Tuesday, July 7, 2009

TAX STIMULUS QUESTIONS

We are still getting questions on the tax relief that was included in The American Recovery and Reinvestment Act of 2009. If you are still confused, here is a summary.

1. Should my employees complete a new W-4 to change their tax withholdings?

No, employees do not need to complete a new W-4. The Making Work Pay tax credit is automatic. However, individuals with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure enough is withheld from their paychecks to cover taxes on the combined income.

2. Will my employees owe money to the government at the end of the year because of the tax change?

People who receive more federal tax credit than they are entitled to will be required to pay it back as part of filing next year’s 1040 personal tax return. Individuals who work multiple jobs or married couples who both work may want to increase the amount of their withholding from one or more of their employers by completing a new W-4 form.

3. When does the tax credit end?

The Making Work Pay tax credit is for the 2009 and 2010 tax years. As currently written, it will end with employees’ last paycheck of 2010.

4. How will my employees know if their withholding is correct?

Employees who are unsure whether they are having enough money withheld should refer to IRS Publication 919 at www.irs.gov for guidance on tax withholding.

Let us know if you have any other questions.

Larry Kopsa CPA

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