That Federal income tax payroll tax reduction that went into effect last year...

[European Socialist]

will reduce your refund for those who get refunds. Won't that be a drag on the economy?

[Skink]

1. Didn't effect my refund.

I made about the same as last year and got the same refund. I almost fell for the turbo tax let us deduct the 14.95 fee from your refund and then charge you 29.95 for doing that. Oh no thanks I'll just use a debit card.

[quiller4]

42. Minimal impact here, too, Under $100 refund last year and refund

this year within $5 of last.

[CBR]

2. Didn't they offset that with the "Making Work Pay" credit? I

am not sure? $400 credit for individuals, $800 for couples.

[Skink]

6. Maybe that's why I got a refund.

Turbo tax showed me the making work pay credit but I don't think I got it. If I did I also got another 150 for a total of 550 on the 18,000 I made in 09.

[Statistical]

11. EXACTLY.

The bill reduced every Amercians payroll deductions by $400 per person.

TO AVOID having refunds reduced by $400 EVERY SINGLE AMERICAN gets a $400 tax credit (for 2009 & 2010).

Thus you paid $400 less in taxes during the year and you get a $400 tax credit so the net change to refund is EXACTLY $0.00

[napi21]

3. You can look at it both ways. If you always depend on a

refund every year at tax time, it will be smaller this year, but you have given the gov't a free loan.

The other side is that it put more money in your packet every payday during the year.

I know when this first started several of us posted here on DU that if you want to preserve your refund, decrease your exemptions on a W4 with your HR dept.

[FarCenter]

5. You should always wind up paying a small amount on April 15

Why lend money to the government?

Ideally, you should owe the government as much as possible on April 15 without oweing so much that you trigger a tax penalty for underpayment.

[napi21]

8. Abslutely, but a lot of people don't look at it that way!

They seem to look at it as a forced savings plan where they get a bonus each year!

[Statistical]

12. Generally you can get away with up to $1000 due without penalty.

[FBaggins]

31. Some people don't have a choice

You can't withhold a negative amount, and some tax credits are refundable.

[RayOfHope]

4. It affected ours a BUNCH. Our refund this year? $1. No kidding It was

a couple thou last year. I had heard last year that folks were going to be surprised at tax time.

[Statistical]

13. No it didn't. $400 less in witholdings + $400 tax credit = net change of $0.00

If your tax refund is substantially different than last year then compare them line by line.

Something else changed or you made an error.

[RayOfHope]

27. I went from 3/4 time at work to full time, that's it. I have gone through the

returns line by line. Our returns are very simple, as we didn't own a home, have major investments, and take standard deductions. Our combined income pre tax is less than $75 K.I don't know what else to tell you! I'm not complaining, and I knew it might be different.

[UTUSN]

7. K&R #1. It affected lots, and not in a good way. n/t

[sinkingfeeling]

9. I paid just about the same in taxes... 2008 was $18273 and 2009 was $18387, so it will all

come down to how much my deductions vary year to year. I think with the $400 work credit, I should have a bigger refund.

[Statistical]

26. The work "credit" will be a wash.

$400 credit but in 2009 your witholdings (taxes taken out of your paycheck was $400 less.

+$400 credit
-$400 in paycheck taxes
===========
$0.00

[sinkingfeeling]

28. No, I had $114 less in withholding. And a tax 'credit' isn't like a deduction. A credit comes

after you have figured your tax amount (all income - all deductions).

[Statistical]

30. Yes I understand.

However if you income is EXACTLY the same then your witholdings should be EXACTLY $400 less.

The IRS made companies adjust the witholdings down $400.

Then to compensate you get $400 tax credit.

So if you were going to owe say $10,000 in taxes (after all deductions, etc) and normally would have $11,000 in witholdings then you would get $1000 refund.

Under the stimuls plan your witholdings would be reduced exactly $400. So $10,600. Now your taxes are still $10,000 so $600 refund. Oh no your refund went down $400.

Nope. You get $400 tax credit on line 63. So $10,600 in witholdings + $400 credit = $10,000 on line 70 (total tax paid + credits).

Thus refund = $1000 ($11,000 - $10,000).

Now if your income changed and/or employer messed up witholdings then you could be up or down but that isn't due to the credit.

[Statistical]

10. 100% not true.

Every American had $400 less taken from their paychecks last year.
(The IRS updated witholding tables so your employer took less out of your check. if you got paid 2x per month it worked out to $16.67 per paycheck)

Now without a tax credit you WOULD have paid $400 less in taxes and owed the same amount so refund would have gone down $400 (or amount owed gone up $400).

HOWEVER. The BILL included a $400 tax credit.

So net change is $0.00
You had $400 less taken from your paycheck during the year ($800 if married and both spouses work).
Your 2009 Tax Return has a $400 ($800 is married filing jointly) tax credit to EXACTLY offset it.

Anyone using Form 1040 (not sure line # on other filing types)
Total taxes is calulated on line 60
Total "paid" is on line 71 which is the total of lines 61 to 70 (which includes both witholding & the credit).

Total paid doesn't change a single penny because:
line 60 witholdings = -400
line 63 making work pay credit = +400

Taxes owed or refund owed is simply line 60 - line 71.



Unrec for incorrect and fear mongering.

[Tejas]

15. A friend's 1040EZ went crazy.

He's single, made approx 40k last year, had a $1700 refund. This year same earnings but even with the 400, he said his refund is 300 less than last year.

Offered to skim over it for him but he already sent it off. Said he has a copy but who knows.



edit: thinking about it, in effect he is actually 700 short of last year. Something definitely doesn't sound right.

[Statistical]

18. Only four possibilities.

The 1040EZ doesn't have that many options.

Only three possibilities.
1) He changed his exemptions on W-4. I.e he had put Single 1 last year and put Single 3 (or Married 2) this year.
2) same as above but his employer did it (accidentally)
3) he made a mistake (forgot to deduct something like student loan interest or credit for going to school).
4) something else changed (credit for going to school last year) or student loan interest (stoped paying on student loans)

More important than refund is simply how much taxes he paid.

Look at taxes paid last year and taxes paid this year. If income is same then taxes paid should be the same on 1040EZ.
Then look at witholdings (taxes paid) last year and this year.

Even if he sent it off if he has a copy and he/you catch a mistake he can file amended return without penalty and get the difference back.

[Jeff In Milwaukee]

39. As I said down thread....

It depends on your W-4 withholding. If you use the "Married" rate, then the withholding was for $800. If you spouse is also employed and using the "Married" rate, then you might find that you've been given the credit twice (so to speak) through excess withholding. So your refund might be lower.

[Statistical]

40. Nope.

The credit is per person.

If you selected Single on W-4 your witholdings were reduced $400.
If you selected Married on W-4 yor witholdings were reduced $400.

If your spouse works they get $400 in their paychecks.

However even there it is a wash. If you file "Married filing jointly you get $800 credit". If you file "Married filing separately" you get $400 credit on each return.

The only instance where you could have too much taken from your check is if:
You have 2 jobs AND the pay on the lower paying job is > $26,000 AND you don't elect to increase withholding on second job.

[Jeff In Milwaukee]

45. Yep.

This is right out of the IRS Pub:

If you're not eligible for the Making Work Pay tax credit, withholding changes could mean a smaller refund next spring. A limited number of people, including those who usually receive very small refunds, could in some situations owe a small amount rather than receiving a refund. Those who should pay particular attention to their withholding include:

Pensioners (see more information under Pensioners, below)
Married couples with two incomes
Individuals with multiple jobs
Dependents
Some Social Security recipients who work
Workers without valid Social Security numbers

[RayOfHope]

46. Married couples with 2 incomes=me. n/t

[Jeff In Milwaukee]

47. Don't be too alarmed....

I checked my withholding at the end of the year, and I didn't see any change at all. There appears to be some broad variance in how companies implemented this.

[Statistical]

49. If you make more than $95K your witholding shouldn't be adjusted.

[Jeff In Milwaukee]

50. True. It phases out.

Sadly, I don't make more than 95K.

[Statistical]

48. Just married and 2 incomes is not enough.

You get $400 extra in your paycheck. Your spouse gets $400 extra in his/hers. No problem there.

where there may be a problem is if
a) you make more than $190K (because tax credit is cut off for those >$190K) so you get the reduced withholding but end up owing the tax.
b) you work multiple jobs and are married (because then you may receive not 2x $400 but 3 or 4x$400 extra in paychecks.

Vast majority of married couples have 2 incomes.

IRS estimates that less than 15 million (that would be about 12% of households) got overpaid and will owe money.

http://money.cnn.com/2009/11/17/pf/taxes/making_work_pay/index.htm

[Jeff In Milwaukee]

51. The Dept of Treasury Inspector General Disagrees with you.

This from their report late last year:

"The Recovery Act states that joint filers qualify to receive $800 in Making Work Pay Credit. The withholding tables that account for the Making Work Pay Credit provide $600 of the $800 allowed. The remaining $200 will be received when the taxpayers file their TY 2009 tax return. The tax tables do not take into consideration whether an employee has more than one job or has a spouse who is employed. In these cases, the employee will most likely receive excess Making Work Pay Credit in advance."

In short, a married couple with two incomes could have $1,200 in decreased withholding and only an $800 credit to offset it.

[earth mom]

14. Rec because this is an important question that needs to be addressed-NOT hidden with unrecs. nt

[Viking12]

16. It has been addressed. The OP is BS!

:banghead: Read the fucking thread and/or look it up yourself.

[earth mom]

17. I'll let you know when I do our taxes, but I have a hunch we're gonna be screwed by this. nt

[Robb]

19. Your hunch is wrong.

This is not a matter of anyone's opinion.

[earth mom]

21. Have you done your taxes yet and can say for certain? nt

[Robb]

22. Yes and yes.

This is also explained, quite well I thought, in post #10.

[Occulus]

23. I did mine yesterday and my refund is higher than it was last year

Postal worker, no special deductions, no income other than my pay, no dependents.

[SoCalDem]

44. Ours was considerably higher too, but

we changed our 401-k deduction to a larger amount, and a LOT of taxes were withheld from my husband's bonus last January

[Statistical]

33. Yes.

[Statistical]

20. You don't need to let anyone know. Math isn't subject to hunches or popularity contests.

It is 100% absolutely wrong.

I laid it out in the steps above.

simple version:
You had exactly $400 less taxes taken out of your check (worked out to about $16 per paycheck if paid 2x per month).

On line 63 of Form 1040 you get a "free" making work pay tax credit.
the credit is EXACTLY $400 and is taken off your taxes owed.(taxes owed in taxes due MINUS payments ).
Your "payments" include the free $400 credit.

$400 less taxes withheld - $400 tax credit = net change of $0.00

It is simple adding and subtracting. No complex formulas. No sliding scales.

If you get less of a refund either
a) you changed withholding
b) you lost a tax credit (or it was reduced)
c) you made a mistake
d) you cheated last year :)

[Jeff In Milwaukee]

38. Here's how you might be screwed....

The Making Work Pay Credit (MWPC) is $400 for a single person or $800 for a married couple. Now the reduction in withholding that has been going on since April (which the MWPC is off-setting) is based on your withholding as shown on your W-4. If you're withholding at the "married" rate, you'll get an extra $800 in your paycheck spread out over roughly eight months.

The problem is, if you're married and your spouse works and he/she also shows as "married" on the W-4, then your spouses withholding will be $800 less, as well, because the payroll system at your company has no idea what they payroll system at your spouse's company is doing. And if you work two jobs? You get the picture.

Now it's not the end of the world. If you're a "small refund" kind of guy/gal like me, you might end up owing a couple hundred dollars when all is said and done.

[Statistical]

41. No you don't.

The adjusted withholding table was increased $400 per job (marital status doesn't change this).

All you ever wanted to know about IRS rules for rate at which taxes need to be withheld.
http://www.irs.gov/pub/irs-pdf/p15t.pdf

IRS information on "making work pay" credit
http://www.irs.gov/newsroom/article/0,,id=204447,00.html

One thing to note is the credit applies to 2010 also.

[Jeff In Milwaukee]

43. The IRS guidance suggests that you check your withholding...

And that's why. Some couples or individuals who work more than one job may experience too much withholding, and that may reduce their refund.

I'm an Enrolled Agent with the IRS, so I've been watching this issue pretty closely. The IRS attempted a fix back in April, but it's not clear that it was entirely successful. One report issued in November estimated that 15 million taxpayers might experience a lower-than-expected refund.

That's nothing cataclysmic, but it could happen.

[earth mom]

24. Why are so many people jumping all over my post?

Oh yeah, can't have Obama look bad. :eyes:

[Statistical]

25. Who is jumping all over your post?

People are explaining that the OP is wrong and thus it is correctly unrecced.

Generally speaking factually incorrect items should be unrecced.

[earth mom]

29. I have a legitimate concern about my taxes and yet I can't say that without a bunch of people

trying to shut me up.

As I said, I will do MY taxes first before I listen to what any of you have to say.

FYI-you are NOT going to shut me up.

[Statistical]

32. Nobody is trying to shut you up.

Your TAXES ARE GOING TO BE $3849023482390428390438904384239024 more than last year. It is all Obama fault.

See now anything less bad than that will be good news.

[ellenfl]

34. maybe it's semantics and i'm no tax expert, but i'm confused.

if you paid $400 less during 2009, you essentially got a $400 credit. add to that a $400 credit and you got $800.00 total credits. ?

btw, as of january 1, 2010, my net pay is down about $2.00/week, so my 'taxes' just went up $104.00/year.

ellen fl

[Statistical]

35. taken from paycheck IS NOT EQUAL taxes owed.

Your taxes due for 2009 is what matters.
Most people think of their refund but what really matter is how much taxes your paid.

Say you paid $6000 in taxes in 2008 and everything stayed the same so you will pay $6000 in taxes in 2009.
Normally (no stimulus bill) lets also say you would have say $7,000 in taxes come out of your check (withholding)
So at end of year you owe $6,000 in taxes but paid $7,000 so you get refund of $1,000.
In 2008 you would owe $6000 in taxes have $7000 taken out of your check and have refund of $1000.
In 2009 you would owe $6000 in taxes have $7000 taken out of your check and have refund of $1000.

The refund doesn't change the amount of taxes paid. Say you had only $5000 taken out of your check = owing $1000 or having $8000 taken out of your check = $2000 refund. In all 3 instances your takes paid is still $6000.

HOW STIMULUS CHANGED THAT:
Now to help the economy they signed a bill that your paycheck withholding (not taxes owed) was reduced $400. Your net pay increased $400 in 2009 (the goal was you would spend it). So you still owe $6,000 but now you only had $6,600 come out of your check so your refund would "only" be $600. Reducing your withholding isn't free money by itself it simply means you would get $400 less back at end of the year. If they withheld $1000 less it would just reduce your refund $1000.

However to offset that there is a "making work pay" tax credit of $400.
So still same normal $6,000 in taxes owed.

You withheld $7,600
you get a "free" $400 tax credit
$7,600 + $4,00 - $6000 = $1000 refund.

Same refund you would have got before all this started with the bonus of getting $400 extra in your paychecks (spread out about $16 per check) in 2009.

Clear as mud?

The net change is you paid $400 less in taxes (not refund but total taxes paid) via the credit. You don't see that in the refund because you already got it ($16 per check in 2009).

[Jeff In Milwaukee]

36. Not particularly

It was an actual reduction in taxes for this year, and your withholding was reduced to match it (more or less). So while your refund is smaller by a few hundred bucks now, you've been receiving the money over the past several months via a lower level of withholding.

[Blue_Roses]

37. bullshit...

I'm getting a BIGGER refund because of it.

[Jeff In Milwaukee]

52. You shouldn't be....

As designed it should be a wash. Your withholding decreased by (one hopes) the amount of the MWPC. As has been discussed upthread, there is a possibility that some taxpayers might experience smaller refunds - and even a balance due - but there should be no circumstances that I can think of where the MWPC would cause your refund to increase. If your refund is larger this year, it's probably some other contributing factor.