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MCC Daily Tribune Archive

Your Paycheck - The American Recovery & Reinvestment Act and How It Affects You


As noted in the Trib article dated March 2, 2009, the American Recovery & Reinvestment Act included the Making Work Pay Tax Credit. In short, this new credit amounts to $400 for single tax filers and $800 per married couple. You will apply for this credit when you file your 2009 tax return (this credit does phase out depending on your income level). Instead of sending $400 to all single tax filers and $800 to all married couples, the IRS changed its withholding tables. This means that you are getting the benefit of this credit in your paycheck as your Federal Tax withholding should have been lowered beginning with your March 5, 2009 paycheck.

The IRS has stated that employees do not need to complete a new W-4 as the new tax tables have taken into account all current tax provisions. However, those individuals with multiple jobs or a married couple with two incomes may find they are receiving too much credit via their payroll taxes. For example: Take a household in which each spouse is employed and each earns $50,000 per year. Assume they each began receiving an extra $25 per bi-weekly pay period starting in April and will each receive 20 paychecks thru December. At the end of the year, this couple will have received $1,000 more in their bi-weekly paychecks but the credit is limited to $800. The $200 will be paid (or refund reduced) when they file their 2009 tax return.

In summary, your spouse’s income and/or income from a second job may put you in a situation where your combined increase in net pay will exceed this new tax credit. Therefore, you may be receiving more credit than is allowable for 2009 – certainly not illegal –but you may be surprised when filing your 2009 tax return.

This is NOT meant as tax advice - see your tax advisor for that. This notice is meant to make you aware of how this credit is being administered. Based on your situation, you may want to complete a new Form W-4. Please refer to <<https://www.irs.gov/newsroom/article/0,,id=204447,00.html>> for more information on this credit.

Mike Quinn
Controller
04/16/2009


Attachments:
icon American Recovery & Reinvestment Act Trib April 2009.doc



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American Recovery & Reinvestment Act Trib April 2009.doc