Making Work Pay Credit

[duanecpa]

Does anyone understand what will happen on the 2009 tax return for those people who, through reduced federal withholding, will receive the $400 credit through reduced federal income tax withholding?

For example, if the projected 2009 federal tax liability is $7,100 and the taxpayer is withholding to meet that projected 2009 federal tax liability - what will happen when the employers of both husband and wife reduce their federal withholding by a total of $800 - $400 credit for each? The taxpayer will have paid in a total of $800 less for 2009 - will the taxpayer have to make up the difference on the 2009 tax return and pay in $800? Or, will the government give the taxpayer a $800 credit on their tax return so that the taxpayer will not be out of pocket any money due to the change in the withholding tables?

Thank you.

[BOB W]

My understanding is that the credit will appear on the tax return whether the employer reduces withholding or not.

[bruehaus]

It's worse than that. Married couples that both work will each have $800 less withheld from their pay. They will get only $800 in Making Work Pay credit on the tax return, so they will be short $800. And it is worse for those with multiple jobs. Each job will withhold $800 less. And adding several jobs together which results in pushing someone into the phase-out range...well, face it, it's gonna cause tax clients to be angry at us tax preparers. I guess I'll just tell them it helped "stimulate" the economy!

[BOB W]

""""Each job will withhold $800 less""...I thought it was $400 less withheld. It should work out even.

Your issue of multiple jobs is well taken......................

[bruehaus]

No it is $800 less withholding per job. I work for a tax software company (CFS) and we have done the comparison. We sent an email out to users to be aware of this issue.

[BOB W]

Something does not sound right with you info.

[Earl]

Making Work Pay Credit

It depends on how your W4 form is filled out. If your W4 shows withhold single or at single rates only $400 will be shorted. If your W4 shows withhold married then $800 will be shorted. So if husband and wife both have W4 with married they will be shorted $800.

[BOB W]

Well, that is another stupid government interpetation. It was supposed to be "Per Worker" and not to be how you file your tax return.. What jerks. It assumes spouse's don't work. Maybe in Chicago it is that way but not where I live.

[David1980]

Yeah the W-4 has always seemed to be set up more for a 1-earner couple where the spouse stays at home.

Easiest way to handle this is to try and get a paystub from taxpayer pre-adjustment and post-adjustment. Then multiply difference in fed withholding by amount of pay periods in year after the adjustment - if it calculates to $400 great. If it's $800 and both spouses are earning, you can have them add an amount to be withheld on the W-4.

[RitaB]

I thought it was "if you have more than one job"

you will have even less than $400 withheld, not "if you're married" you'll have even less than $400 wittheld. (Wow, that sentence is confusing.)

Example: You have two jobs. At each job you will have $400 less withheld, for a total of $800 less withheld. Wife has three jobs. (She's a go-getter.) $1200 less will be withheld. When you do the tax return, each of you get $400 credit on the return, so you're in trouble.

$800 credit on return - $2000 less withheld that you spent already to stimulate the economy = You're short $1200 bucks when you file.

That, the way I understand it, is why they say you might want to think about all this if you have multiple jobs:

http://www.irs.gov/newsroom/article/0,,id=204447,00.html?portlet=7

Do I have this totally wrong? Oh, my, this is gonna be a problem for us, isn't it?



Just got a call: "When are they supposed to send out this year's stimulus checks?" (Not a SS recipient, just a slacker that works once in a while wantin that free money.)

[BOB W]

There goes Government playing business manager again. And you are right, tax preparers are going to pay the price for this.

I guess someone aught to notify the "Press' and get this story out to the public.

[JG EA]

""""Each job will withhold $800 less""...I thought it was $400 less withheld. It should work out even.

Your issue of multiple jobs is well taken......................

No he is correct. We have been writting down the differences. Married people have more withholding returned than single people and it will go up to the $800 in some cases. So, if there are two earners in the family then that is $1600 and only a $800 credit to look forward to.

[S T]

Already

Have reviewed a taxpayer that owes for 2008, small amount, but still owes due to the hours and way payroll is issued. So we just adjusted for that amount, and now have to go back to employer and adjust again for the reduction under the 09 Stimulus Plan, or they will still owe!

Remembrances of years past when Feds adjusted the withholding table. Pesonally I would rather that the clients not owe at the end of the tax period and then not have the extra $15-$20 per pay period to spend. Where are they going to spend the extra, McDonald's or Burger King?

This is ridiculous!

Sandy

[BOB W]

I'm just bumping this up so that others get a chance to read this before it gets lost.