Business & Finance Taxes

Watch Out for Stimulus Overpayments or You May Owe the IRS

What you need to know about the Making Work Pay Credit for your 2009 tax return

The Making Work Pay Credit is an economic stimulus provision of the American Recovery and Reinvestment Act (Stimulus Act) that took effect in April 2009. The purpose of the credit, which is in force for both 2009 and 2010 tax years, is to provide up to an additional $400 per year to working individuals and $800 per year to working married couples through a reduction in withholding taxes. For most workers, this has resulted in a small increase in their take-home pay which is intended to increase spending and stimulate the economy.

The amount of the credit will be calculated on each taxpayer's 2009 income tax return. However, certain working individuals are not eligible for this credit but may have seen a reduction in their withholding anyway. This may result in an overpayment of the Making Work Pay Credit and cause either a reduced income tax refund or taxes due to the IRS.

Who Doesn't Qualify for the Making Work Pay Credit?

Some taxpayers who are not eligible for the Making Work Pay Credit include:

* Individual taxpayers with an Adjusted Gross Income (AGI) of $95,000 or more and married couples filing jointly with an AGI of $190,000 or more.

* Anyone who can be claimed as a dependent on someone else's taxes.

Even if you're not on this list, you may have inadvertently received more than your share of the credit in your pay, since employers are required to use the same withholding tables for all workers. This may mean you owe that money back to the IRS on your personal income taxes.

Who May Have Received Excess Making Work Pay Credit Amounts?

Taxpayers that fall into any of the following categories may end up owing money back to the IRS or seeing a reduced refund amount because of excessive credits in their paycheck:

* Single workers with more than one job.

* Joint filers with multiple jobs.

* Individuals who file with an Individual Taxpayer Identification Number.

According to the Treasury Inspector General for Tax Administration, more than 15.4 million taxpayers may need to pay back some or all of their advance credits or even be assessed an estimated tax penalty as a direct result of the Making Work Pay Credit.

What Can Taxpayers Do About Making Work Pay Credit Overpayments?

If you've received excessive Making Work Pay Credit advances, there isn't much that can be done to alleviate your tax burden for 2009. Using an e-file site, like www.efiletaxreturns.com, to prepare and file your taxes online will help you spot any overpayments and assist you in getting the maximum deductions available in order to reduce your taxes. This will also give you a good idea of what amount you should be withholding from your pay in order to avoid a similar situation next year.

For the 2010 tax year, workers can make adjustments to their withholding now to account for the Making Work Pay Credit. When you have determined your correct withholding amount, any adjustments can be made by filing a revised Form W-4, Employee's Withholding Allowance Certificate, with your employer.
SHARE
RELATED POSTS on "Business & Finance"
How Do Tax Write-Offs Work?
How Do Tax Write-Offs Work?
Arkansas Income Tax Information
Arkansas Income Tax Information
Deductions From Federal Income Tax for Children Attending College
Deductions From Federal Income Tax for Children Attending College
What Is the 1099 Filing Limit?
What Is the 1099 Filing Limit?
Form 1099 Tax Requirements
Form 1099 Tax Requirements
What Are Sales & Use Taxes?
What Are Sales & Use Taxes?
What is Form 941 and Why Must You File It?
What is Form 941 and Why Must You File It?
Exploding The Myths About Your Property Tax Bill
Exploding The Myths About Your Property Tax Bill
The Best Home Businesses to Start
The Best Home Businesses to Start
Accountancy for Contactors England is no Laughing Matter
Accountancy for Contactors England is no Laughing Matter
Can I Deduct the Real Estate Taxes on a Second Home?
Can I Deduct the Real Estate Taxes on a Second Home?
HMRC Ever More Intrusive?
HMRC Ever More Intrusive?
Applying the New Tax Law to Your Taxes
Applying the New Tax Law to Your Taxes
7 Useful Tax Tips for Business Driving
7 Useful Tax Tips for Business Driving
Hiring Naperville Accountants For Your Business Organization
Hiring Naperville Accountants For Your Business Organization
Don't Fall Victim To Tax Scams
Don't Fall Victim To Tax Scams
How to Calculate a Tip Before or After Tax
How to Calculate a Tip Before or After Tax
Can a Full-Time Student Take an IRA Deduction?
Can a Full-Time Student Take an IRA Deduction?
Experts Can Help You Understand Business Tax Rules
Experts Can Help You Understand Business Tax Rules
Casualty (Theft) Loss
Casualty (Theft) Loss
How Much Do I Pay for My Self-Employed Social Security Taxes?
How Much Do I Pay for My Self-Employed Social Security Taxes?
Lower Your Taxes With International Tax Planning
Lower Your Taxes With International Tax Planning
Use Of Tax Planning For Future
Use Of Tax Planning For Future
Qualifications for Earned Income Credits
Qualifications for Earned Income Credits

Leave Your Reply

*