•
8) Other miscellaneous itemized deductions
Penalty on early withdrawal of savings.
1) The amount shown for that item on your
that are more than 2% of your adjusted
•
Alimony payments.
2001 return (or your 2000 return if you
gross income, including:
•
have not yet filed your 2001 return), plus
Certain moving expenses.
a) Unreimbursed employee business ex-
•
2) Any additional amount related to a trans-
Net losses from Schedules C, D, E, and F
penses, such as educational expenses,
action or occurrence (such as the signing
of Form 1040 and from Part II of Form
work clothes and uniforms, union dues
of an agreement or the sale of property)
4797, line 18b(2).
and fees, and the cost of work-related
that you can prove has happened or will
small tools and supplies,
•
Net operating loss carryovers.
happen during 2001 or 2002.
b) Safe deposit box rental,
Enter your estimated total adjustments to in-
Do not include any amount shown on your last
c) Tax counsel and assistance, and
come on line 4 of the worksheet.
tax return that has been disallowed by the IRS.
d) Fees paid to an IRA custodian.
Tax credits (worksheet line 5). Although you
Example 1.1. On June 30, 2001, you
can take most tax credits into account when
bought your first home. On your 2001 tax return
Adjusted gross income for purposes of the
figuring withholding allowances, the Form W – 4
you claimed itemized deductions of $6,600, the
worksheet is your estimated total income for
worksheets use only the child and dependent
total mortgage interest and real estate tax you
2002 minus any estimated adjustments to in-
care credit (line F of the Personal Allowances
come (discussed later) that you include on line 4
paid during the 6 months you owned your home.
Worksheet) and the child tax credit (line G). But
of the worksheet.
Based on your mortgage payment schedule and
you can take these credits and others into ac-
your real estate tax assessment, you can rea-
Enter your estimated total itemized deduc-
count by adding an extra amount on line 5 of the
sonably expect to claim deductions of $13,200
tions on line 1 of the worksheet.
Deductions and Adjustments Worksheet.
for those items on your 2002 return. You can use
Reduction of itemized deductions.
$13,200 to figure the number of your withholding
If you take the child and dependent care
For 2002, your total itemized deduc-
allowances for itemized deductions.
credit into account on line 5, do not use line F of
tions may be reduced if your adjusted
the Personal Allowances Worksheet. If you take
gross income (AGI) is more than $137,300
Not itemizing deductions. If you expect to
the child tax credit into account on line 5, do not
($68,650 if married filing separately). If you ex-
claim the standard deduction on your tax return,
use line G.
pect your AGI to be more than that amount, use
skip lines 1 and 2, and enter “0” on line 3 of the
the following worksheet to figure the amount to
In addition to the child and dependent care
worksheet.
enter on line 1 of the Deductions and Adjust-
credit and child tax credit, you can take into
ments Worksheet.
account the following credits.
Itemized deductions (worksheet line 1).
•
Worksheet 1.2
You can take the following deductions into ac-
Credit for the elderly or the disabled. See
count when figuring additional withholding al-
Publication 524, Credit for the Elderly or
1. Enter the estimated total of your
lowances for 2002. You normally claim these
the Disabled.
itemized deductions . . . . . . . . . . . .
deductions on Schedule A of Form 1040.
2. Enter the amount included in line 1 for
•
Mortgage interest credit. See Mortgage In-
medical and dental expenses,
terest Credit in Publication 530, Tax Infor-
investment interest, casualty or theft
1) Medical and dental expenses that are
losses, and gambling losses . . . . . . .
mation for First-Time Homeowners.
more than 7.5% of your 2002 adjusted
3. Subtract line 2 from line 1 . . . . . . . .
•
gross income (defined later).
Foreign tax credit, except any credit that
Note. If the amount on line 3 is zero,
stop here and enter the amount from
applies to wages not subject to U.S. in-
2) State and local income taxes and property
line 1 of this worksheet on line 1 of the
come tax withholding because they are
taxes.
Deductions and Adjustments
subject to income tax withholding by a for-
Worksheet.
3) Deductible home mortgage interest.
eign country. See Publication 514, Foreign
4. Multiply the amount on line 3 by .80 . .
Tax Credit for Individuals.
4) Investment interest up to net investment
5. Enter your expected AGI . . . . . . . . .
•
income.
6. Enter $137,300 ($68,650 if married
Qualified electric vehicle credit. See the
filing separately) . . . . . . . . . . . . . .
instructions for Form 8834, Qualified Elec-
5) Charitable contributions.
7. Subtract line 6 from line 5 . . . . . . . .
tric Vehicle Credit.
8. Multiply the amount on line 7 by .03 . .
6) Casualty and theft losses that are more
9. Enter the smaller of line 4 or line 8 . . .
•
than 10% of your adjusted gross income.
Credit for prior year minimum tax if you
10. Subtract line 9 from line 1. Enter the
paid alternative minimum tax in an earlier
result here and on line 1 of the
7) Fully deductible miscellaneous itemized
Deductions and Adjustments
year. See the instructions for Form 8801,
deductions, including:
Worksheet . . . . . . . . . . . . . . . . . .
Credit for Prior Year Minimum Tax — Indi-
viduals, Estates, and Trusts.
a) Impairment-related work expenses of
Adjustments to income (worksheet line 4).
persons with disabilities,
•
Earned income credit, unless you re-
You can take the following adjustments to in-
quested advance payment of the credit.
b) Federal estate tax on income in respect
come into account when figuring additional with-
See Publication 596, Earned Income
of a decedent,
h o l d i n g a l l o w a nc e s f o r 2 0 0 2 . T h e s e
Credit.
adjustments appear on page 1 of your Form
c) Repayment of more than $3,000 of in-
•
1040 or 1040A.
Adoption credit. See Publication 968, Tax
come held under a claim of right (that
you included in income in an earlier
•
Benefits for Adoption.
Contributions to a traditional IRA.
year because at the time you thought
•
•
General business credit. See Form 3800,
Contributions to a retirement plan for
you had an unrestricted right to it),
General Business Credit.
self-employed individuals (Keogh plan or
d) Unrecovered investments in an annuity
•
self-employed SEP or SIMPLE plan).
Hope credit. See Publication 970, Tax
contract under which payments have
•
Benefits for Higher Education.
Contributions to a medical savings ac-
ceased because of the annuitant’s
•
count.
Lifetime learning credit. See Publication
death,
•
970, Tax Benefits for Higher Education.
Student loan interest deduction.
e) Gambling losses (up to the amount of
•
gambling winnings reported on your re-
Deduction for one-half of self-employment
To figure the amount to add on line 5 for tax
turn), and
tax.
credits, multiply your estimated total credits by
•
f) Casualty and theft losses from
the appropriate number from the following ta-
Deduction for 70% of self-employed health
income-producing property.
insurance.
bles.
Chapter 1 Tax Withholding for 2002
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