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INSIDE WASHINGTON: Taxpayers to get rude surprise
INSIDE WASHINGTON: Millions of couples, retirees may have to repay some of Obama tax credit

Stephen Ohlemacher, Associated Press Writer
On Thursday April 30, 2009, 6:55 pm EDT

WASHINGTON (AP) -- Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.

At-risk taxpayers include a broad swath of the public: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income.

The Internal Revenue Service acknowledges problems with the withholding tables but has done little to warn average taxpayers.

"They need to get the Goodyear blimp out there on this," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.

For many, the new tax tables will simply mean smaller-than-expected tax refunds next year, IRS spokesman Terry Lemons said. The average refund was nearly $2,700 this year.

But taxpayers who calculate their withholding so they get only small refunds could face an unwelcome tax bill next April, said Jackie Perlman, an analyst with the Tax Institute at H&R Block.

"They are going to get a surprise," she said.

Perlman's advice: check your federal withholding to make sure sufficient taxes are being taken out of your pay. If you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers. If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a Form W-4.

The IRS has a calculator on its Web site to help taxpayers figure withholding. So do many private tax preparers.

Obama has touted the tax credit as one of the big achievements of his first 100 days in office, boasting that 95 percent of working families will qualify in 2009 and 2010.

The credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more $95,000 and couples making more than $190,000 are ineligible.

The tax credit was designed to help boost the economy by getting more money to consumers in their regular paychecks. Employers were required to start using the new withholding tables by April 1.

The tables, however, don't take into account several common categories of taxpayers, experts said.

For example:...............http://finance.yahoo.com/news/INSIDE-WASHINGTON-Rude-apf-15091434.html?.v=1

Oh isn't that nice.  What a success his first 100 days have been. Like Sally says, it's all Bush's fault, I'm voting dem "over here"

The stupid government.  Why the heck didn't they merely send people a check for $400?   Or add $400 to the income tax refunds (or reduce the amount owed byt  $400.

The problem is the government ASSUMES.

Here is what the goverment ASSUMED.   It ASSUMED that everyone who chooses "married" on their W4 is a one-income family, i.e., the named person on the W4 is married, is the worker, but their husband or wife is NOT employed.  

So therefore, EVERYONE who has their tax withholding as "married" will get an additional $600 during the year.   And if their husband or wife also works and is listed as "married" that person will also get and extra $600 net pay.  That adds up to $1,200 which is $400 more than the couple is supposed to have.  

These days, it may be common for either the husband or wife to have a second job, again, if listed as "married" yet another $600 more will be provided in the second job, so now, the couple has received $1,000 more, and may end up paying a tax penalty next spring.

I have a cousin who is widowed and had long had the W-4 has married and gets a small refund every year.  She works two jobs.  When this plan came out and it was supposed to be roughly an extra $10 per weekly paycheck---and she gets paid bi-weekly and got $30 extra--and her second job has variable hours so it's difficult to determine how much extra she got, I started researching this, it was finally understandable.  Since she has married on the withholding for each job, she'd be getting an extra $1,200 this year and then owe $800 next year.  She rarely has that much in the bank!  So she changed to single (for marital status) on both, 0 exemptions on one job and minus 1 exemption on the other job.  So now, her net paycheck is less than before obama's tax relief program!

So, everyone needs to go change their tax withholding to "single" even if they are married.

These days, with a normal household, both husband and wife work, so why didn't the president use that fact instead of assume that only one of the couple works?

Now, what will happen is that everyone should change to single and then when the tax relief ends, then beginning in 2010 most people will forget about their change to single and they will then be having too much tax withheld during the year, yes, they will get it refunded, but by having too much withheld, the goverment wlil be getting an interest free loan from the taxpayers.