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IRS.gov Website
Publication 505
taxmap/pubs/p505-001.htm#en_us_publink1000194335

Chapter 1
Tax Withholding for 2018(p3)


taxmap/pubs/p505-001.htm#en_us_publink1000194336Introduction

This chapter discusses income tax withholding on: This chapter explains in detail the rules for withholding tax from each of these types of income. The discussion of salaries and wages includes an explanation of how to complete Form W-4.
This chapter also covers backup withholding on interest, dividends, and other payments.

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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 How To Get Tax Help at the end of this publication for information about getting these publications and forms.
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Salaries and Wages(p3)

rule
Income tax is withheld from the pay of most employees. Your pay includes your regular pay, bonuses, commissions, and vacation allowances. It also includes reimbursements and other expense allowances paid under a nonaccountable plan. See Supplemental Wages, later, for definitions of accountable and nonaccountable plans.
If your income is low enough that you won’t have to pay income tax for the year, you may be exempt from withholding. This is explained under Exemption From Withholding, later.
You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. 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.
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Military retirees.(p3)

rule
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.
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Household workers.(p3)

rule
If you are a household worker, you can ask your employer to withhold income tax from your pay. A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter.
Tax is withheld only if you want it withheld and your employer agrees to withhold it. If you don’t have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2.
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Farmworkers.(p3)

rule
Generally, income tax is withheld from your cash wages for work on a farm unless your employer both:
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Differential wage payments.(p3)

rule
When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. 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. The wages and withholding will be reported on Form W-2, Wage and Tax Statement.
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Determining Amount of Tax Withheld Using Form W-4(p3)

rule
The amount of income tax your employer withholds from your regular pay depends on three things.
Form W-4 includes four types of information that your employer will use to figure your withholding.
Note. You must specify a filing status and a number of withholding allowances on Form W-4. You can’t specify only a dollar amount of withholding.
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New Job(p4)

rule
When you start a new job, you must fill out a Form W-4 and give it to your employer. Your employer should have copies of the form. If you need to change the information later, you must fill out a new form.
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. You may be able to avoid overwithholding if your employer agrees to use the part-year method. See Part-Year Method, later, for more information.
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Employee also receiving pension income.(p4)

rule
If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. However, you can choose to split your withholding allowances between your pension and job in any manner.
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Changing Your Withholding(p4)

rule
During the year, changes may occur to your marital status, adjustments, deductions, or credits you expect to claim on your tax return. When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances.
If a change in personal circumstances (that is, a change other than a change resulting from the new tax law) reduces the withholding allowances you are entitled to claim, you are required to give your employer a new Form W-4 by 10 days after the change occurs reducing your withholding allowances (or March 30, 2018, if later). If you have a reduction in the number of withholding allowances only because of changes due to the new tax law, you don’t have to give you employer a new Form W-4 during 2018. You can use either the 2018 Form W-4 or the 2017 Form W-4 to reduce your withholding allowances through March 30, 2018. (Use of the 2018 Form W-4 is recommended if it is available to you.) After March 30, 2018, you should use only the 2018 Form W-4 (and not the 2017 Form W-4) to reduce or increase the number of your withholding allowances. See Notice 2018-14 for an explanation of these dates. See Marital Status (line 3 of Form W-4) and Withholding Allowances (line 5 of Form W-4), later.
Otherwise, if you want to change your withholding allowances for any other reason, you can generally do that whenever you wish. See Table 1-1 for examples of personal and financial changes you should consider.

Table 1-1. Personal and Financial Changes

Factor Examples
Lifestyle change Marriage
Divorce
Birth or adoption of child
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
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, later.
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Checking Your Withholding(p4)

rule
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. If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. You can get a blank Form W-4 from your employer or print the form from IRS.gov.
Deposit
You can use the IRS Withholding Calculator at IRS.gov/W4App instead of the worksheets in this publication or included with Form W-4 or W-4P to determine whether you need to have your withholding increased or decreased.
You should try to have your withholding match your actual tax liability. 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. If too much tax is withheld, you will lose the use of that money until you get your refund. 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. See Table 1-1 for examples.
Note. You can’t 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.
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When Should You Check Your Withholding?(p4)

rule
The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld.
You should check your withholding when any of the following situations occur.
  1. You receive a paycheck stub (statement) covering a full pay period in 2018, showing tax withheld based on 2018 tax rates.
  2. You prepare your 2017 tax return and get a:
    1. Big refund, or
    2. Balance due that is:
      1. More than you can comfortably pay, or
      2. Subject to a penalty.
  3. There are changes in your life or financial situation that affect your tax liability. See Table 1-1.
  4. There are changes in the tax law that affect your tax liability.
Due to the tax reform changes, you may want to consider the increase in standard deduction amount, state and local tax deduction limitation, and increase in the child tax credit, as well as the other items under What’s New for 2018, earlier.
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How Do You Check Your Withholding?(p4)

rule
You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. You can also use the IRS Withholding Calculator at IRS.gov/W4App. If you use the worksheets and tables in this publication, follow these steps.
  1. Fill out Worksheet 1-3 to project your total federal income tax liability for 2018.
  2. Fill out Worksheet 1-5 to project your total federal withholding for 2018 and compare that with your projected tax liability from Worksheet 1-3.
If you are not having enough tax withheld, line 6 of Worksheet 1-5 will show you how much more to have withheld each payday. For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding, later.
If line 5 of Worksheet 1-5 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, later, for ways to decrease the amount of tax you have withheld each payday.
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How Do You Increase Your Withholding?(p4)

rule
There are two ways to increase your withholding. You can:
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Requesting an additional amount be withheld.(p5)

rule
You can request that an additional amount be withheld from each paycheck by entering the additional amount on line 6 of Form W-4. To see if you should request an additional amount be withheld, complete Worksheets 1-3 and 1-5. Complete a new Form W-4 if the amount on Worksheet 1-5, line 5:
  1. Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or
  2. Would cause you to pay a penalty when you file your tax return for 2018.
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Example.(p5)

Early in 2018, Steve Miller used Worksheets 1-3, 1-4, and 1-5 to project his 2018 tax liability ($4,316) and his withholding for the year ($3,516). Steve will be underwithheld by $800 ($4,316 − $3,516). His choices are to pay this amount when he files his 2018 tax return, make estimated tax payments, or increase his withholding now. Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2018. 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. He gives the completed form to his employer.
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What if I have more than one job or my spouse also has a job?(p5)

rule
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. If this is the case, you can increase your withholding for one or more of the jobs.
You can apply the amount on Worksheet 1-5, line 5, 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 2018 for that job. This will give you the additional amount to enter on the Form W-4 you will file for that job. You need to give your employer a new Form W-4 for each job for which you are changing your withholding.
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Example.(p5)

Meg Green works in a store and earns $46,000 a year. Her husband, John, works in a factory, earns $68,000 a year and has 49 pay periods left. In 2018, they will also have $184 in taxable interest and $1,000 of other taxable income. They expect to file a joint income tax return. Meg and John complete Worksheets 1-3, 1-4, and 1-5. Line 5 of Worksheet 1-5 shows that they will owe an additional $4,459 after subtracting their withholding for the year. They can divide the $4,459 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 the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. Both claim the same number of allowances as before.
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How Do You Decrease Your Withholding?(p5)

rule
If your completed Worksheets 1-3 and 1-5 show that you may have more tax withheld than your projected tax liability for 2018, you may be able to decrease your withholding. There are two ways to do this. You can:
EIC
You can claim only 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.
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Increasing the number of allowances.(p5)

rule
Figure and increase the number of withholding allowances you can claim as follows.
  1. On a new Form W-4, complete the Personal Allowances Worksheet.
  2. If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions, Adjustments, and Additional Income Worksheet. If you plan to claim tax credits, see Converting Credits to Withholding Allowances below.
  3. If you meet the criteria below line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet.
  4. 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.
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Converting Credits to Withholding Allowances(p5)

rule
Table 1-2 shows many of the tax credits you may be able to use to decrease your withholding. For a complete list of credits you may be able to claim, see the 2017 Form 1040 instructions and What’s New for 2018, earlier.
The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child tax credit and the credit for other dependents. Complete Worksheet 1-6 to figure these credits more accurately and also take other credits into account.
EIC
If you take the child tax credit into account on Worksheet 1-6, enter -0- on line E of the Personal Allowances Worksheet. If you take the credit for other dependents into account on Worksheet 1-6, enter -0- on line F of the Personal Allowances Worksheet.
Enter the amount from line 16 of Worksheet 1-6 in this publication on line G of the Personal Allowances Worksheet on Form W-4. Then complete the Personal Allowances Worksheet, and if needed, other worksheets on the Form W-4, and then complete the first page of Form W-4.
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Example.(p5)

Brett and Alyssa Davis are married and expect to file a joint return for 2018. Their expected taxable income from all sources is $68,000. They plan on taking the standard deduction. Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500.
The Davises complete Worksheet 1-6, as follows, to see whether they can convert their tax credits into additional withholding allowances.
  1. Line 4, expected child and dependent care credit—$960.
  2. Line 6, expected adoption credit—$1,500.
  3. Line 13, total estimated tax credits—$2,460.
  4. Line 14. Their combined total income from all sources, $68,000, falls between $43,051 and $101,400 on the table for married filing jointly or qualifying widow(er). The number to the right of this range is 8.3.
  5. Line 15, multiply line 13 by the multiplication factor from line 14 (8.3)—$20,418.
  6. Line 16, divide line 15 by $4,150 and drop the fraction—4
Then the Davises complete the Form W-4 worksheets. They take the result on line 16 of Worksheet 1-6, enter it on line G of the Form W-4 Personal Allowances Worksheet, and complete the Form W-4 worksheets.
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When Will Your New Form W-4 Go Into Effect?(p5)

rule
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 won’t take effect until next year.
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Retirees Returning to the Workforce(p5)

rule
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). However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. You completed either form based on your projected income at that time. 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.
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. Start off with the Personal Allowances Worksheet. Then, if you will be itemizing your deductions, claiming adjustments to income, or have additional income (such as interest or dividends), complete the Deductions, Adjustments, and Additional Income Worksheet.
The third worksheet is the most important for this situation. Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, and Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. 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.
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. It is your decision how to divide up your withholding allowances between these sources of income. 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." In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4.
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.
And remember, this isn’t a final decision. If you don’t 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.
You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. You may need more tax withheld, or you may need less.
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Table 1-2. Tax Credits for 2018
For more information about the... See...
Adoption creditInstructions for Form 8839
Credit for child and dependent care expensesPub. 503, Child and Dependent Care Expenses
Child tax credit (including the additional child tax credit)2017 Instructions for Form 1040 or Form 1040A and What’s New for 2018
Credit for other dependentsWhat’s New for 2018
Earned income credit Pub. 596, Earned Income Credit (EIC)
Education creditsPub. 970, Tax Benefits for Education
Credit for the elderly or the disabledPub. 524, Credit for the Elderly or the Disabled
Foreign tax credit (except any credit that applies to wages not subject to U.S. income tax withholding because they are subject to income tax withholding by a foreign country) Pub. 514, Foreign Tax Credit for Individuals
General business creditForm 3800, General Business Credit
Health coverage tax creditInstructions for Form 8885
Mortgage interest creditPub. 530, Tax Information for Homeowners
Qualified electric vehicle creditForm 8834
Credit for prior year minimum tax (if you paid alternative minimum tax in an earlier year)Instructions for Form 8801
Retirement savings contributions credit (saver's credit)Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs)
Credit to holders of tax credit bondsInstructions for Form 8912
Premium tax creditPub. 974, Premium Tax Credit (PTC)


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Completing Form W-4 and Worksheets(p6)

rule
When reading the following discussion, you may find it helpful to refer to Form W-4.
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Marital Status(p6)

rule
There is a lower withholding rate for people who qualify to check the "Married" box on line 3 of Form W-4. Everyone else must have tax withheld at the higher single rate.
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Single.(p6)

rule
You must check the "Single" box if any of the following applies.
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Married.(p6)

rule
You qualify to check the "Married" box if any of the following applies.
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Married, but withhold at higher single rate.(p6)

rule
Some married people find that they don’t have enough tax withheld at the married rate. This can happen, for example, when both spouses work. To avoid this, you can check the "Married, but withhold at higher Single rate" box (even if you qualify for the married rate). Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet.
If your filing status is married filing separately, you should check the "Married, but withhold at higher Single rate" box.
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Withholding Allowances(p6)

rule
The more allowances you claim on Form W-4, the less income tax your employer will withhold. You will have the most tax withheld if you claim "0" allowances. The number of allowances you can claim depends on the following factors.
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.
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Form W-4 worksheets.(p7)

rule
Form W-4 has worksheets to help you figure how many withholding allowances you can claim. The worksheets are for your own records. Don’t give them to your employer.
Complete only one set of Form W-4 worksheets, no matter how many jobs you have. 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. Complete separate sets of worksheets only if you and your spouse will file separate returns.
If you are not exempt from withholding (see Exemption From Withholding, later), complete the Personal Allowances Worksheet. Also, use the worksheets on Form W-4 to adjust the number of your withholding allowances for itemized deductions, adjustments to income, additional income (such as interest or dividends), and for two-earner or multiple-job situations.
Complete all worksheets that apply to your situation. 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.
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Multiple jobs.(p7)
If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Then split your allowances between the Forms W-4 for each job. You can’t claim the same allowances with more than one employer at the same time. You can claim all your allowances with one employer and none with the other(s), or divide them any other way.
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Married individuals.(p7)
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, and credits. Use only one set of worksheets. You can divide your total allowances any way, but you can’t claim an allowance that your spouse also claims.
If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, and credits.
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Alternative method of figuring withholding allowances.(p7)

rule
You don’t have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances.
The method you use must be based on withholding schedules, the tax rate schedules, and the 2018 Estimated Tax Worksheet in chapter 2. 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.
You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. You still must give your employer a Form W-4 claiming your withholding allowances.
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Employees who are not citizens or residents.(p7)

rule
If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U.S. national. It also does not apply if your spouse is a U.S. citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Special rules apply to residents of South Korea and India. For more information, see Withholding on Wages in chapter 8 of Pub. 519.
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Personal Allowances Worksheet(p7)

rule
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.
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Filing Status (worksheet lines A, B, and C).(p7)

rule
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Single or married but filing separately from your spouse.(p7)
You can claim an allowance for yourself. If you expect to file as single or married filing separately on your 2018 tax return, enter "1" on line A of the worksheet.
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Married filing jointly or qualifying widow(er).(p7)
You can claim an allowance if you will file as married filing jointly or qualifying widow(er). If you expect to file as married filing jointly or qualifying widow(er) on your 2018 tax return, enter "1" on line B of the worksheet.
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Head of household.(p7)
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:
For more information, see Pub. 501.
If you expect to file as head of household on your 2018 tax return, enter "1" on line C of the worksheet. In addition, see line 10 of Worksheet 1-6 for an additional amount to enter on line G of the Personal Allowances Worksheet.
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Only one job (worksheet line D).(p7)

rule
You can claim an additional withholding allowance if any of the following apply for 2018. If you qualify for this allowance, enter "1" on line D of the worksheet.
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Child tax credit (worksheet line E).(p7)

rule
If your total income will be less than $69,801 ($101,401 if married filing jointly), enter "4" on line E for each eligible child.
If your total income will be from $69,801 to $175,550 ($101,401 and $339,000 if married filing jointly), enter "2" on line E for each eligible child.
If your total income will be from $175,551 to $200,000 ($339,001 and $400,000 if married filing jointly), enter "1" on line E for each eligible child.
If your total income is higher than $200,000 ($400,000 if married filing jointly), enter "0" on line E.
To see if your child is an eligible child for the child tax credit, see the instructions for line 6c in the Form 1040 instructions.
For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A.
Instead of using line E, you can choose to take the child tax credit into account on line 1 of Worksheet 1-6.
Note. For 2018, the maximum amount you can claim for the child tax credit has increased to $2,000 for each qualifying child. The income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
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Credit for other dependents (worksheet line F).(p7)

rule
If your total income will be less than $69,801 ($101,401 if married filing jointly), enter "1" on line F for each eligible dependent.
If your total income will be from $69,801 to $175,550 ($101,401 and $339,000 if married filing jointly), enter "1" on line F for every two dependents (for example, you would enter "0" for one dependent, "1" if you have two or three dependents, or "2" if you have four dependents).
If your total income will be higher than $175,550 ($339,000 if married filing jointly), enter "0" on line F.
Instead of using line F, you can choose to take the child tax credit into account on line 2 of Worksheet 1-6.
Note. For 2018, you can claim a credit of up to $500 for each dependent who does not qualify for the child tax credit.
To see who you can claim as a dependent for the credit for other dependents, see the instructions for line 6c in the Form 1040 instructions. A dependent for purposes of the credit for other dependents also includes an eligible child who had an ITIN but not an SSN by the due date of your 2018 return (including extensions).
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Other credits (worksheet line G).(p8)

rule
Use Worksheet 1-6 to figure the amount of other credits to enter on line G. In addition to the child tax credit and credit for other dependents, you can take your other credits into account when figuring additional withholding allowances for 2018. See Table 1-2.
Head of household filers can also use Worksheet 1-6 to further reduce withholding.
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Example.(p8)

You are married and expect to file a joint return for 2018. You have one child. Your combined estimated wages are $68,000. Your estimated tax credits include a child tax credit of $2,000, a child and dependent care credit of $960, and an education credit of $1,700 (total credits = $4,660).
In Worksheet 1-6, the number corresponding to your combined estimated wages ($43,051–$101,400) is 8.3. Multiply your total estimated credits of $4,660 by 8.3 for a total of $38,678. Divide $38,678 by $4,150 and drop any fraction. Enter the result, 9, on line G of the Personal Allowances Worksheet. Because you choose to account for your child tax credit on Worksheet 1-6, enter -0- on line E of the Personal Allowances Worksheet.
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Total personal allowances (worksheet line H).(p8)

rule
Add lines A through G and enter the total on line H. If you don’t use either of the worksheets on pages 3 and 4 of Form W-4, enter the number from line H on line 5 of Form W-4.
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Deductions, Adjustments, and Additional Income Worksheet(p8)

rule
Use the Form W-4 Deductions, Adjustments, and Additional Income Worksheet if you plan to itemize your deductions or claim adjustments to the income on your 2018 tax return and you want to reduce your withholding. Also, use this worksheet to figure out how much to increase the tax withheld from your paycheck if you have a large amount of nonwage income, such as interest or dividends. Complete this worksheet when you have changes to those items to see if you need to change your withholding.
Use the amount of each item you reasonably can expect to show on your return. However, don’t use more than: Don’t include any amount shown on your last tax return that has been disallowed by the IRS.
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Example.(p8)

On June 30, 2017, you bought your first home. On your 2017 tax return, you claimed itemized deductions of $3,500, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $8,000 for those items on your 2018 return. You can use $8,000 to figure the number of your withholding allowances for itemized deductions.
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Not itemizing deductions.(p8)

rule
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.
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Itemized deductions (worksheet line 1).(p8)

rule
Enter your estimated total itemized deductions on line 1 of the worksheet.
Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2018. You normally claim these deductions on Schedule A of Form 1040. For a full list of itemized deductions, see the Instructions for Schedule A (Form 1040 for 2017) and What’s New for 2018, earlier.
  1. Medical and dental expenses that are more than 7.5% of your 2018 adjusted gross income (AGI) (defined under Expected AGI, later).
  2. State and local income or property taxes (up to $10,000).
  3. Deductible home mortgage interest.
  4. Investment interest up to net investment income.
  5. Charitable contributions.
  6. Casualty and theft losses attributable to a federally declared disaster that are more than $100 and 10% of your AGI.
Deposit
When figuring your 2018 estimated taxes, and estimating your deductions, you might want to take into account that the standard deduction for all filing statuses has increased substantially and many itemized deductions have been eliminated or the deduction amount has been reduced. See the items under What’s New for 2018, earlier.
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Adjustments to income (worksheet line 4).(p8)

rule
Enter your estimated total adjustments to income on line 4 of the Deductions, Adjustments, and Additional Income Worksheet.
You can take the following adjustments to income into account when figuring additional withholding allowances for 2018.
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Nonwage income (worksheet line 6).(p8)

rule
Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income.
If line 6 is more than line 5, you may not have enough income tax withheld from your wages. See Getting the Right Amount of Tax Withheld, later.
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Net deductions and adjustments (worksheet line 8).(p8)

rule
Divide the amount on line 7 by $4,150, drop any fraction, and enter the amount on line 8. If it's a negative amount, enter it in parentheses.
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Example.(p8)

If line 7 is $5,200, $5,200 ÷ $4,150 = 1.3. Drop the fraction (0.3) and enter "1" on line 8.
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Two-Earners/Multiple Jobs Worksheet(p8)

rule
Complete the Two-Earners/Multiple Jobs Worksheet on page 4 of Form W-4 if you have more than one job or are married filing jointly and you and your spouse both work and the combined earnings from all jobs are more than $52,000 ($24,000 if married filing jointly).
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Reducing your allowances (worksheet lines 1–3).(p8)

rule
On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions, Adjustments, and Additional Income Worksheet, if used). 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). Enter that number on line 2. If you (or you and your spouse if married) have more than two jobs, add up earnings for all jobs except the highest paying job when locating the relevant number in Table 1. However, if you are married filing jointly and estimated wages from the highest paying job are $75,000 or less and the combined wages for you and your spouse are $107,000 or less, don’t enter more than "3."
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. If line 1 is more than or equal to line 2, don’t use the rest of the worksheet.
If line 1 is less than line 2, enter "0" on Form W-4, line 5. Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding.
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Other amounts owed.(p9)

rule
If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. The total is the additional withholding needed for the year.
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Getting the Right Amount of Tax Withheld(p9)

rule
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.
But because the worksheets and withholding methods don’t account for all possible situations, you may not be getting the right amount withheld. This is most likely to happen in the following situations.
If any of these situations apply to you, you can use the IRS Withholding Calculator at IRS.gov/W4App to see if you need to change your withholding.
If you have self-employment income or owe self-employment tax you should use the worksheets in this publication to determine if you should pay estimated tax.
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Part-Year Method(p9)

rule
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. To be eligible for the part-year method, you must meet both of the following requirements.
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How to apply for the part-year method.(p9)

rule
You must ask your employer in writing to use this method. The request must state all three of the following.
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Cumulative Wage Method(p9)

rule
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. 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. You must ask your employer in writing to use this method.
To be eligible, your payroll periods (weekly, biweekly, etc.) must have been the same since the beginning of the year.
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Aids for Figuring Your Withholding(p9)

rule
taxmap/pubs/p505-001.htm#en_us_publink1000194434

IRS Withholding Calculator.(p9)

rule
If you are concerned that you may be having too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Go to IRS.gov/W4App. It can help you determine the correct amount to be withheld any time during the year.
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Rules Your Employer Must Follow(p9)

rule
It may be helpful for you to know some of the withholding rules your employer must follow. These rules can affect how to fill out your Form W-4 and how to handle problems that may arise.
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New Form W-4.(p9)

rule
When you start a new job, your employer should give you a Form W-4 to fill out. Beginning with your first payday, your employer will use the information you give on the form to figure your withholding.
If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. 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.
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No Form W-4.(p9)

rule
If you don’t 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.
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Repaying withheld tax.(p9)

rule
If you find you are having too much tax withheld because you didn’t claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Your employer can’t repay any of the tax previously withheld. Instead, claim the full amount withheld when you file your tax return.
However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you don’t have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Your employer can repay the amount that was withheld incorrectly. 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.
taxmap/pubs/p505-001.htm#en_us_publink1000194439

IRS review of your withholding.(p9)

rule
Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Your employer may be required to send a copy of the Form W-4 to the IRS. There is a penalty for supplying false information on Form W-4. See Penalties, later.
If the IRS determines that you can’t 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.
The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. 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. Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. At the end of this period, if you haven’t responded or if your response isn’t adequate, your employer will be required to withhold based on the original lock-in letter.
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.
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. 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.
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. Your employer must then withhold tax based on this new Form W-4.
Additional information is available at IRS.gov. Enter ``withholding compliance questions'' in the search box.
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Exemption From Withholding(p10)

rule
If you claim exemption from withholding, your employer won’t withhold federal income tax from your wages. The exemption applies only to income tax, not to social security or Medicare tax.
You can claim exemption from withholding for 2018 only if both of the following situations apply.
Use Figure 1-A to help you decide whether you can claim exemption from withholding. Don’t use Figure 1-A if you: These situations are discussed later.
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Students.(p10)

rule
If you are a student, you are not automatically exempt. If you work only part time or during the summer, you may qualify for exemption from withholding.
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Example 1.(p10)

You are a high school student and expect to earn $2,500 from a summer job. You don’t expect to have any other income during the year, and your parents will be able to claim you as a dependent on their tax return. You worked last summer and had $375 federal income tax withheld from your pay. The entire $375 was refunded when you filed your 2017 return. Using Figure 1-A, you find that you can claim exemption from withholding.
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taxmap/pubs/p505-001.htm#en_us_publink1000194446
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Example 2.(p10)

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. Using Figure 1-A, you find that you can’t claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,050.
EIC
You may have to file a tax return, even if you are exempt from withholding. See Pub. 501 to see whether you must file a return.
Pencil
Age 65 or older or blind. If you are 65 or older or blind, use Worksheet 1-1 or Worksheet 1-2 to help you decide whether you can claim exemption from withholding. Don’t use either worksheet if you will itemize deductions or claim tax credits on your 2018 return. Instead, see Itemizing deductions or claiming credits next.
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Itemizing deductions or claiming credits.(p11)

rule
If you had no tax liability for 2017, and you will: use Worksheet 2-1 (also see chapter 2) to figure your 2018 expected tax liability. You can claim exemption from withholding only if your total expected tax liability (line 11c of the worksheet) is zero.
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Claiming exemption from withholding.(p11)

rule
To claim exemption, you must give your employer a Form W-4. Don’t complete lines 5 and 6. Enter "Exempt" on line 7.
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. If you claim exemption in 2018 but you expect to owe income tax for 2019, you must file a new Form W-4 by December 1, 2018.
Your claim of exempt status may be reviewed by the IRS. See IRS review of your withholding, earlier.
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An exemption is good for only 1 year.(p11)
You must give your employer a new Form W-4 by February 15 each year to continue your exemption.
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Supplemental Wages(p11)

rule
Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. The payer can figure withholding on supplemental wages using the same method used for your regular wages. 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 22% flat rate under certain circumstances as explained in the section on Supplemental Wages in Pub. 15.
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Expense allowances.(p11)

rule
Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. 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.
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 don’t return the excess payments within a reasonable period of time.
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Accountable plan.(p11)

rule
To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules.
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.
The definition of reasonable period of time depends on the facts and circumstances of your situation. 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.
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Nonaccountable plan.(p11)

rule
Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan.
For more information about accountable and nonaccountable plans, see chapter 6 of Pub. 463, Travel, Entertainment, Gift, and Car Expenses.
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Penalties(p11)

rule
You may have to pay a penalty of $500 if both of the following apply.
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. The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both.
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. A simple error or an honest mistake won’t result in one of these penalties. For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, won’t be charged a Form W-4 penalty. However, see chapter 4 for information on the penalty for underpaying your tax.