When you complete Form W-4 you help your employer withhold the proper amount of federal income tax from your paycheck so you don't have a surprise at tax time. It isn't a complicated form, but there are a few things you should make sure you know.
The first four boxes are just your personal information. There are different withholding rates for single and married individuals, so decide whether you should have tax withheld at the higher or lower rate. If you've had a name change (e.g., recently married), mark box 4 and call the Social Security Administration.
You might be exempt from withholding. The basic rule to qualify as exempt is (1) you must have had no tax liability the previous year and had a right to a refund of all tax withheld, and (2) expect the same this year. That means no income tax is withheld (though Social Security and Medicare will still be withheld). This is usually only applicable to students working part-time, but may also apply to you if you are 65 or older, blind, or itemize deductions. Use the following flow chart to see if you might be exempt. If the special rules (age 65+, etc.) apply to you, see IRS Publication 505 for more information.
If you are exempt, complete W-4 boxes 1-4 and write Exempt in box 7. Sign, date, and submit. You are done. No federal income tax will be withheld from your paycheck. If you are not exempt, you need to figure out your personal allowances.
Personal allowances are calculated on the worksheet found with Form W-4. The calculation on the Personal Allowances Worksheet helps you have the right amount of income tax withheld. This number is not the same as the number of dependents or exemptions claimed on Form 1040, so do not confuse the two. When you have completed the worksheet take the amount from line H and transfer it to box 5 of Form W-4. Note that this is a worksheet, not part of the actual form, and the instructions tell you to keep it for your records.
When you submit a new W-4 your employer can place it in effect immediately, but is not required to do so until the deadline for putting it into effect, which is the first payroll period ending 30 or more days after you turn it in.
Your W-4 is valid until you change it. The exception is if you claim exempt, when it is only valid until February 15 of the following year. That means if you claim exempt you must complete a new W-4 each year. If you fail to do so, your employer is required to begin withholding at the highest possible rate, because (as explained above) you have not submitted a (new) form.
Though not a complicated form, the W-4 can have a significant impact on your tax return if you do not complete it correctly. Be sure to read the instructions carefully, and let us know if you need any help.
With the ever present sources of free Wi-Fi comes the ever present risk of a security breach and identity theft. A great tool, Wi-Fi can also be our biggest threat.
Protecting yourself can be easy if you educate yourself and use that knowledge. Read this article about The do's and don'ts of using public Wi-Fi, published by internet security leader Norton by Symantec.
There are more than 30 types of non-profit entity classifications described by various sections of the Internal Revenue Code. These range from corporations organized under act of Congress to social and recreational clubs, from business organizations to labor organizations, and virtually everything in between. The authorized purposes are as diverse as our economy. When the intent is appropriate, almost any organization can be set up as a non-profit.
The most well known type of non-profit is, of course, the 501(c)(3). The purposes for which these are organized include religious, educational, charitable, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or prevention of cruelty to children or animals. If you find an organization that does something for the benefit of others, it is probably a 501(c)(3).
Many organizations accept contributions. Some even plead, regularly, asking for your money. (Does PBS ring a bell?) If you write a check, can you deduct the gift?
Many times, Yes, but there are limits to contributions. Usually these are created either by the type of organization or the dollar amount. The most basic question when making a contribution, however, is whether the receiving organization is a qualified exempt organization.
If you want to know if an organization is eligible to receive tax-deductible charitable contributions, check out the IRS website Exempt Organizations Select Check. When you search, be sure to limit your search to avoid getting hundreds or thousands of results. The search results will include any word typed in the Name field, so either use only key words, or include an exact name (or portion of) in quotation marks to help keep your results reasonable.
If you're a nerd like me you'll be interested to see the organizations in your search results. Go check it out! (And if you have questions, let us know!)
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Our blog is intended as a tool to keep people informed about relevant tax and accounting issues. If you have a question or an idea for a post, let us know!