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Tax credits: Credit for taxes withheld
Withholdings
Don't forget to claim all of your withholdings! Most people don't
have a problem with remembering to report withholdings found on
their W-2s. But many people forget to claim any withholdings on
dividends or interest income. You'll find the figures on the tax
statements your account holders end you each January.
Excess Social Security
You may be entitled to the Excess Social Security tax credit if
you worked more than one job or if you changed jobs during a tax
year. Why? Uncle Sam may have received too much in Social Security
withholdings from your wages.
There's a limit on the maximum amount of wages subject
to Social Security taxes. It changes each year because of inflation
adjustments. The maximum Social Security tax for the tax year can
be found in the Form
1040 Instructions for the "Payments" section under "Excess Social
Security and RRTA Tax Withheld," or in Publication 505, Tax Withholding
and Estimated Tax.
An employer will deduct 6.2 percent from your wages
for Social Security purposes. But since you're only liable for a
maximum of 6.2 percent of the IRS salary limit, if you had two jobs
with combined incomes over that limit, too much Social Security
tax probably was withheld. (There is no maximum earnings for the
1.45 percent withheld for Medicare purposes.)
How to claim overpaid-SS as a credit
The good news: You can take a credit for the excess withheld in
the "Payments" section of Form
1040 or Form
1040A. Since it is credited in the payment section, it is a
refundable credit and is applied like a payment. It will either
be applied against any tax owed or refunded to you.
You can't claim the credit for excess Social Security
tax on Form 1040EZ.
Credit from a Regulated Investment
Company
You must include in your income any amounts that an investment company
(for example, a mutual fund) allocated to you as capital gain distributions,
even if you didn't actually receive them.
If the investment company paid a tax on the capital
gain, you're allowed a credit for the tax since it is considered
paid by you. The company will send you Form
2439, Notice to Shareholder of Undistributed Long-Term Capital
Gains, showing the undistributed capital gains amount and the
tax paid, if any. Claim the credit by entering the amount on line
65, Form 1040, and checking box A. Also, attach Copy B of Form 2439
to your return.
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