Alert: New IRS withholding tables kick in April 1
February 25, 2009 by Kerry IsbergPosted in: In this week's e-newsletter, Latest News & Views, Money, Pay and benefits
Alert to Payroll: You must start using IRS’ new withholding tables by April 1. And don’t forget to mention the silver lining to your employees: They’ll will end up with more take-home pay under the Obama Administration’s “Making Work Pay” tax credit.
The new tables, along with other instructions related to the new tax law, will be incorporated in IRS’ new Publication 15-T (not yet available but the IRS promises it will be up soon at its Web site www.irs.gov). You can get the new tables now from Notice 1036, Early Release Copies of New Wage Withholding and Advance Earned Income Credit Payment Tables.
Let employees know they don’t need to take any action (e.g,. filling out new Forms W-4) to get their “share” of the stimulus package. The extra money will begin showing up in paychecks after April 1. In 2009 and 2010, they’ll get 6.2% of earned income, up to a maximum credit of $400 for individuals and $800 for married working couples filing a joint return. The credit begins phasing out for higher income taxpayers – those earning more than $75,000 each.
Tags: IRS, withholding
February 25th, 2009 at 4:41 pm
When will the employers receive the new tables in the mail?
February 25th, 2009 at 6:06 pm
I’ve heard unofficially that IRS will mail Publication 15-T sometime in mid-March. No need to wait, though, you can download the tables now from http://www.irs.gov/pub/irs-pdf/n1036.pdf.
Hope that helps.
Kerry
March 2nd, 2009 at 1:55 pm
Yes they will get a credit now but should we tell them they will have to pay taxes on that
down the road, thanks but No Thanks Mr President!!!!!
March 2nd, 2009 at 2:40 pm
I hear that Cathy, and what shall we do with that whole $13.00 a week? Can not even take anyone to Micky D’s for lunch. What a joke.
March 2nd, 2009 at 3:37 pm
Even $50 – $100 more in our pockets each month help with one bill or another. If you make no money, you pay no taxes, if you make some money, you pay some taxes, if you make more money, you pay more taxes….you see where I am going.
I am glad to paye taxes as long as I know that they are not being squandered on earmarks, inflated project costs, and dirty deals. If you pay taxes, count yourself lucky in these times where so many can’t find work.
Together we can work on making things better.
March 2nd, 2009 at 5:55 pm
Thanks, Daniela. Nobody pretends that it’s going to be all pie-in-the-sky, but haven’t we heard enough grousing already? A little more “can do” attitude can’t hurt. And I too, am grateful every day I have a job to go to. But don’t get me started on taxes being used for folks who don’t even contribute to the system! Ooops, guess I’m grousing….
March 4th, 2009 at 3:32 pm
How about taxes being used for perks for highly paid individuals – like cars, gas, trips, entertainment, company jets, etc., etc. I think everybody at those levels should “share the pain” along with the average person – you know, those regular people who prettymuch have to live frugally most of the time and more so at this time.
March 4th, 2009 at 7:17 pm
Judy — we do not live in a level world.
I dont feel like I owe anything to anyone but myself. I dont work for anyone but myself and for my family. If I didnt work I would be another abuser of the system and be another “taker”.
The only way this system will work is based on incentives. If you want a nice car, work hard long hours for it.
March 13th, 2009 at 3:32 pm
So will we owe more money when we file taxes next year?
March 16th, 2009 at 2:44 pm
D: (A bit late in responding) I didn’t think we did live in a level world. I was responding to Alexis’ comment about folks who don’t contribute to the system but still receive assistance. I was referring to taxpayer funds used to bail out companies who are, at the same time, giving lavish perks to their (especially) upper level staff. Example: AIG has contracts requiring them to pay hundreds of millions in bonuses even though AIG received billions in bailout funds. Just as concerning is AIG’s statement that they can’t afford to have these key people quit because only they understand the complicated AIG dealings and far-reaching deals. The government has reviewed these contracts and agrees the bonuses have to be paid. Going forward the administration will require more reasonable terms in these contracts if companies want help.
March 20th, 2009 at 5:43 am
if i am reading the new withholding tables correctly my withholding will be reduced $30.00/pay x 20 pays. so will my wife’s pay. that will be $1200.00 less wittholding. our joint stimulus reduction will be $800.00. i appreciate the reduced taxes but i believe most people don’t understand the sticker shock next spring when they have been under withheld. that is my issue with the withholding game. how hard is it to adjust the withholding tables properly? the government assumed most employers wouldn’t implement the new withholding until april.
March 20th, 2009 at 1:09 pm
Brian: I just re-read the above article and the way I’m interpreting this, it is a tax credit. That would mean a reduction of the amount of taxes we pay. So, I guess I don’t understand your interpretation that this is an “underwithholding” of taxes and we’ll face sticker shock next year. The article says employees do not need to fill out new W-4’s, so that makes me think this is actually a reduction in taxes and not simply underwithholding. Am I misinterpreting this?
March 20th, 2009 at 4:37 pm
judy: i have my withholding at married-0, so does my wife. it allows us to break even each year on our federal liability. we had approx $290.00 w/h bi-weekly. the new w/h tables reduced our w/h to $260.00. multiplied by 20 pays it is a reduction of $1200.00 in our withholding for 2009. however the $800.00 married/joint stimulus is credited- whether thru a credit or an adjustment in the federal tables when we file- we will have had too much withheld based on the new witholding tables. we will have to file a new w-4 and have aditional monies w/h so we will not owe. i think there will be many others in our shoes.
March 23rd, 2009 at 5:58 pm
Brian: OK, I just reread the article again and it does say this is a tax credit, part of the stimulus plan. The withholding tables are changed so that we get 6.2% more of our money in our paycheck – meaning the government wants the withholding to be reduced as the way to pay us our part of the stimulus. Unless there is a piece missing, it does not indicate the government will then turn around and tax us on that increase. The tax percentage has been reduced, as I read this. So, the number of exemptions we claim should be OK. If you feel unsure about it, you can always change your W-4 anyway and request payroll deduct the larger amount. I claim zero exemptions and my husband and I (he’s retired) file jointly. I have extra dollars taken out to cover our social security income, since the government doesn’t withhold from that. And, so far, this has worked out so that we get a return each year.
March 25th, 2009 at 2:40 pm
So no one has answered will the amount taken out of each paycheck, what will happen next April 15th? Will we be penalized for those extra funds given every week and punished for them at then end of the 2009 tax season?
March 25th, 2009 at 3:31 pm
Angela: if this is truly a tax credit, as it seems to be, we shouldn’t be “penalized” for it next year. My husband and I once got a $4,000 tax credit for purchasing a solar water heating system. That credit was an actual reduction in the amount owed for the year, so we did not owe that amount of the taxes. If anybody out there is more thoroughly informed about how this present lowering of the withholding will affect us, I would be very interested in knowing, also. If we will somehow owe something on this item which seems to be a tax credit, I’ll adjust my W-4 now.
March 26th, 2009 at 5:21 am
A tax credit is just that… it is like a child care credit…. it just reduces the tax liability… I don’t see how this credit could be treated any other way. Obviously, we pay in less with the reduced withholding, but our tax liability will be reflected with the credit once we file in April ‘09… at least that is how I see it
March 26th, 2009 at 5:23 am
whoops… in April ‘10
October 26th, 2009 at 11:22 am
I heard from a benefits rep. that if the healthcare bill passes, employers will report the amount paid for healthcare as taxable income on the employees’ W2. Has anyone heard more on that?