Two-Earner/Two-Job Worksheet

You should complete this worksheet if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $35,000.

If you use this worksheet and your earnings are more than $125,000 ($175,000 if you are married), see Publication 919 to check that you are having enough tax withheld.

Reducing your allowances (worksheet lines 1 - 3).   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). Using Table 1 on the Form W-4, find the number listed beside the amount of your estimated wages for the year from your lowest paying job (or if lower, your spouse's job). Enter that number on line 2.

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, do not use the rest of the worksheet (or skip to line 8 if you expect to owe amounts other than income tax).

If line 1 is less than line 2, you should complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding.

Other amounts owed.   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.

Example 1.3

Joyce Green works in a bookstore and expects to earn about $13,300. Her husband, John, works full time at the Acme Corporation, where his expected pay is $48,500. They file a joint income tax return and claim exemptions for their two children. Because they file jointly, they use only one set of Form W-4 worksheets to figure the number of withholding allowances. The Greens' worksheets and John's W-4 are shown on the next page.

Filled-in Form W–4, page 1

Filled-in Form W–4, page 2

Personal Allowances Worksheet.   On this worksheet, John and Joyce claim allowances for themselves and their children by entering 1 on line A, 1 on line C, and 2 on line D. Because both John and Joyce will receive wages of more than $1,000, they are not entitled to the additional withholding allowance on line B. The Greens expect to have child and dependent care expenses of $2,400. They enter 1 on line F of the worksheet. Because they are married, their total income will be between $20,000 and $65,000 and they have two eligible children, they enter 2 on line G.

They enter their total personal allowances, 7, on line H.

Deductions and Adjustments Worksheet.   Because they plan to itemize deductions and claim adjustments to income, the Greens use this worksheet to see whether they are entitled to additional allowances.

The Greens' estimated itemized deductions total $11,200, which they enter on line 1 of the worksheet. Because they will file a joint return, they enter $7,850 on line 2. They subtract $7,850 from $11,200 and enter the result, $3,350, on line 3.

The Greens expect to have an adjustment to income of $3,000 for their deductible IRA contributions. They do not expect to have any other adjustments to income. They enter $3,000 on line 4.

The Greens add line 3 and line 4 and enter the total, $6,350, on line 5.

Joyce and John expect to receive $600 in interest and dividend income during the year. They enter $600 on line 6 and subtract line 6 from line 5. They enter the result, $5,750, on line 7. They divide line 7 by $3,000, and drop the fraction to determine one additional allowance. They enter 1 on line 8.

The Greens enter 7 (the number from line H of the Personal Allowances Worksheet) on line 9 and add it to line 8. They enter 8 on line 10.

Two-Earner/Two-Job Worksheet.   The Greens use this worksheet because they both work and together earn over $35,000. They enter 8 (the number from line 10 of the Deductions and Adjustments Worksheet) on line 1.

Next, they use Table 1 on the Form W-4 to find the number to enter on line 2 of the worksheet. Because they will file a joint return and their expected wages from their lowest paying job are $13,300, they enter 2 on line 2. They subtract line 2 from line 1 and enter 6 on line 3 of the worksheet and on Form W-4, line 5.

John and Joyce Green can take a total of 6 withholding allowances between them. They decide that John will take all 6 allowances on his Form W-4. Joyce, therefore, cannot claim any allowances on hers. She will enter 0 on line 5 of the Form W-4 she gives to her employer.

Getting the Right Amount of Tax Withheld

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.

1. You accurately complete all the Form W-4 worksheets that apply to you.
2. You give your employer a new Form W-4 when changes occur.

But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. This is most likely to happen in the following situations.

• You are married and both you and your spouse work.
• You have more than one job at a time.
• You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income.
• You will owe additional amounts with your return, such as self-employment tax.
• Your withholding is based on obsolete Form W-4 information for a substantial part of the year.
• Your earnings are more than $125,000 if you are single or $175,000 if you are married.

To make sure you are getting the right amount of tax withheld, get Publication 919. It will help you compare the total tax to be withheld during the year with the tax you can expect to figure on your return. It also will help you determine how much, if any, additional withholding is needed each payday to avoid owing tax when you file your return. If you do not have enough tax withheld, you may have to make estimated tax payments. See chapter 2 for information about estimated tax.

Rules Your Employer Must Follow

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.

New Form W-4.   When you start a new job, your employer should give you a Form W-4 to fill out. Your employer will use the information you give on the form to figure your withholding beginning with your first payday.

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.

No Form W-4.   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate - as if you were single and claimed no allowances.

Repaying withheld tax.   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Your employer cannot repay any of the tax previously withheld.

However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not 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 incorrectly withheld. If you are not repaid, your Form W-2 will reflect the full amount actually withheld.

Sending your Form W-4 to the IRS.   Your employer will usually keep your Form W-4 and use it to figure your withholding. Under normal circumstances, it will not be sent to the IRS. However, your employer must send a copy of your Form W-4 to the IRS for verification in both of the following situations.

1. You claim more than 10 withholding allowances.
2. You claim exemption from withholding and your wages are expected to usually be more than $200 a week. See Exemption From Withholding, later.

The IRS may ask you for information showing how you figured either the number of allowances you claimed or your eligibility for exemption from withholding. If you choose, you can give this information to your employer to send to the IRS along with your Form W-4.

If the IRS determines that you cannot take all the allowances claimed on your Form W-4, or that you are not exempt as claimed, it will inform both you and your employer and will specify the maximum number of allowances you can claim. The IRS also may ask you to fill out a new Form W-4. However, your employer cannot figure your withholding on the basis of more allowances than the maximum number determined by the IRS.

If you believe you are exempt or can claim more withholding allowances than determined by the IRS, you can complete a new Form W-4, stating on the form, or in a written statement, any circumstances that have changed or any other reasons for your claim. You can send it directly to the IRS or give it to your employer to send to the IRS. 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 to withhold on the basis of the new Form W-4.

There is a penalty for supplying false information on Form W-4. See Penalties, later.

Social security (FICA) tax.   Generally, each employer for whom you work during the tax year must withhold social security tax up to the annual limit.

Exemption From Withholding

If you claim exemption from withholding, your employer will not 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 2002 only if both the following situations apply.

1. For 2001 you had a right to a refund of all federal income tax withheld because you had no tax liability.
2. For 2002 you expect a refund of all federal income tax withheld because you expect to have no tax liability.

Use Figure A, later in this chapter, to help you decide whether you can claim exemption from withholding. Do not use Figure A if you:

• Are 65 or older,
• Are blind,
• Will itemize deductions on your 2002 return.
• Will claim an exemption for a dependent on your 2002 return.
• Will claim any tax credits on your 2002 return.

These situations are discussed later.

Student.   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.

Example 1.4.   You are a high school student and expect to earn $2,500 from a summer job. You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you 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 2001 return. Using Figure A, you find that you can claim exemption from withholding.

Example 1.5.   The facts are the same as in Example 1.4, except that you have a savings account and expect to have $320 interest income during the year. Using Figure A, you find that you cannot claim exemption from withholding because your unearned income will be more than $250 and your total income will be more than $750.

You may have to file a tax return, even if you are exempt from withholding. See Publication 501, Exemptions, Standard Deduction, and Filing Information, to see whether you must file a return.

Age 65 or older or blind. If you are 65 or older or blind, use one of the following worksheets to help you decide whether you can claim exemption from withholding. Do not use either worksheet if you will itemize deductions or claim exemptions for dependents or claim tax credits on your 2002 return - instead, see Itemizing deductions or claiming exemptions or credits, following the worksheets.

Worksheet 1.3 Exemption From Withholding Worksheet for 65 or Older or Blind

Use this worksheet only if, for 2001, you had a right to a refund of all federal income tax withheld because you had no tax liability.
Caution. This worksheet does not apply if you can be claimed as a dependent. See Worksheet 1.4 instead.
1. Check the boxes below that apply to you.
65 or older	Blind
2. Check the boxes below that apply to your spouse if you will claim your spouse's exemption on your 2002 return.
65 or older	Blind
3. Add the number of boxes you checked in 1 and 2 above. Enter the result
You can claim exemption from withholding if:
Your filing status is:	and the number on line 3 above is:	and your 2002 total income will be no more than:
Single	1	$ 8,850
	2	10,000
Head of household	1	$11,050
	2	12,200
Married filing separately for both 2001 and 2002	1	$ 7,825
	2	8,725
	3	9,625
	4	10,525
Other married status	1	$14,750*
	2	15,650*
	3	16,550*
	4	17,450*
*Include both spouses' income whether you will file separately or jointly.
Qualifying widow(er)	1	$11,750
	2	12,650
You cannot claim exemption from withholding if your total income will be more than the amount shown for your filing status.

Worksheet 1.4 Exemption From Withholding Worksheet for Dependents Who Are 65 or Older or Blind

Use this worksheet only if, for 2001, you had a right to a refund of all federal income tax withheld because you had no tax liability.
1.	Enter your expected earned income plus $250
2.	Minimum amount		$750
3.	Compare lines 1 and 2. Enter the larger amount
4.	Enter the appropriate amount from the following table
Filing Status Amount
	Single	$4,700
	Married filing separately	3,925
5.	Compare lines 3 and 4. Enter the smaller amount
6.	Enter the appropriate amount from the following table
Filing Status Amount
	Single
	Either 65 or older or blind	$1,150
	Both 65 or older and blind	2,300
	Married filing separately
	Either 65 or older or blind	900
	Both 65 or older and blind	1,800
7.	Add lines 5 and 6. Enter the result
8.	Enter your total expected income
You can claim exemption from withholding if line 7 is equal to or more than line 8. If line 8 is more than line 7, you cannot claim exemption from withholding.

Itemizing deductions or claiming exemptions or credits.   If you had no tax liability for 2001, and you will either:

1. Itemize deductions,
2. Claim an exemption for a dependent, or
3. Claim a tax credit,

use the 2002 Estimated Tax Worksheet in Form 1040-ES (also see chapter 2), to figure your 2002 expected tax liability. You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero.

Claiming exemption from withholding.   To claim exemption, you must give your employer a Form W-4. Print Exempt on line 7.

Your employer must send the IRS a copy of your Form W-4 if you claim exemption from withholding and your pay is expected to usually be more than $200 a week. If it turns out that you do not qualify for exemption, the IRS will send both you and your employer a written notice.

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 2002, but you expect to owe income tax for 2003, you must file a new Form W-4 by December 1, 2002.

An exemption is good for only one year.   You must give your employer a new Form W-4 by February 15 each year to continue your exemption.

Figure A: Exemption From Withholding Algorithm

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