Archive for the 'W4 Assistance' Category

Itemized deductions

June 29th, 2011 -- Posted in W4 Assistance, W4 tax Form | No Comments »

Have you noticed itemized deduction items like mortgage interest, state and local income and property taxes, and charitable donations? By filing Form 1040, you can without difficulty write-off the full amounts on your itemized deductions. Good news is that: the current tax cut additional legislation cancelled the phase-outs for 2011 and 2012 as well.

For 2010, the highest adoption credit was increased to $13,170 (up from $12,150 in 2009). In addition, the credit was made 100% refundable for the 2010 tax year (previously, it was nonrefundable). This means that you will receive a check for any surplus adoption credit after your federal income tax bill has been condensed to zero. To claim the credit, fill out Form 8839 (Qualified Adoption Expenses), and enter the credit on line 71 of Form 1040.

Self-employed people can subtract their health insurance premiums on page 1 of Form 1040 (use line 29 for 2010). The deduction will help them to reduce their federal income tax bills. However, the self-employed have never been allowed to deduct those premiums while calculating their self-employment tax bills on Schedule SE. Good news is that for 2010 only, you will be able to deduct health insurance premiums. So those premiums will reduce both your income tax bill and your SE tax bill. Unfortunately, this break will not be accessible for 2011 and further unless Congress extends it.
In the majority of cases, only those who purchased homes in 2008 will be greatly affected. They will have to repay 1/15 of the credit with the 2010 Form 1040.

For 2008 and 2009, unmarried individuals who did not list could write off up to $500 of state and local real property taxes by claiming an increased standard deduction. Married, joint-filing couples can write off up to $1,000. The 2009 Stimulus Act created a temporary write-off for non-itemizers who paid state and local sales taxes on new vehicles purchased between 2/17/09 and 12/31/09. The write-off came in the form of an additional standard deduction allowance. Similarly, itemizers were allowed to claim an extra itemized deduction for such taxes. Both breaks failed at the end of 2009, and they were not reinstated for 2010.

Would you like to get lump-sum pension?

June 29th, 2011 -- Posted in W4 Assistance, W4 tax Form | No Comments »

Personal Allowances Worksheet:

Nobody wants to owe a lot of money or have the IRS come knocking on your door. The personal allowances worksheet will give you step by step instructions on exactly how to file out a W-4 Tax Form.

The W-4 Form starts at A and ends with H. You have eight questions to consider. You can see the W-4 Form online through the IRS provided PDF file.

Lump-Sum Pension Payout:

If you receive a lump-sum payment from your retirement plan, the plan supervisor is required to withhold 10% for federal income taxes.

If you plan to spin the funds over into an IRA or another tax-free pension plan yourself, the tax withholding requirement is 20%. This applies even if you have retired, quit or are laid off. If 20% is withheld, you would have to prepay tax you might not even owe – especially if you spin over the distribution within 60 days.

So, if you handle the spin over yourself by taking the check and depositing it in IRA within 60 days:

  • Your plan supervisor will withhold 20% of your distribution.
  • Unless you include the amount which is equal to the 20% withholding from another source, you will not have sufficient to put the full payment into an IRA.
  • The IRS will tax and possibly penalize any part of the gross distribution that is not spinned into an IRA within 60 days.


To shun having 20% withheld from your distribution, you should go for a direct spin over by following:

  1. Inform your employer that you want to roll the funds over directly to another plan or IRA.
  2. Give your employer all the information about the account that is going to receive the rollover funds.
  3. Your employer will transfer the funds directly to the other account without withholding any taxes.

If done in this way, the transaction will be tax-free to you completely.

Tips and Withholding:

All the tips you receive are taxable income subject to withholding. If you receive $20 or more per month in tips, you should report that income to your employer.

How to get freedom from withholding?

June 29th, 2011 -- Posted in W4 Assistance, W4 tax Form | No Comments »

Exemption From Withholding:

You must have withholding if any of these apply:

  • Your income for 2010 is higher than $950.
  • You have more than $300 of unearned income. Unearned income includes interest on savings accounts and mutual fund dividends.

If you cannot be claimed as a dependent, you can make much more and still be exempt from withholding.

If you owe no federal tax last year and anticipate owing nothing in the current year, you might be exempt from withholding. For 2010, a single person who is not a dependent can have as much as $9,350 in gross income before any tax is due.

If you earn $200 weekly or more and claim the exemption from withholding on your W-4, your employer might be asked to send the form to the IRS. If the IRS questions about the number of exemptions you claim, you will be required to justify your claim.

Working Couples and Withholding:

If both of you- you and your spouse are employed, outline the total allowances that you both are entitled to and divide those total allowances between you and your spouse. The W-4 has a special worksheet for 2-earning couples. It helps you and your spouse figure the number of allowances you should each claim based on each income.

Withholding and Retirement Income:

You can choose to have federal income taxes withheld from your:

  • Pension
  • Annuity
  • Traditional IRA withdrawals
  • Social Security benefits

With other retirement plans, you might be required to file a form with the payer to end the required withholding. If you do not complete the withholding forms for pension benefits, then taxes will be withheld as though you were married and claiming 3 exemptions. So, taxes will only be withheld if your pension is at least $2,080 per month.

You should re-evaluate each year to see if you want to have taxes withheld. Use Form W-4P to have taxes withheld from your pension, annuities, and IRAs.

Voluntary Withholding Request to have taxes withheld from Social Security. Choose any 1 of these rates for Social-Security withholding:

  • 7%, 10%, 15% or 25%

Getting The Answer To Your W4 Questions Straight By Knowing What Payment Strategy You Should Use

December 19th, 2008 -- Posted in W4 Assistance | No Comments »

If you are thinking about how to make filling out tax return forms less painful, you should really begin by knowing precisely how you should pay off your tax liability in the first place. Everything begins with your tax payment strategy. Once you have decided how, answering W4 questions should be a lot easier. There are 2 ways in doing so. One: you pay enough just so to cover the bases until next tax filing deadline. Two: you pay more in order to avoid the penalty for underpaying your tax liability.

In the first strategy, you can declare a lesser amount (as compared to strategy #2) and you may just get away without facing any IRS penalties at all. However, the problem lies when you gain a substantial profit for the covered year. In which case, you will be faced with paying off a higher overdue balance; not to mention the possibility of paying for penalties as well in the event someone notices your “oversight.” You can remedy this though, by simply filing another W4 tax return when you do earn more than your projected earnings for the covered year.

The second strategy dispenses away with the need to file a second tax return form. You simply pay a little more from the very onset, taking into consideration the possible earnings you will have from your savings account, or account from any money market source, or any proven stable investment schemes you may have. You do not have to include your possible earnings from speculative investments as these cannot be substantiated until they do materialize.

Fielding W4 Questions: What Is The Easiest Way Of Getting The Amount For Tax Liability?

December 17th, 2008 -- Posted in W4 Assistance | No Comments »

W4 is a tax return form that basically declares how much tax should be withheld by your employer from your paycheck for the next year. Although this has some similarities with tax return form 1040, there are several differences between the two. For one thing, the amount you may be declaring for W4 may not correspond with the one you have for 1040. In theory, these declarations should be of the same amount. However, it seldom works that way.

One of the most important W4 questions is how much exactly tax should an employee pay. The easiest possible answer to this is to simply declare a payable amount of 110% from the previous year’s total tax liability. This is of course, assuming that you are still earning the same or slightly higher wage amount. If it is not your wont to compute your tax projection from scratch, simply take a copy of your accomplished 1040 tax return form from last year and look at line 56. Here, you will see the amount you have declared after “Total Tax.” Simply take that amount, compute for 10% and add that 10% to the Total Tax amount.

Example: last year’s declared amount is $10,000. 10% of that would be $1,000. Then this year’s tax liability should amount to $11,000.

In some cases, you may only be liable to pay 100% of last year’s tax, so paying for 110% may seem extreme. This is particularly true if your earning capability from last year was under the $150,000 mark; which means that you should only be paying for $10,000 (if we take the abovementioned example as basis.) However, paying for 10% more for this year’s tax liability projection will provide you the financial safety net in case something unexpected turns up.

Expedient Measures In Answering W4 Questions

December 16th, 2008 -- Posted in W4 Assistance | No Comments »

The W4 form is basically a way of gauging how much federal income tax should be deducted (withheld) from your paycheck within one working year. This form is very different from Form 1040 or the Income Tax Return form, although most information can be seen in both forms. In case you want to take less complicated measures in answering the W4 questions, here are some tips on how to do so.

1.  Download the *.pdf form from the IRS website or any reputable online page. Some companies provide their employees a virtual copy of the W4 for easier access.
2.  Fill out all pertinent personal information like name, Social Security Number, address and civil status. This will be a lot easier if you have all the information right there with you. Also, try to simplify matters considerably. For example, if you are living with someone but not really legally married, then simply tick off the ‘single’ box. Fussing over minor details will only make your work harder for you.
3.  Calculating your withholding tax allowances may be as simple as checking your personal exemptions on your 1040. However, should you decide to deviate from the details of your income tax return, then try to use the IRS Withholding Calculator (http://www.irs.gov/individuals/article/0,,id=96196,00.html) for easier computation. You can also use the tables on the back of the W4 form.
4.  Go over your forms several times to ensure that the entries are correct before signing it and affixing the date.
5.  You need to submit the W4 form on the deadline your employer has set – and not the nationally set deadline. Your employer also needs to fill part of the W4 and submit this along with the W4 papers of the other employees.