Reduction in tax withholding will count against tax credit
Staff writer
Many employees have begun taking more money home in every paycheck thanks to a 6.2 percent reduction in withholdings provided by a measure in the American Recovery and Reinvestment Act of 2009.
It is a repeat of the stimulus payments taxpayers received in 2008 but is being done in a different way.
According to local tax preparers, people need to be aware that, although the withholding reduction puts more money in their pockets, it will count against a tax credit (Making Work Pay Credit) due to them in 2009 and 2010. The tax credit is $400 per year for individuals and $800 for couples.
“You’ll get it either now or later,” said Woody Crawshaw, Jr., a tax accountant in Marion.
He cautioned people to be aware that if they receive more than the allotted tax credit in additional income from reduced withholdings, they may see a decrease in their federal tax refund or even may owe more tax.
Ken Koslowsky, a tax preparer in Hillsboro, concurred. He said the decrease in tax withholding is intended to get more money in the hands of consumers sooner, but if there is not a corresponding reduction in the tax rate, it could affect their 2009 tax return.
This is especially true for people who have multiple jobs
“If people want to get a sizeable refund, they need to adjust their W-4s to have more withheld,” Crawshaw said. “Don’t rely on the government to make sure you withhold enough.”