary travel expenses that are more than the allowance. 2011 free tax software Deductible travel expenses. 2011 free tax software   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. 2011 free tax software Because these travel expenses are not business-related, they are not subject to the same limits as business-related expenses. 2011 free tax software For information on business travel expenses, see Travel Expenses in chapter 26. 2011 free tax software Contributions You Cannot Deduct There are some contributions you cannot deduct, such as those made to specific individuals and those made to nonqualified organizations. 2011 free tax software (See Contributions to Individuals and Contributions to Nonqualified Organizations , next. 2011 free tax software ) There are others you can deduct only part of, as discussed later under Contributions From Which You Benefit . 2011 free tax software Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. 2011 free tax software Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members. 2011 free tax software Contributions to individuals who are needy or worthy. 2011 free tax software You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. 2011 free tax software But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. 2011 free tax software Example. 2011 free tax software You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. 2011 free tax software However, you cannot deduct contributions earmarked for relief of a particular individual or family. 2011 free tax software Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. 2011 free tax software Expenses you paid for another person who provided services to a qualified organization. 2011 free tax software Example. 2011 free tax software Your son does missionary work. 2011 free tax software You pay his expenses. 2011 free tax software You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. 2011 free tax software Payments to a hospital that are for a specific patient's care or for services for a specific patient. 2011 free tax software You cannot deduct these payments even if the hospital is operated by a city, a state, or other qualified organization. 2011 free tax software Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. 2011 free tax software Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. 2011 free tax software Chambers of commerce and other business leagues or organizations (but see chapter 28). 2011 free tax software Civic leagues and associations. 2011 free tax software Communist organizations. 2011 free tax software Country clubs and other social clubs. 2011 free tax software Most foreign organizations (other than certain Canadian, Israeli, or Mexican charitable organizations). 2011 free tax software For details, see Publication 526. 2011 free tax software Homeowners' associations. 2011 free tax software Labor unions (but see chapter 28). 2011 free tax software Political organizations and candidates. 2011 free tax software Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. 2011 free tax software See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. 2011 free tax software These contributions include the following. 2011 free tax software Contributions for lobbying. 2011 free tax software This includes amounts that you earmark for use in, or in connection with, influencing specific legislation. 2011 free tax software Contributions to a retirement home for room, board, maintenance, or admittance. 2011 free tax software Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. 2011 free tax software Costs of raffles, bingo, lottery, etc. 2011 free tax software You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. 2011 free tax software For information on how to report gambling winnings and losses, see Gambling winnings in chapter 12 and Gambling Losses Up to the Amount of Gambling Winnings in chapter 28. 2011 free tax software Dues to fraternal orders and similar groups. 2011 free tax software However, see Membership fees or dues , earlier, under Contributions You Can Deduct. 2011 free tax software Tuition, or amounts you pay instead of tuition. 2011 free tax software You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. 2011 free tax software You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. 2011 free tax software ” Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. 2011 free tax software Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. 2011 free tax software The cost of meals you eat while you perform services for a qualified organization unless it is necessary for you to be away from home overnight while performing the services. 2011 free tax software Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final (but see Adoption Credit in chapter 37, and the instructions for Form 8839, Qualified Adoption Expenses). 2011 free tax software You also may be able to claim an exemption for the child. 2011 free tax software See Adopted child in chapter 3. 2011 free tax software Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property (but see chapter 28). 2011 free tax software Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. 2011 free tax software However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. 2011 free tax software See Giving Property That Has Increased in Value , later. 2011 free tax software For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. 2011 free tax software Clothing and household items. 2011 free tax software   You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. 2011 free tax software Exception. 2011 free tax software   You can take a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. 2011 free tax software Household items. 2011 free tax software   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. 2011 free tax software   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. 2011 free tax software Cars, boats, and airplanes. 2011 free tax software    The following rules apply to any donation of a qualified vehicle. 2011 free tax software A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. 2011 free tax software Deduction more than $500. 2011 free tax software   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. 2011 free tax software If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 free tax software Form 1098-C. 2011 free tax software   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. 2011 free tax software The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. 2011 free tax software   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453 and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. 2011 free tax software   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. 2011 free tax software    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. 2011 free tax software But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. 2011 free tax software Filing deadline approaching and still no Form 1098-C. 2011 free tax software   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. 2011 free tax software Request an automatic 6-month extension of time to file your return. 2011 free tax software You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 2011 free tax software S. 2011 free tax software Individual Income Tax Return. 2011 free tax software  For more information, see Automatic Extension in chapter 1. 2011 free tax software File the return on time without claiming the deduction for the qualified vehicle. 2011 free tax software After receiving the Form 1098-C, file an amended return, Form 1040X, claiming the deduction. 2011 free tax software Attach Copy B of Form 1098-C (or other statement) to the amended return. 2011 free tax software For more information about amended returns, see Amended Returns and Claims for Refund in chapter 1. 2011 free tax software Exceptions. 2011 free tax software   There are two exceptions to the rules just described for deductions of more than $500. 2011 free tax software Exception 1—vehicle used or improved by organization. 2011 free tax software   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. 2011 free tax software But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 free tax software The Form 1098-C (or other statement) will show whether this exception applies. 2011 free tax software Exception 2—vehicle given or sold to needy individual. 2011 free tax software   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. 2011 free tax software But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 free tax software The Form 1098-C (or other statement) will show whether this exception applies. 2011 free tax software   This exception does not apply if the organization sells the vehicle at auction. 2011 free tax software In that case, you cannot deduct the vehicle's fair market value. 2011 free tax software Example. 2011 free tax software Anita donates a used car to a qualified organization. 2011 free tax software She bought it 3 years ago for $9,000. 2011 free tax software A used car guide shows the fair market value for this type of car is $6,000. 2011 free tax software However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. 2011 free tax software Neither exception 1 nor exception 2 applies. 2011 free tax software If Anita itemizes her deductions, she can deduct $2,900 for her donation. 2011 free tax software She must attach Form 1098-C and Form 8283 to her return. 2011 free tax software Deduction $500 or less. 2011 free tax software   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. 2011 free tax software But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 free tax software   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. 2011 free tax software The statement must contain the information and meet the tests for an acknowledgment described under Deductions of At Least $250 But Not More Than $500 under Records To Keep, later. 2011 free tax software Partial interest in property. 2011 free tax software   Generally, you cannot deduct a charitable contribution of less than your entire interest in property. 2011 free tax software Right to use property. 2011 free tax software   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. 2011 free tax software For exceptions and more information, see Partial Interest in Property Not in Trust in Publication 561. 2011 free tax software Future interests in tangible personal property. 2011 free tax software   You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. 2011 free tax software Tangible personal property. 2011 free tax software   This is any property, other than land or buildings, that can be seen or touched. 2011 free tax software It includes furniture, books, jewelry, paintings, and cars. 2011 free tax software Future interest. 2011 free tax software   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. 2011 free tax software Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. 2011 free tax software Publication 561 contains a more complete discussion. 2011 free tax software Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. 2011 free tax software Used clothing and household items. 2011 free tax software   The fair market value of used clothing and household goods is usually far less than what you paid for them when they were new. 2011 free tax software   For used clothing, you should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. 2011 free tax software See Household Goods in Publication 561 for information on the valuation of household goods, such as furniture, appliances, and linens. 2011 free tax software Example. 2011 free tax software Dawn Greene donated a coat to a thrift store operated by her church. 2011 free tax software She paid $300 for the coat 3 years ago. 2011 free tax software Similar coats in the thrift store sell for $50. 2011 free tax software The fair market value of the coat is $50. 2011 free tax software Dawn's donation is limited to $50. 2011 free tax software Cars, boats, and airplanes. 2011 free tax software   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. 2011 free tax software Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. 2011 free tax software The guides may be published monthly or seasonally and for different regions of the country. 2011 free tax software These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 2011 free tax software The prices are not “official” and these publications are not considered an appraisal of any specific donated property. 2011 free tax software But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 2011 free tax software   You can also find used car pricing information on the Internet. 2011 free tax software Example. 2011 free tax software You donate a used car in poor condition to a local high school for use by students studying car repair. 2011 free tax software A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 2011 free tax software However, the guide shows the price for a private party sale of the car is only $750. 2011 free tax software The fair market value of the car is considered to be $750. 2011 free tax software Large quantities. 2011 free tax software   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. 2011 free tax software Giving Property That Has Decreased in Value If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value. 2011 free tax software You cannot claim a deduction for the difference between the property's basis and its fair market value. 2011 free tax software Giving Property That Has Increased in Value If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. 2011 free tax software Your basis in property is generally what you paid for it. 2011 free tax software See chapter 13 if you need more information about basis. 2011 free tax software Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. 2011 free tax software Ordinary income property. 2011 free tax software   Property is ordinary income property if you would have recognized ordinary income or short-term capital gain had you sold it at fair market value on the date it was contributed. 2011 free tax software Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined in chapter 14) held 1 year or less. 2011 free tax software Amount of deduction. 2011 free tax software   The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. 2011 free tax software Generally, this rule limits the deduction to your basis in the property. 2011 free tax software Example. 2011 free tax software You donate stock you held for 5 months to your church. 2011 free tax software The fair market value of the stock on the day you donate it is $1,000, but you paid only $800 (your basis). 2011 free tax software Because the $200 of appreciation would be short-term capital gain if you sold the stock, your deduction is limited to $800 (fair market value minus the appreciation). 2011 free tax software Capital gain property. 2011 free tax software   Property is capital gain property if you would have recognized long-term capital gain had you sold it at fair market value on the date of the contribution. 2011 free tax software It includes capital assets held more than 1 year, as well as certain real property and depreciable property used in your trade or business and, generally, held more than 1 year. 2011 free tax software Amount of deduction — general rule. 2011 free tax software   When figuring your deduction for a contribution of capital gain property, you generally can use the fair market value of the property. 2011 free tax software Exceptions. 2011 free tax software   In certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value. 2011 free tax software Generally, this means reducing the fair market value to the property's cost or other basis. 2011 free tax software Bargain sales. 2011 free tax software   A bargain sale of property is a sale or exchange for less than the property's fair market value. 2011 free tax software A bargain sale to a qualified organization is partly a charitable contribution and partly a sale or exchange. 2011 free tax software A bargain sale may result in a taxable gain. 2011 free tax software More information. 2011 free tax software   For more information on donating appreciated property, see Giving Property That Has Increased in Value in Publication 526. 2011 free tax software When To Deduct You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as explained later under Carryovers ). 2011 free tax software This applies whether you use the cash or an accrual method of accounting. 2011 free tax software Time of making contribution. 2011 free tax software   Usually, you make a contribution at the time of its unconditional delivery. 2011 free tax software Checks. 2011 free tax software   A check you mail to a charity is considered delivered on the date you mail it. 2011 free tax software Text message. 2011 free tax software   Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. 2011 free tax software Credit card. 2011 free tax software    Contributions charged on your credit card are deductible in the year you make the charge. 2011 free tax software Pay-by-phone account. 2011 free tax software    Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount. 2011 free tax software Stock certificate. 2011 free tax software   A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity's agent. 2011 free tax software However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the charity, your contribution is not delivered until the date the stock is transferred on the books of the corporation. 2011 free tax software Promissory note. 2011 free tax software   If you issue and deliver a promissory note to a charity as a contribution, it is not a contribution until you make the note payments. 2011 free tax software Option. 2011 free tax software    If you grant a charity an option to buy real property at a bargain price, it is not a contribution until the organization exercises the option. 2011 free tax software Borrowed funds. 2011 free tax software   If you contribute borrowed funds, you can deduct the contribution in the year you deliver the funds to the charity, regardless of when you repay the loan. 2011 free tax software Limits on Deductions The amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income (AGI). 2011 free tax software Your deduction may be further limited to 30% or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. 2011 free tax software If your total contributions for the year are 20% or less of your AGI, these limits do not apply to you. 2011 free tax software The limits are discussed in detail under Limits on Deductions in Publication 526. 2011 free tax software A higher limit applies to certain qualified conservation contributions. 2011 free tax software See Publication 526 for details. 2011 free tax software Carryovers You can carry over any contributions you cannot deduct in the current year because they exceed your adjusted-gross-income limits. 2011 free tax software You can deduct the excess in each of the next 5 years until it is used up, but not beyond that time. 2011 free tax software For more information, see Carryovers in Publication 526. 2011 free tax software Records To Keep You must keep records to prove the amount of the contributions you make during the year. 2011 free tax software The kind of records you must keep depends on the amount of your contributions and whether they are: Cash contributions, Noncash contributions, or Out-of-pocket expenses when donating your services. 2011 free tax software Note. 2011 free tax software An organization generally must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods or services. 2011 free tax software (See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. 2011 free tax software ) Keep the statement for your records. 2011 free tax software It may satisfy all or part of the recordkeeping requirements explained in the following discussions. 2011 free tax software Cash Contributions Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. 2011 free tax software You cannot deduct a cash contribution, regardless of the amount, unless you keep one of the following. 2011 free tax software A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. 2011 free tax software Bank records may include: A canceled check, A bank or credit union statement, or A credit card statement. 2011 free tax software A receipt (or a letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution. 2011 free tax software The payroll deduction records described next. 2011 free tax software Payroll deductions. 2011 free tax software   If you make a contribution by payroll deduction, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the date and amount of the contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization. 2011 free tax software If your employer withheld $250 or more from a single paycheck, see Contributions of $250 or More , next. 2011 free tax software Contributions of $250 or More You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records. 2011 free tax software If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions. 2011 free tax software Amount of contribution. 2011 free tax software   In figuring whether your contribution is $250 or more, do not combine separate contributions. 2011 free tax software For example, if you gave your church $25 each week, your weekly payments do not have to be combined. 2011 free tax software Each payment is a separate contribution. 2011 free tax software   If contributions are made by payroll deduction, the deduction from each paycheck is treated as a separate contribution. 2011 free tax software   If you made a payment that is partly for goods and services, as described earlier under Contributions From Which You Benefit , your contribution is the amount of the payment that is more than the value of the goods and services. 2011 free tax software Acknowledgment. 2011 free tax software   The acknowledgment must meet these tests. 2011 free tax software It must be written. 2011 free tax software It must include: The amount of cash you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), A description and good faith estimate of the value of any goods or services described in (b) (other than intangible religious benefits), and A statement that the only benefit you received was an intangible religious benefit, if that was the case. 2011 free tax software The acknowledgment does not need to describe or estimate the value of an intangible religious benefit. 2011 free tax software An intangible religious benefit is a benefit that generally is not sold in commercial transactions outside a donative (gift) context. 2011 free tax software An example is admission to a religious ceremony. 2011 free tax software You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. 2011 free tax software   If the acknowledgment does not show the date of the contribution, you must also have a bank record or receipt, as described earlier, that does show the date of the contribution. 2011 free tax software If the acknowledgment shows the date of the contribution and meets the other tests just described, you do not need any other records. 2011 free tax software Payroll deductions. 2011 free tax software   If you make a contribution by payroll deduction and your employer withholds $250 or more from a single paycheck, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the amount withheld as a contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization and states the organization does not provide goods or services in return for any contribution made to it by payroll deduction. 2011 free tax software A single pledge card may be kept for all contributions made by payroll deduction regardless of amount as long as it contains all the required information. 2011 free tax software   If the pay stub, Form W-2, pledge card, or other document does not show the date of the contribution, you must have another document that does show the date of the contribution. 2011 free tax software If the pay stub, Form W-2, pledge card, or other document shows the date of the contribution, you do not need any other records except those just described in (1) and (2). 2011 free tax software Noncash Contributions For a contribution not made in cash, the records you must keep depend on whether your deduction for the contribution is: Less than $250, At least $250 but not more than $500, Over $500 but not more than $5,000, or Over $5,000. 2011 free tax software Amount of deduction. 2011 free tax software   In figuring whether your deduction is $500 or more, combine your claimed deductions for all similar items of property donated to any charitable organization during the year. 2011 free tax software   If you received goods or services in return, as described earlier in Contributions From Which You Benefit , reduce your contribution by the value of those goods or services. 2011 free tax software If you figure your deduction by reducing the fair market value of the donated property by its appreciation, as described earlier in Giving Property That Has Increased in Value , your contribution is the reduced amount. 2011 free tax software Deductions of Less Than $250 If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing: The name of the charitable organization, The date and location of the charitable contribution, and A reasonably detailed description of the property. 2011 free tax software A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt. 2011 free tax software You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site). 2011 free tax software Additional records. 2011 free tax software   You must also keep reliable written records for each item of contributed property. 2011 free tax software Your written records must include the following information. 2011 free tax software The name and address of the organization to which you contributed. 2011 free tax software The date and location of the contribution. 2011 free tax software A description of the property in detail reasonable under the circumstances. 2011 free tax software For a security, keep the name of the issuer, the type of security, and whether it is regularly traded on a stock exchange or in an over-the-counter market. 2011 free tax software The fair market value of the property at the time of the contribution and how you figured the fair market value. 2011 free tax software If it was determined by appraisal, keep a signed copy of the appraisal. 2011 free tax software The cost or other basis of the property, if you must reduce its fair market value by appreciation. 2011 free tax software Your records should also include the amount of the reduction and how you figured it. 2011 free tax software The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. 2011 free tax software Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. 2011 free tax software They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed it. 2011 free tax software The terms of any conditions attached to the contribution of property. 2011 free tax software Deductions of At Least $250 But Not More Than $500 If you claim a deduction of at least $250 but not more than $500 for a noncash charitable contribution, you must get and keep an acknowledgment of your contribution from the qualified organization. 2011 free tax software If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that shows your total contributions. 2011 free tax software The acknowledgment must contain the information in items (1) through (3) under Deductions of Less Than $250 , earlier, and your written records must include the information listed in that discussion under Additional records . 2011 free tax software The acknowledgment must also meet these tests. 2011 free tax software It must be written. 2011 free tax software It must include: A description (but not necessarily the value) of any property you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), and A description and good faith estimate of the value of any goods or services described in (b). 2011 free tax software If the only benefit you received was an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in a commercial transaction outside the donative context, the acknowledgment must say so and does not need to describe or estimate the value of the benefit. 2011 free tax software You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. 2011 free tax software Deductions Over $500 You are required to give additional information if you claim a deduction over $500 for noncash charitable contributions. 2011 free tax software See Records To Keep in Publication 526 for more information. 2011 free tax software Out-of-Pocket Expenses If you give services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following two rules apply. 2011 free tax software You must have adequate records to prove the amount of the expenses. 2011 free tax software If any of your unreimbursed out-of-pocket expenses, considered separately, are $250 or more (for example, you pay $250 or more for an airline ticket to attend a convention of a qualified organization as a chosen representative), you must get an acknowledgment from the qualified organization that contains: A description of the services you provided, A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred, A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and A statement that the only benefit you received was an intangible religious benefit, if that was the case. 2011 free tax software The acknowledgment does not need to describe or estimate the value of an intangible religious benefit (defined earlier under Acknowledgment ). 2011 free tax software You must get the acknowledgment on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. 2011 free tax software Car expenses. 2011 free tax software   If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. 2011 free tax software Whether your records are considered reliable depends on all the facts and circumstances. 2011 free tax software Generally, they may be considered reliable if you made them regularly and at or near the time you had the expenses. 2011 free tax software   For example, your records might show the name of the organization you were serving and the dates you used your car for a charitable purpose. 2011 free tax software If you use the standard mileage rate of 14 cents a mile, your records must show the miles you drove your car for the charitable purpose. 2011 free tax software If you deduct your actual expenses, your records must show the costs of operating the car that are directly related to a charitable purpose. 2011 free tax software   See Car expenses under Out-of-Pocket Expenses in Giving Services, earlier, for the expenses you can deduct. 2011 free tax software How To Report Report your charitable contributions on Schedule A (Form 1040). 2011 free tax software If your total deduction for all noncash contributions for the year is over $500, you must also file Form 8283. 2011 free tax software See How To Report in Publication 526 for more information. 2011 free tax software Prev  Up  Next   Home   More Online Publications
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The 2011 Free Tax Software

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