Obama's Tax Credit Isn't Worth It!

Hey Joe!


Attached is some information you may want to provide to readers in reference to he "stimulus" money most of us are seeing in our paychecks each pay period. Basically, there was no point for us to receive this money as now we may not have enough being withheld to keep us from having to pay in at the end of the year when we file taxes.


Please feel free to contact our office with any questions regarding this, we are trying to pass the information on to clients as well as anyone else that can benefit from it.

Thank you!


"Making Work Pay" tax credit—Understanding the facts


Last February, President Obama announced to the nation that most American workers would begin to see more money in their paychecks due to the "Making Work Pay" tax credit that was to be effective no later than April 1. Some may have even heard of an exact figure per paycheck. However, not only is the tax credit amount not consistent for all workers, it could also potentially result in not enough tax withheld for the year.


While the tax credit is beneficial to many individuals and families, it is important that research be done in order to understand the impact that it will have on personal income tax returns. The tax credit is intended to provide up to $400 to individuals and $800 to married couples as part of the economic recovery package enacted in February. Instead of issuing this credit in the form of refund checks to all eligible workers, the IRS issued new withholding tax tables. These new tables will result in reduced tax withheld from employee’s paychecks.



The IRS has recently identified that the new withholding tables could cause some workers to have too little income tax withheld (causing some to either owe taxes or to see their refund reduced next year) if:
An employee is working more than one job (OR)
A married couple where both spouses are working


For example, a married couple’s combined income could make them eligible for an $800 credit; however, if both spouses work, the new withholding tables could reduce their tax withheld each by $600 – creating an overall joint reduction of $1,200 where only $800 will be allowed. The under withholding created by the new tables could result in the employee owing taxes to the IRS in April 2010.


It is strongly suggested that employees use the new IRS withholding calculator to ensure that they are not at risk. Click on the link below to access the calculator:
www.irs.gov/individuals/article/0,,id=96196,00.html


For more information about the new withholding tables that your employer is now required to use in calculating federal income tax withheld, visit the IRS website at: www.irs.gov/newsroom/article/0,,id=204521,00.html