File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

E File 1040x

Irs Easy FormHow To Fill Out Form 1040ezH R Block Free FileHow To File Taxes From 20102008 Turbotax2013 Form 1040xH&r Free FileIrs Form 1040 20102012 Free TaxesFile Tax ReturnHow To File A 1040ezHow To File A 1040 EzAmend My 2012 Tax ReturnWww Taxes Hrblock ComWww Irs Gov FormspubsUnemployment And TaxesE File TaxesH&rblock ComFree Taxes Online2012 State Tax FormTurbotax 1040ez FreeHr Block Free Tax FilingEfile 2012 TaxesInstructionsTax Form 1040xIrs 2012 Tax Forms 1040ezH R Block Home 2012How To Ammend Tax ReturnFile 2010 TaxIrs File 1040ezFederal Tax Forms 2011Free Tax Filing 2013 TurbotaxHow To File Amended ReturnTaxact Returning UserAmended Federal Tax FormFree State Income Tax FilingAmend A Tax Return OnlineAmmend ReturnFile Tax Return For 20121040ez Form 2013

E File 1040x

E file 1040x 9. E file 1040x   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. E file 1040x Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. E file 1040x Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. E file 1040x Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. E file 1040x It also covers the following topics. E file 1040x Personal use of dwelling unit (including vacation home). E file 1040x Depreciation. E file 1040x Limits on rental losses. E file 1040x How to report your rental income and expenses. E file 1040x If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. E file 1040x If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. E file 1040x If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. E file 1040x See Publication 527, Residential Rental Property, for more information. E file 1040x Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. E file 1040x Rental income is any payment you receive for the use or occupation of property. E file 1040x In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. E file 1040x When to report. E file 1040x   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. E file 1040x You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. E file 1040x You constructively receive income when it is made available to you, for example, by being credited to your bank account. E file 1040x   For more information about when you constructively receive income, see Accounting Methods in chapter 1. E file 1040x Advance rent. E file 1040x   Advance rent is any amount you receive before the period that it covers. E file 1040x Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. E file 1040x Example. E file 1040x You sign a 10-year lease to rent your property. E file 1040x In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. E file 1040x You must include $10,000 in your income in the first year. E file 1040x Canceling a lease. E file 1040x   If your tenant pays you to cancel a lease, the amount you receive is rent. E file 1040x Include the payment in your income in the year you receive it regardless of your method of accounting. E file 1040x Expenses paid by tenant. E file 1040x   If your tenant pays any of your expenses, the payments are rental income. E file 1040x Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. E file 1040x See Rental Expenses , later, for more information. E file 1040x Property or services. E file 1040x   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. E file 1040x   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. E file 1040x Security deposits. E file 1040x   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. E file 1040x But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. E file 1040x   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. E file 1040x Include it in your income when you receive it. E file 1040x Part interest. E file 1040x   If you own a part interest in rental property, you must report your part of the rental income from the property. E file 1040x Rental of property also used as your home. E file 1040x   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. E file 1040x However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. E file 1040x See Personal Use of Dwelling Unit (Including Vacation Home) , later. E file 1040x Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. E file 1040x It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. E file 1040x Depreciation , which you can also deduct from your rental income, is discussed later. E file 1040x Personal use of rental property. E file 1040x   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. E file 1040x Also, your rental expense deductions may be limited. E file 1040x See Personal Use of Dwelling Unit (Including Vacation Home) , later. E file 1040x Part interest. E file 1040x   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. E file 1040x When to deduct. E file 1040x   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. E file 1040x Depreciation. E file 1040x   You can begin to depreciate rental property when it is ready and available for rent. E file 1040x See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. E file 1040x Pre-rental expenses. E file 1040x   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. E file 1040x Uncollected rent. E file 1040x   If you are a cash-basis taxpayer, do not deduct uncollected rent. E file 1040x Because you have not included it in your income, it is not deductible. E file 1040x Vacant rental property. E file 1040x   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. E file 1040x However, you cannot deduct any loss of rental income for the period the property is vacant. E file 1040x Vacant while listed for sale. E file 1040x   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. E file 1040x If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. E file 1040x Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. E file 1040x Improvements. E file 1040x   You must capitalize any expense you pay to improve your rental property. E file 1040x An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. E file 1040x Betterments. E file 1040x   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. E file 1040x Restoration. E file 1040x   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. E file 1040x Adaptation. E file 1040x   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. E file 1040x Separate the costs of repairs and improvements, and keep accurate records. E file 1040x You will need to know the cost of improvements when you sell or depreciate your property. E file 1040x The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. E file 1040x Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. E file 1040x Insurance premiums paid in advance. E file 1040x   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. E file 1040x You cannot deduct the total premium in the year you pay it. E file 1040x Legal and other professional fees. E file 1040x   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. E file 1040x For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. E file 1040x You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. E file 1040x Local benefit taxes. E file 1040x   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. E file 1040x These charges are nondepreciable capital expenditures, and must be added to the basis of your property. E file 1040x However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. E file 1040x Local transportation expenses. E file 1040x    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. E file 1040x However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. E file 1040x See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. E file 1040x   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. E file 1040x For 2013, the standard mileage rate for business use is 56. E file 1040x 5 cents per mile. E file 1040x For more information, see chapter 26. E file 1040x    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. E file 1040x In addition, you must complete Form 4562, Part V, and attach it to your tax return. E file 1040x Rental of equipment. E file 1040x   You can deduct the rent you pay for equipment that you use for rental purposes. E file 1040x However, in some cases, lease contracts are actually purchase contracts. E file 1040x If so, you cannot deduct these payments. E file 1040x You can recover the cost of purchased equipment through depreciation. E file 1040x Rental of property. E file 1040x   You can deduct the rent you pay for property that you use for rental purposes. E file 1040x If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. E file 1040x Travel expenses. E file 1040x   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. E file 1040x You must properly allocate your expenses between rental and nonrental activities. E file 1040x You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. E file 1040x You recover the cost of improvements by taking depreciation. E file 1040x For information on travel expenses, see chapter 26. E file 1040x    To deduct travel expenses, you must keep records that follow the rules in chapter 26. E file 1040x   See Rental Expenses in Publication 527 for more information. E file 1040x Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. E file 1040x You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. E file 1040x You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. E file 1040x However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). E file 1040x Example. E file 1040x Your tax year is the calendar year. E file 1040x You moved from your home in May and started renting it out on June 1. E file 1040x You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. E file 1040x Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. E file 1040x Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. E file 1040x You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). E file 1040x You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of your house. E file 1040x There is no change in the types of expenses deductible for the personal-use part of your property. E file 1040x Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). E file 1040x You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. E file 1040x You do not have to divide the expenses that belong only to the rental part of your property. E file 1040x For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. E file 1040x If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. E file 1040x You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. E file 1040x How to divide expenses. E file 1040x   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between the rental use and the personal use. E file 1040x You can use any reasonable method for dividing the expense. E file 1040x It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. E file 1040x The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. E file 1040x Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. E file 1040x You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. E file 1040x For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. E file 1040x Where to report. E file 1040x   Report your not-for-profit rental income on Form 1040, line 21. E file 1040x For example, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. E file 1040x   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A, line 23. E file 1040x You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. E file 1040x Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. E file 1040x In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. E file 1040x Only your rental expenses may be deducted on Schedule E (Form 1040). E file 1040x Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). E file 1040x You must also determine if the dwelling unit is considered a home. E file 1040x The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. E file 1040x Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. E file 1040x There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. E file 1040x Dwelling unit. E file 1040x   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. E file 1040x It also includes all structures or other property belonging to the dwelling unit. E file 1040x A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. E file 1040x   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. E file 1040x Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. E file 1040x Example. E file 1040x   You rent a room in your home that is always available for short-term occupancy by paying customers. E file 1040x You do not use the room yourself, and you allow only paying customers to use the room. E file 1040x The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. E file 1040x Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. E file 1040x When dividing your expenses, follow these rules. E file 1040x Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. E file 1040x This rule does not apply when determining whether you used the unit as a home. E file 1040x Any day that the unit is available for rent but not actually rented is not a day of rental use. E file 1040x Example. E file 1040x Your beach cottage was available for rent from June 1 through August 31 (92 days). E file 1040x During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. E file 1040x The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. E file 1040x Your family also used the cottage during the last 2 weeks of May (14 days). E file 1040x The cottage was not used at all before May 17 or after August 31. E file 1040x You figure the part of the cottage expenses to treat as rental expenses as follows. E file 1040x The cottage was used for rental a total of 85 days (92 − 7). E file 1040x The days it was available for rent but not rented (7 days) are not days of rental use. E file 1040x The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. E file 1040x You used the cottage for personal purposes for 14 days (the last 2 weeks in May). E file 1040x The total use of the cottage was 99 days (14 days personal use + 85 days rental use). E file 1040x Your rental expenses are 85/99 (86%) of the cottage expenses. E file 1040x Note. E file 1040x When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. E file 1040x Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. E file 1040x Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. E file 1040x If you have a net loss, you may not be able to deduct all of the rental expenses. E file 1040x See Dwelling Unit Used as a Home, next. E file 1040x Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. E file 1040x You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. E file 1040x See What is a day of personal use , later. E file 1040x Fair rental price. E file 1040x   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. E file 1040x The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. E file 1040x   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. E file 1040x Instead, count it as a day of personal use in applying both (1) and (2) above. E file 1040x What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. E file 1040x You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). E file 1040x However, see Days used as a main home before or after renting , later. E file 1040x A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. E file 1040x Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. E file 1040x ), and lineal descendants (children, grandchildren, etc. E file 1040x ). E file 1040x Anyone under an arrangement that lets you use some other dwelling unit. E file 1040x Anyone at less than a fair rental price. E file 1040x Main home. E file 1040x   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. E file 1040x Shared equity financing agreement. E file 1040x   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. E file 1040x Donation of use of property. E file 1040x   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. E file 1040x Examples. E file 1040x   The following examples show how to determine days of personal use. E file 1040x Example 1. E file 1040x You and your neighbor are co-owners of a condominium at the beach. E file 1040x Last year, you rented the unit to vacationers whenever possible. E file 1040x The unit was not used as a main home by anyone. E file 1040x Your neighbor used the unit for 2 weeks last year; you did not use it at all. E file 1040x Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. E file 1040x Example 2. E file 1040x You and your neighbors are co-owners of a house under a shared equity financing agreement. E file 1040x Your neighbors live in the house and pay you a fair rental price. E file 1040x Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. E file 1040x This is because your neighbors rent the house as their main home under a shared equity financing agreement. E file 1040x Example 3. E file 1040x You own a rental property that you rent to your son. E file 1040x Your son does not own any interest in this property. E file 1040x He uses it as his main home and pays you a fair rental price. E file 1040x Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. E file 1040x Example 4. E file 1040x You rent your beach house to Joshua. E file 1040x Joshua rents his cabin in the mountains to you. E file 1040x You each pay a fair rental price. E file 1040x You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. E file 1040x Days used for repairs and maintenance. E file 1040x   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. E file 1040x Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. E file 1040x Days used as a main home before or after renting. E file 1040x   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. E file 1040x Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. E file 1040x You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. E file 1040x However, this special rule does not apply when dividing expenses between rental and personal use. E file 1040x Examples. E file 1040x   The following examples show how to determine whether you used your rental property as a home. E file 1040x Example 1. E file 1040x You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. E file 1040x You rented the basement apartment at a fair rental price to college students during the regular school year. E file 1040x You rented to them on a 9-month lease (273 days). E file 1040x You figured 10% of the total days rented to others at a fair rental price is 27 days. E file 1040x During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. E file 1040x Your basement apartment was used as a home because you used it for personal purposes for 30 days. E file 1040x Rent-free use by your brothers is considered personal use. E file 1040x Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). E file 1040x Example 2. E file 1040x You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). E file 1040x Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. E file 1040x You figured 10% of the total days rented to others at a fair rental price is 3 days. E file 1040x The room was used as a home because you used it for personal purposes for 21 days. E file 1040x That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). E file 1040x Example 3. E file 1040x You own a condominium apartment in a resort area. E file 1040x You rented it at a fair rental price for a total of 170 days during the year. E file 1040x For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. E file 1040x Your family actually used the apartment for 10 of those days. E file 1040x Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. E file 1040x You figured 10% of the total days rented to others at a fair rental price is 16 days. E file 1040x Your family also used the apartment for 7 other days during the year. E file 1040x You used the apartment as a home because you used it for personal purposes for 17 days. E file 1040x That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). E file 1040x Minimal rental use. E file 1040x   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. E file 1040x See Used as a home but rented less than 15 days , later, for more information. E file 1040x Limit on deductions. E file 1040x   Renting a dwelling unit that is considered a home is not a passive activity. E file 1040x Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. E file 1040x The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. E file 1040x Any expenses carried forward to the next year will be subject to any limits that apply for that year. E file 1040x This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. E file 1040x   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. E file 1040x Reporting Income and Deductions Property not used for personal purposes. E file 1040x   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. E file 1040x Property used for personal purposes. E file 1040x   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. E file 1040x Not used as a home. E file 1040x   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. E file 1040x Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . E file 1040x The expenses for personal use are not deductible as rental expenses. E file 1040x   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. E file 1040x Used as a home but rented less than 15 days. E file 1040x   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). E file 1040x You are not required to report the rental income and rental expenses from this activity. E file 1040x The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). E file 1040x See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. E file 1040x Used as a home and rented 15 days or more. E file 1040x   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. E file 1040x Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . E file 1040x The expenses for personal use are not deductible as rental expenses. E file 1040x   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. E file 1040x You do not need to use Worksheet 9-1. E file 1040x   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. E file 1040x To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. E file 1040x Depreciation You recover the cost of income-producing property through yearly tax deductions. E file 1040x You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. E file 1040x Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. E file 1040x You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. E file 1040x You can deduct depreciation only on the part of your property used for rental purposes. E file 1040x Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. E file 1040x You may have to use Form 4562 to figure and report your depreciation. E file 1040x See How To Report Rental Income and Expenses , later. E file 1040x Alternative minimum tax (AMT). E file 1040x    If you use accelerated depreciation, you may be subject to the AMT. E file 1040x Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). E file 1040x Claiming the correct amount of depreciation. E file 1040x   You should claim the correct amount of depreciation each tax year. E file 1040x If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. E file 1040x   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. E file 1040x S Individual Income Tax Return. E file 1040x If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. E file 1040x See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. E file 1040x Changing your accounting method to deduct unclaimed depreciation. E file 1040x   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. E file 1040x In some instances, that consent is automatic. E file 1040x For more information, see chapter 1 of Publication 946. E file 1040x Land. E file 1040x   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. E file 1040x The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. E file 1040x More information. E file 1040x   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. E file 1040x Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. E file 1040x You must consider these rules in the order shown below. E file 1040x At-risk rules. E file 1040x These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. E file 1040x This applies only if the real property was placed in service after 1986. E file 1040x Passive activity limits. E file 1040x Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. E file 1040x However, there are exceptions. E file 1040x At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. E file 1040x Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. E file 1040x In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. E file 1040x You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. E file 1040x See Publication 925 for more information. E file 1040x Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. E file 1040x For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. E file 1040x Limits on passive activity deductions and credits. E file 1040x    Deductions or losses from passive activities are limited. E file 1040x You generally cannot offset income, other than passive income, with losses from passive activities. E file 1040x Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. E file 1040x Any excess loss or credit is carried forward to the next tax year. E file 1040x   For a detailed discussion of these rules, see Publication 925. E file 1040x    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. E file 1040x Real estate professionals. E file 1040x   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. E file 1040x For a detailed discussion of the requirements, see Publication 527. E file 1040x For a detailed discussion of material participation, see Publication 925. E file 1040x Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. E file 1040x Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. E file 1040x Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. E file 1040x This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. E file 1040x Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. E file 1040x Active participation. E file 1040x   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. E file 1040x Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. E file 1040x Maximum special allowance. E file 1040x   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. E file 1040x   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. E file 1040x If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. E file 1040x   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. E file 1040x More information. E file 1040x   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. E file 1040x How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). E file 1040x However, do not use that schedule to report a not-for-profit activity. E file 1040x See Not Rented for Profit, earlier. E file 1040x Providing substantial services. E file 1040x   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). E file 1040x Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. E file 1040x For information, see Publication 334, Tax Guide for Small Business. E file 1040x You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. E file 1040x   Use Form 1065, U. E file 1040x S. E file 1040x Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). E file 1040x Qualified joint venture. E file 1040x   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. E file 1040x This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. E file 1040x For more information, see Publication 527. E file 1040x Form 1098, Mortgage Interest Statement. E file 1040x    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. E file 1040x If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. E file 1040x Attach a statement to your return showing the name and address of the other person. E file 1040x In the left margin of Schedule E, next to line 13, enter “See attached. E file 1040x ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. E file 1040x , you normally report your rental income and expenses on Schedule E, Part I. E file 1040x List your total income, expenses, and depreciation for each rental property. E file 1040x Be sure to enter the number of fair rental and personal use days on line 2. E file 1040x If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. E file 1040x Complete lines 1 and 2 for each property. E file 1040x However, fill in lines 23a through 26 on only one Schedule E. E file 1040x On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. E file 1040x To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. E file 1040x If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. E file 1040x Form 6198, At-Risk Limitations. E file 1040x See At-Risk Rules , earlier. E file 1040x Also see Publication 925. E file 1040x Form 8582, Passive Activity Loss Limitations. E file 1040x See Passive Activity Limits , earlier. E file 1040x Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. E file 1040x If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. E file 1040x Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). E file 1040x Worksheet 9-1. E file 1040x Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. E file 1040x Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . E file 1040x ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. E file 1040x Rental Use Percentage A. E file 1040x Total days available for rent at fair rental price A. E file 1040x       B. E file 1040x Total days available for rent (line A) but not rented B. E file 1040x       C. E file 1040x Total days of rental use. E file 1040x Subtract line B from line A C. E file 1040x       D. E file 1040x Total days of personal use (including days rented at less than fair rental price) D. E file 1040x       E. E file 1040x Total days of rental and personal use. E file 1040x Add lines C and D E. E file 1040x       F. E file 1040x Percentage of expenses allowed for rental. E file 1040x Divide line C by line E     F. E file 1040x   PART II. E file 1040x Allowable Rental Expenses 1. E file 1040x Enter rents received 1. E file 1040x   2a. E file 1040x Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. E file 1040x       b. E file 1040x Enter the rental portion of real estate taxes b. E file 1040x       c. E file 1040x Enter the rental portion of deductible casualty and theft losses (see instructions) c. E file 1040x       d. E file 1040x Enter direct rental expenses (see instructions) d. E file 1040x       e. E file 1040x Fully deductible rental expenses. E file 1040x Add lines 2a–2d. E file 1040x Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. E file 1040x   3. E file 1040x Subtract line 2e from line 1. E file 1040x If zero or less, enter -0- 3. E file 1040x   4a. E file 1040x Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. E file 1040x       b. E file 1040x Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. E file 1040x       c. E file 1040x Carryover of operating expenses from 2012 worksheet c. E file 1040x       d. E file 1040x Add lines 4a–4c d. E file 1040x       e. E file 1040x Allowable expenses. E file 1040x Enter the smaller of line 3 or line 4d (see instructions) 4e. E file 1040x   5. E file 1040x Subtract line 4e from line 3. E file 1040x If zero or less, enter -0- 5. E file 1040x   6a. E file 1040x Enter the rental portion of excess casualty and theft losses (see instructions) 6a. E file 1040x       b. E file 1040x Enter the rental portion of depreciation of the dwelling unit b. E file 1040x       c. E file 1040x Carryover of excess casualty losses and depreciation from 2012 worksheet c. E file 1040x       d. E file 1040x Add lines 6a–6c d. E file 1040x       e. E file 1040x Allowable excess casualty and theft losses and depreciation. E file 1040x Enter the smaller of  line 5 or line 6d (see instructions) 6e. E file 1040x   PART III. E file 1040x Carryover of Unallowed Expenses to Next Year 7a. E file 1040x Operating expenses to be carried over to next year. E file 1040x Subtract line 4e from line 4d 7a. E file 1040x   b. E file 1040x Excess casualty and theft losses and depreciation to be carried over to next year. E file 1040x  Subtract line 6e from line 6d b. E file 1040x   Worksheet 9-1 Instructions. E file 1040x Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. E file 1040x Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. E file 1040x Line 2a. E file 1040x Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. E file 1040x Do not include interest on a loan that did not benefit the dwelling unit. E file 1040x For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. E file 1040x Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. E file 1040x Include the rental portion of this interest in the total you enter on line 2a of the worksheet. E file 1040x   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. E file 1040x See the Schedule A instructions. E file 1040x However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. E file 1040x See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. E file 1040x Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. E file 1040x   Note. E file 1040x Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. E file 1040x Instead, figure the personal portion on a separate Schedule A. E file 1040x If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. E file 1040x           Line 2c. E file 1040x Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. E file 1040x To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. E file 1040x If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. E file 1040x On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. E file 1040x Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. E file 1040x   Note. E file 1040x Do not file this Form 4684 or use it to figure your personal losses on Schedule A. E file 1040x Instead, figure the personal portion on a separate Form 4684. E file 1040x           Line 2d. E file 1040x Enter the total of your rental expenses that are directly related only to the rental activity. E file 1040x These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. E file 1040x Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. E file 1040x           Line 2e. E file 1040x You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. E file 1040x Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. E file 1040x           Line 4b. E file 1040x On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. E file 1040x If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. E file 1040x Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). E file 1040x           Line 4e. E file 1040x You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. E file 1040x *           Line 6a. E file 1040x To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. E file 1040x   A. E file 1040x Enter the amount from Form 4684, line 10       B. E file 1040x Enter the rental portion of line A       C. E file 1040x Enter the amount from line 2c of this worksheet       D. E file 1040x Subtract line C from line B. E file 1040x Enter the result here and on line 6a of this worksheet               Line 6e. E file 1040x You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. E file 1040x * *Allocating the limited deduction. E file 1040x If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. E file 1040x Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. E file 1040x Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

What to Expect for Refunds in 2014

The IRS issues more than 9 out of 10 refunds in less than 21 days. Where’s My Refund? has the most up to date information available about your refund. The tool is updated once a day so you don’t need to check more often.

However, it’s possible your tax return may require additional review and take longer.

  • The easiest way to check your refund status is by using our automated tools.
  • Our phone and walk-in representatives can research the status of your refund only if it's been 21 days or more since you filed electronically, more than 6 weeks since you mailed your paper return or if Where’s my refund? directs you to contact us.

You can use Where’s My Refund? to start checking on the status of your return within 24 hours after we have received your e-filed return or 4 weeks after you mail a paper return. Where’s My Refund? has a tracker that displays progress through 3 stages: (1) Return Received, (2) Refund Approved and (3) Refund Sent.

You will get personalized refund information based on the processing of your tax return. The tool will provide an actual refund date as soon as the IRS processes your tax return and approves your refund. Remember, most refunds will be issued in less than 21 days, and our phone and walk-in representatives can research the status of your refund only if it’s been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return.

Additional Information

 

 

Page Last Reviewed or Updated: 11-Mar-2014

The E File 1040x

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