INSIDE WASHINGTON: Taxpayers to get rude surprise

[KatWrangler]

http://finance.yahoo.com/news/INSIDE...1434.html?.v=1

WASHINGTON (AP) -- Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

[lolar2]

As I recall there were a few posts here last month, from people who got burned on something similar last year. The government didn't want the money "back" but it caused problems calculating taxes. Apparently the IRS, Congress, and the President move on parallel tracks and don't communicate very well!

Here is the big advice take-away from the article:

"Perlman's advice: check your federal withholding to make sure sufficient taxes are being taken out of your pay. If you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers. If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a Form W-4."

[rebeccalynn]

I changed our withholding the next payday after they made their "changes". I had finally gotten our withholding set right this year so that we were "even" (did not owe or get a refund) for federal & state. Now, they go messing around again and made things so that we would owe this year and we only have one income household. It is going to be a harsh reality come tax time next year for a lot of people.

[KatWrangler]

Think of it this way.

You only get $400 individual or $800 couple. If you are getting more back during the year, you are going to have to pay it back.

[polyhymnia]

Originally Posted by KatWrangler

Think of it this way.

You only get $400 individual or $800 couple. If you are getting more back during the year, you are going to have to pay it back.

I posted about this here about a month ago.

What I have discovered is, it changed my withholdings and I am getting an extra $20 per week ish back based on MY salary. BUT, because I file jointly with my husband, together we are above the cap where this tax break is phased out, so I will owe some of it back because it's not taking into account my husband's salary.

Oh well. I am sure it's really helpful for most people!

[KatWrangler]

Originally Posted by polyhymnia

I posted about this here about a month ago.

What I have discovered is, it changed my withholdings and I am getting an extra $20 per week ish back based on MY salary. BUT, because I file jointly with my husband, together we are above the cap where this tax break is phased out, so I will owe some of it back because it's not taking into account my husband's salary.

Oh well. I am sure it's really helpful for most people!

Well You must of posted it when I was on vacation in Florida. Sorry.

[mar123]

What many people don't realize is that there is not a tax cut to go along with this; actually many tax cuts are expiring. For example, the child tax credit is going back down to $600 per child. Only the amount of withholding has changed. If your status meant that usually you got back a small amount come tax time, you will probably owe now. So, theoretically it helps people, but those people could have made their own changes.

[Sk8ermaiden]

This pisses me off. Because people are too stupid to plan their own exemptions and refunds. The government needs to "help" us.

Is there any way to have this removed? We're already at 0 exemptions on DH's W2, and if our tax return next year is lower than expected I will be PISSED. :That's my new kitchen we're talking about.

[polyhymnia]

Originally Posted by KatWrangler

Well You must of posted it when I was on vacation in Florida. Sorry.

Ohhh, I didn't mean like "dude why did you post this I already did!", because I didn't post the actual article, I just meant that I had noticed the lower withholding on my paycheck and posted here about it and figured out the effects, so I can sympathise.

[polyhymnia]

Originally Posted by Sk8ermaiden

This pisses me off. Because people are too stupid to plan their own exemptions and refunds. The government needs to "help" us.

Is there any way to have this removed? We're already at 0 exemptions on DH's W2, and if our tax return next year is lower than expected I will be PISSED. :That's my new kitchen we're talking about.

I don't understand this. You are going to get the same amount of money - it's just a matter of getting it NOW versus LATER. So, if you can't adjust your withholdings any further, just put the difference (on my paycheck it's about $20) into savings and pay for the kitchen.

mta. Maybe I misunderstood. Basically what is happening is there's a small tax cut for people under about $150k per year. So, your tax withholdings are calculated at a slightly lower rate if you are under that amount. UNLESS you exceed the income when it comes time to do your taxes next year, you don't do anything differently. If you got money back last year due to credits or whatever, you probably will still get some back next year (everything else staying the same). IF you end up exceeding the income limit for the tax cut due to multiple jobs/both spouses working (not accounted for in the calculations for each individual paycheck) then you may owe some of this money back... but it won't affect any of the standard credits, deductions, etc that you normally take.

[Sk8ermaiden]

The problem is that we don't want it NOW, we LIKE our big refund. We arrange it that way. We live on way, way less because of the way we have arranged our exemptions. There are things that we really do need that I manage to put off and put off because of the amount in the checking account. If there's an extra $20 in there and my shoes have holes in them, new shoes just ain't gonna wait the way they would if there wasn't extra money. We are great savers, but not great enough to live on what we do now without the help of the 0% interest gov't savings plan.

Bottom line though is I just don't appreciate it when the government thinks it knows what will "help" you. They are almost always wrong.

[Denvergirlie]

Originally Posted by Sk8ermaiden

This pisses me off. Because people are too stupid to plan their own exemptions and refunds. The government needs to "help" us.

Is there any way to have this removed? We're already at 0 exemptions on DH's W2, and if our tax return next year is lower than expected I will be PISSED. :That's my new kitchen we're talking about.

You can fill out a new W4 and request an additional "$20" (or whatever amount you want) to be taken out in Federal taxes. Talk to HR, thye can help you with this.

I did this for years as I worked a combination of employee as well as independent contractor (IC) jobs. IC's don't have taxes removed from their checks, so to balance it out I had extra monies taken from my employee positions to help with the tax balance in April.

[Sk8ermaiden]

Originally Posted by Denvergirlie

You can fill out a new W4 and request an additional "$20" (or whatever amount you want) to be taken out in Federal taxes. Talk to HR, thye can help you with this.

Thanks much! I will have DH do this.

[polyhymnia]

Originally Posted by Sk8ermaiden

The problem is that we don't want it NOW, we LIKE our big refund. We arrange it that way. We live on way, way less because of the way we have arranged our exemptions. There are things that we really do need that I manage to put off and put off because of the amount in the checking account. If there's an extra $20 in there and my shoes have holes in them, new shoes just ain't gonna wait the way they would if there wasn't extra money. We are great savers, but not great enough to live on what we do now without the help of the 0% interest gov't savings plan.

Bottom line though is I just don't appreciate it when the government thinks it knows what will "help" you. They are almost always wrong.

But what I'm saying is, this ISN'T a way to give you your USUAL REFUND MONEY earlier. This is the result of a TAX CUT, which will not affect your usual refunds. It is putting MORE MONEY in your pocket in the long run (unless you are above the income cap, which it sounds like you won't be).

[Sk8ermaiden]

Originally Posted by polyhymnia

I don't understand this. You are going to get the same amount of money - it's just a matter of getting it NOW versus LATER. So, if you can't adjust your withholdings any further, just put the difference (on my paycheck it's about $20) into savings and pay for the kitchen.

I apologize if I misunderstood, but I though that was exactly what you said.

[polyhymnia]

Originally Posted by Sk8ermaiden

I apologize if I misunderstood, but I though that was exactly what you said.

Ohh.. I see. Sorry, you're right, that wasn't clear.

You won't get the same amount as last year. But you will get the same amount TOTAL for this year once you file this year's taxes; it's just that the result of the new tax cut is being reflected in current paychecks, and your usual deductions/credits/etc will be reflected at the end of the year as usual.

So, if you're counting on a refund like last year's, and your income/exemptions/etc stayed the same, you'll still get it (barring any changes to your deductions/credits/etc) - even with the extra bit of money per paycheck that you're seeing now. Now, if you sort out a way to work your tax withholdings so that you don't see that money in your paycheck now, you'll also get it back at the end of the year along with your usual refund.

[Sk8ermaiden]

Ahhhhh. Thanks.

[mar123]

It is not the result of a tax cut. There was one proposed, but it was taken out. There are also many tax cuts/credits expiring, so even if they manage to give another small one, most people will simply break even. We have three kids; the child tax credit is going down by $400 per child- that is quite a bit more on our tax bill.

[sunflower.mama]

Originally Posted by mar123

It is not the result of a tax cut. There was one proposed, but it was taken out. There are also many tax cuts/credits expiring, so even if they manage to give another small one, most people will simply break even. We have three kids; the child tax credit is going down by $400 per child- that is quite a bit more on our tax bill.

Do you have a link to any info on the change to the child tax credit? Are you just saying it's set to expire or it already has? Often times they will only renew those laws at the last minute. Frankly I'm surprised that we're not hearing more about that if it's sure to expire for 2009.

[mar123]

They are letting most if not all of the Bush tax cuts expire- maybe you have heard it phrased that way because they are presented as being tax cuts for the wealthy. Within those cuts, however, was in increase in the child tax credit from $600 to $1,000 per child. There has been talk of keeping the credits high for lower income levels and phasing it out at lower levels than currently exist.

But if the withholding change was related to a tax cut, then accountants would not be warning all of their employees to be careful about oweing money next year. When we all got "rebate" checks, they were based on the previous years taxes. It was a rebate on the taxes people had already paid for 2007. The only reason it was mentioned on the 2008 returns was to make sure everyone had received the money they were entitled to.