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Archive for Tuesday, November 17, 2009

Millions of Americans will have to repay part of tax credit

November 17, 2009

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— More than 15 million taxpayers may owe the government $250 or more because of how the IRS last spring set up President Barack Obama’s tax break that was designed to help consumers spend the U.S. economy out of recession.

Individuals with more than one job and married couples in which both spouses work may have to repay the government $400, either through a smaller tax refund or a larger tax bill, according to a report released Monday by the Treasury Department’s inspector general for tax administration. Social Security recipients who also earn taxable wages may have to repay $250.

The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was Obama’s signature tax break in the massive stimulus package enacted in February. The credit has increased weekly paychecks for 95 percent of working families, giving them cash to help boost consumer spending during the worst economic recession in decades.

Workers concerned about whether they are withholding enough taxes can use a calculator on the IRS Web site to find the appropriate amount that should be withheld.

Taxpayers can adjust their withholding by filing a new W-4 form with their employer. But with only a month and a half remaining in the 2009 tax year, it’s getting late to make adjustments.

Most workers started receiving the credit through small increases in their paychecks in April. The tax credit was made available through new tax withholding tables issued by the Internal Revenue Service.

The withholding tables, however, do not take into account several common categories of taxpayers. And that could force some people to repay what the government gave them.

For example, a worker with two jobs gets a $400 boost in pay at each job, for a total of $800. That worker, however, only is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time — either through a smaller refund or a payment to the IRS.

The IRS recognized there could be a similar problem for married couples if both spouses work, so it adjusted the withholding tables. The fix, however, was imperfect.

A married couple is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them each a $600 boost — for a total of $1,200.

Also, a single student with a part-time job gets a $400 boost in pay. However, if students are claimed as dependents on their parents’ tax returns, they don’t qualify for the credit and would have to repay it when they file their returns.

Some retirees face even bigger headaches.

More than 50 million Social Security recipients received $250 payments in the spring as part of the economic stimulus package. Those lump sum payments were intended to provide a boost for people who didn’t qualify for the tax credit.

However, the payments were sent to many retirees who also received the tax credit. Those retirees will have the $250 payment deducted from their tax credit — but not until they file their tax returns next year, long after the money may have been spent.

Comments

Maracas 5 years, 1 month ago

Thanks a lot, Barry. If this was your "signature", I am breathless to see what else awaits.

Flap Doodle 5 years, 1 month ago

Put another check mark in the fail column for Dear Leader's regime.

oldvet 5 years, 1 month ago

The Chicagaho fooled you again... calling a change in the withholding tables a "tax cut"... The change you wanted?

corey872 5 years, 1 month ago

Thanks.....for nothing?!? Though I distinctly remember last years tax bill jumping by $1200 - to make repayment of the GWB tax 'break' also.

mr_right_wing 5 years, 1 month ago

Change we can believe in! (Just no change left over in your pockets.)

tbaker 5 years, 1 month ago

Yet another example of why we need the FairTax. It abolishes the IRS. Check it out.

The federal government should not be allowed to take money from individual people. It's immoral. It's un-American. It's stupid to tax production. It punishes work and achievement. The 77,000+ page tax code is nothing more than a weapon politicians use to punish their enemies, reward their cronies, and enslave us.

ModSquadGal 5 years, 1 month ago

I don't even have the words for this. I'm simply dumbfounded. Sadly, I'm NOT surprised. So tired of our government deciding what is best for those of us who work our butts off for a living. Goodbye Middle Class!

puddleglum 5 years, 1 month ago

middle class? that boat left town about 15 years ago

thanks for buying japanese cars and cheap china garbage

maxcrabb 5 years, 1 month ago

"For example, a worker with two jobs gets a $400 boost in pay at each job, for a total of $800. That worker, however, only is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time — either through a smaller refund or a payment to the IRS."

I'm sorry, but part of the responsibility falls on the taxpayer here. If you receive credits you know you aren't eligible for, then you share a responsibility to give it back.

And if you don't check your pay stubs to account for your income and tax info, then it's your own fault. It's part of the responsibility of being a citizen.

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