Page 7 - Tax withholding and Estimated Taxes

12:15 - 17-Jun-2020
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Detailed instructions for completing a new Tax Credits Once you have figured out how many allow-
Form W-4 to adjust your withholding follow ances you are entitled to claim, look at the in-
Worksheet 1-5. Table 1-2 shows many of the tax credits you come from both your pension and your new job,
may be able to use to decrease your withhold- and how often you receive payments. It is your
How Do You Increase Your ing. For a complete list of credits you may be decision how to divide up your withholding al-
Withholding? able to claim, see the 2019 Instructions for lowances between these sources of income.
Forms 1040 and 1040-SR. For example, you may want to “take home”
You can increase your withholding by entering most of your weekly paycheck to use as spend-
an additional amount that you want withheld Step 3 of Form W-4 provides instructions for ing money and use your monthly pension to
from each paycheck on Form W-4. determining the amount of the child tax credit “pay the bills.” In that case, change your Form
and the credit for other dependents. You can W-4P to zero allowances and claim all that you
Requesting an additional amount be with- also include other tax credits in Step 3 of Form are entitled to on your Form W-4.
held. You can request that an additional W-4. To do so, complete Worksheet 1-6 and
amount be withheld from each paycheck by en- add the amount from line 11 of that worksheet There are a couple of ways you can get a
tering the additional amount in Step 4(c) of to the amount you are entering for other de- better idea of how much tax will be withheld
Form W-4. To see if you should request an ad- pendents in Step 3 of Form W-4. Including when claiming a certain number of allowances.
ditional amount be withheld, complete Work- these credits will increase your paycheck and • Use the withholding tables in Pub.15-T,
sheets 1-3 and 1-5. Complete a new Form W-4 reduce the amount of any refund you may re- Federal Income Tax Withholding Methods.
if the amount on Worksheet 1-5, line 5: ceive when you file your tax return. For determining the amount that will be
withheld from a pension or annuity, use the
1. Is more than you want to pay with your tax When Will Your New Form W-4 Go tables in either Section 3 or Section 5 of
return or in estimated tax payments Pub. 15-T, which are used for Forms W-4
throughout the year, or Into Effect? from 2019 or earlier. The tables in those
2. Would cause you to pay a penalty when If the change is for the current year, your em- sections also apply to Forms W-4P, includ-
you file your tax return for 2020. ployer must put your new Form W-4 into effect ing 2020 Forms W-P.
no later than the start of the first payroll period • Contact your pension provider and your
What if I have more than one job or my ending on or after the 30th day after the day on employer's payroll department.
spouse also has a job? You are more likely which you give your employer your revised
to need to increase your withholding if you have Form W-4. And remember, this isn’t a final decision. If
more than one job or if you are married filing you don’t get the correct amount of withholding
jointly and your spouse also works. If this is the If the change is for next year, your new Form with the first Forms W-4 and W-4P you submit,
case, you can increase your withholding for one W-4 won’t take effect until next year. you should refigure your withholding using the
or more of the jobs. information and worksheets in this publication,
You can apply the amount on Worksheet Retirees Returning to the or the resources mentioned above.
1-5, line 5, to only one job or divide it between Workforce
the jobs any way you wish. For each job, deter- You should go through this same process
mine the extra amount that you want to apply to When you first began receiving your pension, each time your life situation changes, whether it
that job and divide that amount by the number you told the payer how much tax to withhold, if be for personal or financial reasons. You may
of paydays remaining in 2020 for that job. This any, by completing Form W-4P, Withholding need more tax withheld, or you may need less.
will give you the additional amount to enter on Certificate for Pension or Annuity Payments (or
the Form W-4 you will file for that job. You need similar form). However, if your retirement pay is Getting the Right Amount
to give your employer a new Form W-4 for each from the military or certain deferred compensa- of Tax Withheld
job for which you are changing your withhold- tion plans, you completed Form W-4 instead of
ing. Form W-4P. You completed either form based In most situations, the tax withheld from your
on your projected income at that time. Now that pay will be close to the tax you figure on your
Example. Meg Green works in a store and you are returning to the workforce, your new return if you follow these two rules.
earns $46,000 a year. Her husband John works Form W-4 (given to your employer) and your • You accurately complete all the Form W-4
in a factory, earns $68,000 a year, and has 49 Form W-4 or W-4P (on file with your pension worksheets that apply to you.
pay periods left. In 2020, they will also have plan) must work together to determine the cor- • You give your employer a new Form W-4
$184 in taxable interest and $1,000 of other tax- rect amount of withholding for your new amount when changes occur.
able income. They expect to file a joint income of income.
tax return. Meg and John complete Worksheets But because the worksheets and withhold-
1-3, 1-4, and 1-5. Line 5 of Worksheet 1-5 Use the worksheets that come with Form ing methods don’t account for all possible situa-
shows that they will owe an additional $4,459 W-4P to figure out how many withholding allow- tions, you may not be getting the right amount
after subtracting their withholding for the year. ances you are entitled to claim. Start off with the withheld. This is most likely to happen in the fol-
They can divide the $4,459 any way they want. Personal Allowances Worksheet. Then, if you lowing situations.
They can enter an additional amount on either will be itemizing your deductions, claiming ad- • You are married and both you and your
of their Forms W-4, or divide it between them. justments to income, or have additional income spouse work.
They decide to have the additional amount with- (such as interest or dividends), complete the • You have more than one job at a time.
held from John's wages, so they enter $91 Deductions, Adjustments, and Additional In- • You have nonwage income, such as inter-
($4,459 ÷ 49 remaining paydays) on his Form come Worksheet. est, dividends, alimony, or unemployment
W-4 in Step 4(c). compensation.
The third worksheet, the Multiple Pensions/ • You will owe additional amounts with your
How Do You Decrease Your More-Than-One-Income Worksheet, is the most return.
Withholding? important for this situation. If you have more • Your withholding is based on obsolete
than one source of income, in order to have Form W-4 information for a substantial part
If your completed Worksheets 1-3 and 1-5 show enough withholding to cover the tax on your of the year.
that you may have more tax withheld than your higher income, you may need to claim fewer • You work only part of the year.
projected tax liability for 2020, you may be able withholding allowances or request that your em- • You change the amount of your withhold-
to decrease your withholding by following the ployer withhold an additional amount from each ing during the year.
instructions in Worksheet 1-5. paycheck. • You are subject to Additional Medicare Tax
or NIIT. If you anticipate liability for Addi-
tional Medicare Tax or NIIT, you may re-
quest that your employer withhold an
Chapter 1 Tax Withholding for 2020 Page 5