Monday, March 23, 2009

Making Work Pay Tax Credit begins April 1st

If you haven't heard by now, the government has passed the Making Work Pay provision which is giving people a bit more back on their paychecks. As an employer, you must be aware of the change and what the new tax tables will be in order to comply with the tax credit changes. Chances are pretty good, your employees know atleast enough that their normal net pay will be slightly higher, so if it's not, they will ask!

From the IRS website:

For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns.

This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes in early spring. These changes may result in an increase in take-home pay. The amount of the credit must be reported on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.

It's not necessary to have any employees re-submit any forms W-4 in order to participate, it will be to all employees.

If you use a computer program to generate your payroll, make sure you get proper updates from your software provider in plenty of time to begin the changes on April 1, 2009.

If you use a professional payroll preparation service, be sure to check in with them if you have any specific questions about the tax credit.

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