A program launched by the federal government in 2009 to put a little more money into people's pockets during tough economic times will continue this year, and like last year, some taxpayers might find that less tax is being withheld than they prefer, according to the Internal Revenue Service.
As a result of the program, known as the Making Work Pay Tax Credit, some taxpayers might get a smaller refund or owe money to the IRS as part of their 2009 income taxes, and could face the same thing for their 2010 taxes if they don’t adjust the amount of tax withheld on their paychecks.
Making Work Pay was part of last year’s American Recovery and Reinvestment Act, the federal stimulus legislation signed into law by President Barack Obama in response to the economic meltdown in the second half of 2008. The program provides a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns, but it doesn’t apply to those whose adjusted gross income exceeds $75,000 or $150,000 for married couples filing jointly.
According to the IRS:
“For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.”
However, a limited number of people, including those who usually receive small refunds, could owe a small amount. Those include:
• Pensioners who receive earned income, such as wages or who are self-employed.
• Married couples with two incomes.
• Individuals with more than one job.
• Some Social Security recipients who work.
• Workers without valid Social Security numbers.
The self-employed also can qualify for Making Work Pay, according to the IRS, by evaluating their expected income tax liability and allowing for the tax credit if they are eligible.
This could mean making adjustments to estimated tax payments.
For more information or to check whether your current withholding is appropriate to your situation, you can:
• Go to the IRS withholding calculator at http://www.irs.gov/individuals/article/0,,id=96196,00.html?portlet=4
• Check out information on the Making Work Pay tax credit at http://www.irs.gov/newsroom/article/0,,id=204447,00.html
• Call the IRS from 7 a.m. to 10 p.m. Monday through Friday at 1-800-829-1040 or go to the Web site at www.irs.gov.