The new "Making Work Pay" tax credit is helping millions of Americans enjoy a small windfall. However, the government is going to want some of that money back and we'll be in for an unpleasant suprise next spring. The tax credit is suppose to provide up to $400 to individuals and $800 to married couples as part of the massive economic recover package enacted in February. Most works started receiving the credit through small increases in their paychecks. But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time. At-risk taxpayers include: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income. For many, the new tax tables will simply mean smaller-than-expected tax refunds next year.
Our advice: Check your federal withholding to make sure sufficient taxes are being taken out of your pay. if you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers. If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a Form W-4. Here is a link to the IRS website for a calculator to help you figure withholding. |
