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Taxmap/pubs/p919-002.htm#TXMP01318a5a Adjusting Your Withholding

Adjustment, Withholding

The purpose of this section is to explain how to adjust your withholding.

If you are not having enough tax withheld or you are having too much tax withheld, you should either increase or decrease your withholding.

Taxmap/pubs/p919-002.htm#TXMP54d04ace How Do I Adjust My Withholding?

Adjustment, Withholding

You increase or decrease your withholding by filling out a new Form W-4 and giving it to your employer. You can use the worksheets and information in this publication to help you complete Form W-4. You can complete the Form W-4 near the end of this publication and give it to your employer.

Taxmap/pubs/p919-002.htm#TXMP02a99c59 How Do I Increase My Withholding?

Adjustment, Withholding

There are two ways to increase your withholding. You can:

• Decrease the number of allowances you claim on line 5 of Form W-4, or
• Enter an additional amount that you want withheld from each paycheck on line 6 of Form W-4.

Taxmap/pubs/p919-002.htm#TXMP7c43968d How to request an additional amount to be withheld.

You can request that an additional amount be withheld from each paycheck by following these steps.

1. Complete Worksheets 1 and 2.
2. Complete a new Form W-4 if the amount on line 5 of Worksheet 2 is more than you want to have to pay or would cause a penalty when you file your tax return for 2005.
3. Enter on line 5 of the new Form W-4 the same number of withholding allowances your employer now uses for your withholding. This is the number of allowances you entered on the last Form W-4 you gave your employer.
4. Enter on line 6 of the new Form W-4 the amount from line 6 of Worksheet 2.
5. Give your newly completed Form W-4 to your employer.

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.

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Example.

Using Worksheets 1 and 2, Steve figures that his 2005 tax liability will be $5,000 and that his withholding for the year will be $4,700. Steve's tax will be underwithheld by $300 ($5,000 − $4,700). He will have to pay this amount when he files his 2005 tax return or he can increase his withholding. Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in the year. Steve completes the form as before, and enters the same number of withholding allowances as before, then enters $6 ($300 ÷ 50) on line 6 of the form. This is the additional amount to be withheld from his pay each payday. He gives the completed form to his employer.

Taxmap/pubs/p919-002.htm#TXMP30971518 What if I have more than one job or my spouse also has a job?

You are 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). If this is the case, you can increase your withholding for one or more of the jobs.

You can apply the amount on line 5 of Worksheet 2 to only one job or divide it between the jobs any way you wish. 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 2005 for that job. This will give you the additional amount to enter on line 6 of the Form W-4 you will file for that job. You need to file a Form W-4 for each job for which you are changing your withholding.

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Example.

Meg Green works in a store. Her husband, John, works full time in manufacturing. They file a joint income tax return. When they fill out Worksheets 1 and 2, they find they will not have enough tax withheld. They can divide the amount on line 6 of Worksheet 2 any way they want. They can enter an additional amount on either of their Forms W-4, or divide it between them. They decide to have all of the additional amount from line 6 withheld from John's wages, so they enter on line 6 of his W-4 the number from line 6 of their completed Worksheet 2. Both claim the same number of allowances as before.

Taxmap/pubs/p919-002.htm#TXMP4edb2186 How Do I Decrease My Withholding?

Adjustment, Withholding

If you expect to have more tax withheld than your projected tax liability for 2005, you may be able to decrease your withholding by increasing the number of allowances that you claim on Form W-4.

You can only claim the number of allowances to which you are entitled. To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication.

Taxmap/pubs/p919-002.htm#TXMP0cf7e2cb How do I increase the number of allowances I can claim?

You figure and increase the number of withholding allowances you are entitled to claim as follows.

1. Complete Worksheets 1 and 2.
2. If your projected withholding is significantly more than your projected tax, get a new Form W-4 (or use the one in the back of this publication).
3. Complete the Personal Allowances Worksheet on Form W-4.
4. Use the remainder of the worksheets in this publication, as applicable.
5. Complete the Deductions and Adjustments Worksheet on Form W-4 if you plan to itemize deductions, claim adjustments to income, or claim tax credits from Worksheet 7 on your 2005 return.
6. Complete the Two-earner/two-job worksheet on Form W-4 if you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet.
7. Fill out Form W-4.
8. Enter the number of allowances you are entitled to claim on line 5 of Form W-4.
9. If the number of allowances you are entitled to claim is different from the number you are already claiming, give the newly completed Form W-4 to your employer.

Taxmap/pubs/p919-002.htm#TXMP46876bb7 What if I can claim tax credits?

Figure 2 shows tax credits you may be able to use to reduce your withholding. The Form W-4 Personal Allowances Worksheet only provides rough adjustments for the child and dependent care credit (line F) and the child tax credit (line G). Use Worksheet 7 to take these credits into account more accurately and also take other credits into account.

If you take the child and dependent care credit into account on Worksheet 7, enter -0- on line F of the Personal Allowances Worksheet. If you take the child tax credit into account on Worksheet 7, enter -0- on line G of the Personal Allowances Worksheet.

To figure the additional amount to add on line 5 of the Form W-4 Deductions and Adjustments Worksheet for your tax credits, complete Worksheet 7. Then complete the Form W-4 Deductions and Adjustments Worksheet and the rest of Form W-4.

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Example.

Brett and Alyssa are married and expect to file a joint return for 2005. Their combined estimated wages are $68,000. Their projected tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700.

They use Worksheet 7 to see whether they can convert their tax credits into additional allowances.

1. They enter their expected child and dependent care credit, $960, on line 1 of Worksheet 7.
2. They enter their expected mortgage interest credit, $1,700, on line 8 of Worksheet 7.
3. They add these credits and enter the total, $2,660, on line 10.
4. Because they are married filing a joint return, they use the table for married filing jointly or qualifying widow(er).
5. They see that their combined estimated wages, $68,000, falls between $34,001 and $79,000, and that the number to the right of this range is 6.7.
6. They enter 6.7 on line 11.
7. They multiply line 10 by line 11 and enter the result, $17,822, on line 12.
8. They take the result on line 12, and add it to their other adjustments on line 5 of the Deductions and Adjustments Worksheet on Form W-4.
9. They finish filling out the Deductions and Adjustments Worksheet.
10. Because they chose to account for their child and dependent care credit this way, they enter -0- on line F of the Personal Allowances Worksheet.

Taxmap/pubs/p919-002.htm#TXMP72e3b262 When Will My New   Form W-4 Go Into Effect?

FW4

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.

If the change is for next year, your new Form W-4 will not take effect until next year.

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Worksheet 1. Projected Tax for 2005 1. Enter amount of adjusted gross income (AGI) you expect in 2005. (To determine this, you may want to start with the AGI on your last year's return, and add or subtract your expected changes.) 1   2. If you:             · Do not plan to itemize deductions on Schedule A (Form 1040), enter the standard deduction you expect from Table 1, 2, or 3, later             · Plan to itemize deductions, and the amount on line 1 is:               · Not more than $145,950 ($72,975 if married filing separately), enter the total itemized deductions you expect after applying any limits (such as the 7.5% limit on medical expenses).               · More than $145,950 ($72,975 if married filing separately), use Worksheet 3 to figure the amount to enter here 2   3. Subtract line 2 from line 1. (If zero or less, enter -0-) 3   4. If the amount on line 1 is:             · Not more than the amount shown below for your 2005 filing status, multiply the number of exemptions you plan to claim on your 2005 tax return by $3,200 and enter the result here.             · More than the amount shown below for your 2005 filing status, use Worksheet 4 to figure the amount to enter here 4          · Single, $145,950               · Married filing jointly or Qualifying widow(er), $218,950               · Head of household, $182,450               · Married filing separately, $109,475        5. Subtract line 4 from line 3. (If zero or less, enter -0-.) 5   6. If the amount on line 1:               · Does not include capital gain or qualified dividends, use Worksheet 1a, 1b, 1c, or 1d, as appropriate, to figure the tax to enter here.               · Includes capital gain or qualified dividends, use Worksheet 5 to figure the tax to enter here 6   7. Enter any expected additional taxes from an election to report your child's interest and dividends (Form 8814), and from lump-sum distributions (Form 4972) 7   8. Add lines 6 and 7 8   9. Enter the amount of any expected tax credits. See Figure 2, earlier 9   10. Subtract line 9 from line 8. (If zero or less, enter -0-.) 10   11. Self-employment tax. If you expect to file a joint return, figure the self-employment tax for each of you separately, and enter the total on line 11. If the projected total of your net self-employment income multiplied by .9235 plus your wage income is:               · $400 or more, but no more than $90,000, multiply your expected net self-employment income by .9235, and multiply that result by .153 and enter here.               · More than $90,000, use Worksheet 6 to figure the amount to enter here. 11   12. Enter any other expected taxes (such as tax on early distributions from an IRA, alternative minimum tax, etc.) 12   13. Add lines 10 through 12. This is your projected tax for 2005. Enter it here and on line 1 of Worksheet 2 13   Worksheet 2. Projected Withholding for 2005 1. Enter your projected tax for 2005 from line 13 of Worksheet 1 1   2. Enter your total federal income tax withheld to date in 2005 from all of your jobs. (You should be able to find your withholding to date on your last payslip or statement.) 2   3. Enter the federal tax withholding you expect for the rest of 2005. For each job, multiply the amount of federal income tax now being withheld each payday by the number of paydays remaining in the year and enter the combined amount for all jobs 3   4. Add lines 2 and 3. This is your projected withholding for 2005 4   5. Compare the amounts on lines 1 and 4. If:               · Line 1 is more than line 4, subtract line 4 from line 1, enter the result here, and go to line 6.               · Line 4 is more than line 1, stop here and see How Do I Decrease My Withholding? 5   6. Divide line 5 by the number of paydays remaining in 2005 and enter the result. This is the additional amount you should have withheld from your pay each payday. Enter this amount on line 6 of Form W-4 6

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Worksheets 1a, 1b, 1c, and 1d. Tax Rate Schedule Worksheets for 2005 Worksheet 1a. For Single Filing Status 1. Enter the amount from line 5 of Worksheet 1, or if figuring the amount to enter on lines 28 and 30 of Worksheet 5, enter the amount from line 1 or 14 of Worksheet 5 1   2. Enter whichever of the amounts in column A below is closer to, but not more than, the amount you entered on line 1 above 2     Column A Column B Column C         $0 10% $0.00         $7,300 15% $730.00         $29,700 25% $4,090.00         $71,950 28% $14,652.50         $150,150 33% $36,548.50         $326,450 35% $94,727.50       3. Subtract line 2 from line 1 3   4. Enter the percentage from column B above that corresponds to the amount from column A that you entered on line 2 4   5. Multiply line 3 by line 4 5   6. Enter the amount from column C above that corresponds to the amount from column A that you entered on line 2 6   7. Add lines 5 and 6 and enter the result here and on line 6 of Worksheet 1, or on line 28 or 30 of Worksheet 5, whichever is appropriate 7   Worksheet 1b. For Head of Household Filing Status 1. Enter the amount from line 5 of Worksheet 1, or if figuring the amount to enter on lines 28 and 30 of Worksheet 5, enter the amount from line 1 or 14 of Worksheet 5 1   2. Enter whichever of the amounts in column A below is closer to, but not more than, the amount you entered on line 1 above 2     Column A Column B Column C         $0 10% $0.00         $10,450 15% $1,045.00         $39,800 25% $5,447.50         $102,800 28% $21,197.50         $166,450 33% $39,019.50         $326,450 35% $91,819.50       3. Subtract line 2 from line 1 3   4. Enter the percentage from column B above that corresponds to the amount from column A that you entered on line 2 4   5. Multiply line 3 by line 4 5   6. Enter the amount from column C above that corresponds to the amount from column A that you entered on line 2 6   7. Add lines 5 and 6 and enter the result here and on line 6 of Worksheet 1, or on line 28 or 30 of Worksheet 5, whichever is appropriate 7

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Worksheet 1c. For Married Filing Jointly or Qualifying Widow(er) Filing Status 1. Enter the amount from line 5 of Worksheet 1, or if figuring the amount to enter on lines 28 and 30 of Worksheet 5, enter the amount from line 1 or 14 of Worksheet 5 1   2. Enter whichever of the amounts in column A below is closer to, but not more than, the amount you entered on line 1 above 2     Column A Column B Column C         $0 10% $0.00         $14,600 15% $1,460.00         $59,400 25% $8,180.00         $119,950 28% $23,317.50         $182,800 33% $40,915.50         $326,450 35% $88,320.00       3. Subtract line 2 from line 1 3   4. Enter the percentage from column B above that corresponds to the amount from column A that you entered on line 2 4   5. Multiply line 3 by line 4 5   6. Enter the amount from column C above that corresponds to the amount from column A that you entered on line 2 6   7. Add lines 5 and 6 and enter the result here and on line 6 of Worksheet 1, or on line 28 or 30 of Worksheet 5, whichever is appropriate 7   Worksheet 1d. For Married Filing Separately Filing Status 1. Enter the amount from line 5 of Worksheet 1, or if figuring the amount to enter on lines 28 and 30 of Worksheet 5, enter the amount from line 1 or 14 of Worksheet 5 1   2. Enter whichever of the amounts in column A below is closer to, but not more than, the amount you entered on line 1 above 2     Column A Column B Column C         $0 10% $0.00         $7,300 15% $730.00         $29,700 25% $4,090.00         $59,975 28% $11,658.75         $91,400 33% $20,457.75         $163,225 35% $44,160.00       3. Subtract line 2 from line 1 3   4. Enter the percentage from column B above that corresponds to the amount from column A that you entered on line 2 4   5. Multiply line 3 by line 4 5   6. Enter the amount from column C above that corresponds to the amount from column A that you entered on line 2 6   7. Add lines 5 and 6 and enter the result here and on line 6 of Worksheet 1, or on line 28 or 30 of Worksheet 5, whichever is appropriate 7

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Worksheet 3. Itemized Deductions Limit 1. Enter the total itemized deductions you expect for 2005 after applying any limits (such as the 7.5% limit on medical expenses) 1   2. Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty and theft losses, and gambling losses 2   3. Subtract line 2 from line 1 3   Note: If the amount on line 3 is zero, stop here and enter on line 2 of Worksheet 1 the larger of the amount from line 1 of this worksheet or your standard deduction from Table 1, 2, or 3.           4. Multiply the amount on line 3 by .80 4   5. Enter the amount from line 1 of Worksheet 1 5   6. Enter $145,950 ($72,975 if married filing separately) 6   7. Subtract line 6 from line 5 7   Note: If the amount on line 7 is zero or less, stop here and enter on line 2 of Worksheet 1 the larger of the amount from line 1 of this worksheet or your standard deduction from Table 1, 2, or 3.           8. Multiply the amount on line 7 by .03 8   9. Enter the smaller of line 4 or line 8 9   10. Subtract line 9 from line 1. Enter the result here, on line 2 of Worksheet 1, and on line 1 of the Form W-4 Deductions and Adjustments Worksheet 10   Worksheet 4. Exemptions Phaseout 1. Multiply $3,200 by the number of exemptions you plan to claim 1   2. Enter the amount from line 1 of Worksheet 1 2   3. Enter: 3     $145,950 if single   $218,950 if married filing jointly or qualifying widow(er)   $109,475 if married filing separately   $182,450 if head of household 4. Subtract line 3 from line 2 and enter here 4   Note: If line 4 is more than $122,500 (more than $61,250 if married filing separately), stop; you cannot take a deduction for exemptions. Enter -0- on line 4 of Worksheet 1.           5. Divide the amount on line 4 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next whole number 5   6. Multiply the number on line 5 by .02. Enter the result as a decimal, but not more than 1 6   7. Multiply the amount on line 1 by the decimal on line 6 7   8. Subtract line 7 from line 1. Enter the result here and on line 4 of Worksheet 1 8

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Worksheet 5. Figuring Tax If You Expect To Have Capital Gain or Qualified Dividends  1. Enter the amount from Worksheet 1 1.                2. Enter your expected qualified dividends for 2005 2.                3. Enter the net capital gain expected for 2005 3.                4. Add lines 2 and 3 4.                5. Enter your 28% rate gain or loss expected for 2005 5.                6. Enter the unrecaptured section 1250 gain expected for 2005 6.                7. Add lines 5 and 6 7.                8. Enter the smaller of line 3 or line 7 8.                9. Subtract line 8 from line 4 9.               10. Subtract line 9 from 1. If zero or less, enter -0- 10.               11. Enter the smaller of line 1 or $59,400 ($29,700 if single or married filing separately; $39,800 if head of household). 11.               12. Enter the smaller of line 10 or line 11 12.               13. Subtract line 4 from line 1. If zero or less, enter -0- 13.               14. Enter the larger of line 12 or line 13. If line 11 and line 12 are the same, skip lines 15 and 16 and go on to line 17 14.               15. Subtract line 12 from line 11 15.               16. Multiply line 15 by 5% (.05). If lines 1 and 11 are the same, skip lines 17-27 and go to line 28        16.        17. Enter the smaller of line 1 or line 9 17.               18. Subtract the amount from line 15 from line 17. If zero or less, enter -0- 18.               19. Multiply line 18 by 15% (.15). If line 6 is zero or blank, skip lines 20 - 24 and go to line 25        19.        20. Enter the smaller of line 3 or line 6 20.               21. Add lines 4 and 14 21.               22. Subtract line 1 from line 21. If zero or less, enter -0- 22.               23. Subtract line 22 from line 20. If zero or less, enter -0- 23.               24. Multiply line 23 by 25% (.25). If line 5 is zero or blank, skip lines 25 - 27 and go to line 28        24.        25. Add lines 14, 15, 18, and 23 25.               26. Subtract line 25 from line 1 26.               27. Multiply line 26 by 28% (.28) 27.        28. Tax on the amount on line 14 from the 2005 Tax Rate Schedule 28.        29. Add lines 16, 19, 24, 27, and 28 29.        30. Tax on the amount on line 1 from the 2005 Tax Rate Schedule 30.        31. Tax. Enter the smaller of line 29 or line 30 here and on line 6 of Worksheet 1 31.

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Worksheet 6. Self-Employment Tax 1. Enter expected self-employment income for 2005 1   2. Multiply the amount on line 1 by .9235 2   3. Multiply the amount on line 2 by .029 3   4. Social security tax maximum income 4 $90,000 5. Enter estimated wages for 2005 5   6. Subtract line 5 from line 4 6   Note: If line 6 is zero or less, stop here and enter the amount from line 3 on line 11 of Worksheet 1.              7. Enter the smaller of line 2 or line 6 7   8. Multiply the amount on line 7 by .124 8   9. Add line 3 and line 8. Enter the result here and on line 11 of Worksheet 1. If you expect to file a joint return, combine the result with your spouse's expected self-employment tax and enter the total on line 11 of Worksheet 1. 9