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. WASHINGTON ? The Internal Revenue Service today
released new withholding tables that will result in more take-home
pay this spring for millions of American workers.
The new tables incorporate the new Making Work Pay
credit, one of the key
tax provisions included in the American Recovery and Reinvestment
Act of 2009 that became law earlier this week.
“For most taxpayers, the additional credit will automatically
start showing up in their paychecks this spring,” said IRS Commissioner
Doug Shulman. “Since employers and payroll companies will handle
this change, people typically won’t need to take any additional
action. The IRS will continue working to implement this and other
provisions of the new law as quickly as possible.”
The new
withholding tables, along with other instructions related to
the new tax law, will be incorporated in new Publication 15-T. This
publication will be posted to this Web site next week and mailed
to more than 9 million employers in mid-March. The IRS asks that
employers start using these new tables as soon as possible but not
later than April 1. Most workers will see a boost in their take-home
pay soon thereafter.
Eligible workers will get the benefit of this change
without any action on their part. This means that workers don’t
need to fill out a new W-4 withholding form to get the Making Work
Pay credit reflected in their take-home pay. A Form W-4 will not
need to be submitted for the automatic withholding change. 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.
Available for tax years 2009 and 2010, the Making
Work Pay credit is 6.2 percent of a taxpayer’s earned income
with a maximum credit of $800 for a married couple filing a joint
return and $400 for other taxpayers, but it is phased out for higher
income taxpayers. Most workers will qualify for the maximum credit.
Because the credit is refundable (people can get it even if they
owe no tax), most low-income workers will also qualify for the full
credit.
Though all eligible taxpayers will need to claim the
credit when they file their 2009 income tax return next year, the
benefit will generally be spread out over the paychecks they receive
beginning this spring and continue until the end of the year.
Many higher-income taxpayers will see little or no
change in their take-home pay. That’s because the Making Work Pay
credit is phased out for a married couple filing a joint return
whose modified adjusted gross income (AGI) is between $150,000 and
$190,000 and other taxpayers whose modified AGI is between $75,000
and $95,000.
Taxpayers will not get a separate, special check mailed
to them from the IRS like last year’s economic stimulus payment.
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