Withholding Change Coming

[Silverbird]

[I just got this from our Human Resources Department at Commerce.]

On March 1, 2009, the formula for computing an individual's Federal withholding for income taxes changed as a result of the American Recovery and Reinvestment Act of 2009. This change results in a decrease in the amount of Federal tax withheld and is effective for eligible employees who claim Single, Head of Household, or Married status for Federal withholding purposes. Some taxpayers may see little or no change in the amount of Federal tax withheld because the change is phased out for a married couple filing a joint return with an adjusted gross income (AGI) between $150,000 and $190,000, and is phased out for other taxpayers with an AGI between $75,000 and $95,000. The change will be reflected in employee's salary payments for pay period 5 and is automatic; no action required by the employee or the human resources offices.

[wv-girl]

[I just got this from our Human Resources Department at Commerce.]

On March 1, 2009, the formula for computing an individual's Federal withholding for income taxes changed as a result of the American Recovery and Reinvestment Act of 2009. This change results in a decrease in the amount of Federal tax withheld and is effective for eligible employees who claim Single, Head of Household, or Married status for Federal withholding purposes. Some taxpayers may see little or no change in the amount of Federal tax withheld because the change is phased out for a married couple filing a joint return with an adjusted gross income (AGI) between $150,000 and $190,000, and is phased out for other taxpayers with an AGI between $75,000 and $95,000. The change will be reflected in employee's salary payments for pay period 5 and is automatic; no action required by the employee or the human resources offices.

That is fine except my accountant says year to date, she knows of no plans to change the tax tables on which your yearly income tax is calculated. So, we could get more in our paychecks each payday only to pay it back next year when we do taxes? :(

[Scout333]

Taxes for 2009 are being reduced by the MWP credit amounts so single or one earner families should be fine. The problem may come with taxpayers having more than one job. i.e Married couples filing jointly who may be entitled to one $ 800 credit amount may have their withholdings reduced (per revised tables) by more than the $ 800 credit amount i.e. each spouse may have their withholdings reduced which will make your withholdings too low for the year. May want to watch this carefully and adjust withholdings to compensate.


"Individuals and couples with multiple jobs may want to submit revised Form W-4 forms to ensure enough withholding is held to cover the tax for the combined income. Publication 919 provides additional guidance for tax withholding."

[Hallatauer]

I just manipulated my withholding so as to be at zero at years end... don't mess with it! We will still pay the same amount of tax come years end. How they not gonna suck us for more with the money they are paying billions for bailouts... mortaging our future even more..... <sigh>

[Scout333]

May want to look at withholdings for pension plans as well. See below.

Question: Do the new IRS tax withholding tables (Publication 15-T) apply to public pension benefit recipients and their pension income?
Answer: The new withholding tables are also applicable to certain pension payments unless the recipient has elected no withholding. The new tables incorporate the new Making Work Pay credit, a refundable credit based on an individual's earned income, and will result in lower withholding for most taxpayers. However, pension payments are not considered earned income for purposes of the credit. Consequently, a pension recipient with no earned income would not be eligible for the credit and may not have enough withheld from their pension benefits to cover their tax liability on those payments. Therefore, it is recommended that pension recipients evaluate their expected tax liability for the year and consider whether they need to make estimated tax payments or adjust their withholding on Form W-4P.:(

[Scout333]

A little better explanation of the way this credit works-

The Making Work Pay tax credit — Do I need to adjust my withholding?
Additional link: Making Work Pay Tax Credit and Q&As on IRS. gov


For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.

All eligible individuals will need to claim the credit on your 2009 income tax return, but you are receiving the benefit now (effective pay period 05 (March 1–14, 2009) through a reduction in the amount of tax that is withheld from your paycheck.

The reduced withholding tables were automatically implemented and in most cases will not require you to make any adjustment to your withholding. However,

If you have multiple jobs and both are subject to withholding or
If you are married and both receive paychecks that are subject to withholding,
the new withholding tables are being applied to each paycheck and may result in too little tax being withheld. In these instances, you should consider adjusting your withholding.

For those in higher income brackets, be aware that the credit phases out. The phase out begins for individuals with modified adjusted gross income in excess of $75,000 and $150,000 for married taxpayers, filing joint returns. The phase out of the tax credit and the automatic withholding change may also cause you to be underwithheld.

If these special circumstances apply to you, then you may want to submit a revised Form W-4 (.pdf). Publication 919 (.pdf) provides additional guidance for tax withholding. You can make changes to the amount of taxes withheld from your salary through the “Federal Tax” menu item of Employee Express.

(Submitted by W&I – Wage and Investment)





Posted by Harley Mazuk on Monday, April 06, 2009


Send your comments, questions or suggestions about this issue to IRS Headlines... and More Comments or fax them to 202-622-9875, Attention: Editor, IRS Headlines…and More.

Dept. of the Treasury
Doc. 11359
Internal Revenue Service
Cat. Number 31095R

[Scout333]

New withholding calculator is available on irs.gov

http://wwhttp://www.irs.gov/individuals/article/0,,id=96196,00

[Scout333]

Sorry link didn't work. Try this instead. New withholding calculator.

http://www.irs.gov/individuals/article/0,,id=96196,00.html