A few weeks ago the American Recovery and Reinvestment Act of 2009 was passed. Since it was passed we have talked about quite a few of the benefits including home buyer tax credits, sales tax credits for new car buyers, and a post about overall stimulus package benefits. Today I thought we could answer the question that I keep seeing in the search and traffic logs for this site. “When can I expect to see the increase in my paycheck for the “Making Work Pay” tax credit?”.
When Will I See An Increase In My Paycheck Due To The American Recovery and Reinvestment Act?
As a refresher, most people who work will be receiving a tax credit by having less federal tax withheld from their paychecks:
Making Work Pay Credit: The stimulus bill will give a $400 credit per worker and a $800 credit per working couple. Almost everyone will receive this. The full credit would be paid to people making $75,000 or less ($150,000 per dual-earner couple). A partial credit would be paid to those making above those amounts but no more than $100,000 ($200,000 for couples). The credit would also be refundable, which means that even very low-income families who don’t make enough to owe income tax would be able to claim it. For most working individuals, the credit will be paid over time at roughly $15 per period, assuming 26 pay periods in a year. People who are self-employed can adjust their quarterly tax filings to account for the credit.
So pretty much everyone under 75-100k will be getting this tax credit through decreased withholdings. So the question remains, when will this decreased withholding of taxes begin? The IRS has put together new withholding tables for businesses to use when doing their payroll, and they have been mailed out to all businesses. Businesses should all start using the new tables “this spring”. From the IRS site:
“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.
So employers are being asked to start using the tables ASAP, but that they should start using them no later than April 1st. If you haven’t seen a boost in your take home pay by then, you should soon thereafter. If not, you may want to check into it!
‘Making Work Pay’ Credit Could Bring Unexpected Tax Bill For Some
One thing to keep in mind when getting your tax credit is to make sure that you’re not getting too much. From Fox News:
If you file a joint return with your spouse, and you both work, you should carefully review your withholding, because it’s highly likely both employers, without knowledge of what the other is doing, will adjust withholding such that both spouses receive up to $800, for a total credit of $1,600.
“It’s conceivable that if both are married-filing-joint and their income is not otherwise going to cause a phase-out [of the credit], they could get the double benefit,” said Frank Keith, chief of communications for the IRS. “When they file their return, the actual credit they’re entitled to is $800.”
That means paying back up to $800 with your return, though Keith said the money paid out this year, and thus any tax bill later, likely would be slightly lower — since the withholding adjustment starts close to midyear, the full credit won’t be paid out in paychecks.
For some, what’s effectively a loan from the government might be welcome. But others will find the big bill next year unwelcome. One way to prevent it: Adjust your withholding this year.
So be careful, and make sure that you’re not receiving double the benefit. If you do, you may have an unwelcome tax bill come next year!
Will the $400-800 extra in your paychecks for the year make a difference? Have you started seeing it yet in your paycheck?
Thanks for the information! I think it is worth noting that for the self-employed, the IRS has publication T-15 that can help you figure out how to adjust your estimated taxes. Or you can just wait until the end of the year and take the entire credit then.
I know that my work starting participating in this two weeks ago, so some people may have already seen the change.
I started getting my money in my paycheck from 3/13 – our checks are from ADP. I am one of those that will have to adjust our withholding because my husband and I both work. How many people are going to be shocked that they will have to pay the gov’t money at tax time because the whole amount is being give to each person? Its crazy the the gov’t is going to change the withholding tables and then say Oh wait, WE are responsible to make sure we don’t get too much. Oh, and we might penalize you if you get too much of the credit. Pretty bogus if you ask me.
Steve M says
I had $33 extra on the March 13th payday. I filled out a new W4 and found out today, I am getting an extra $36 next Tuesday! Gotta keep on these HR guys, they are having a handful right now, I imagine!
thomas fanuzzi says
I get paid every 2 weeks In my last paycheck i received $15.77 the yearly total came to about $325 will i receive the extra $75 on my tax refund in 2010?
So the with holding rate changed, but how about the tax rate? If the tax rate didn’t change and they with hold less, don’t I still have to give it back next April 15th?
Doesn’t make much sense to me, but everything that comes from DC these last 20 years doesn’t make any sense!
Lord, Please come back soon!
I have zero income and my husband makes 102,000
will we be able to take any of the 400/800 stimulus credit on our taxes? we file married-jointly can we get any of the 200,000 credit?
Just for everyone’s info, I just looked at my projected pay stub for Feb and my Fed tax went up $25. They say no tax hikes, but the Making Work Pay credit expired 31 Dec 2010. They get you one way or the other.
Peter Anderson says
Yup, fed tax may increase, but you should also see a 2% cut in your social security taxes this year. See this article:
2011 Federal Tax Increase For Some