TAXMAN Posted March 7, 2009 Report Share Posted March 7, 2009 I must be having brain cramps on this NEW $400.00 work pay credit. If tables are reduced TP gets this in higher pay by reducing withholding. When filing 2009 return his taxable income reflects a $4000. tax liability. Wouldn't this make my balance due higher or my refund less? or do we claim a credit against tax thus bringing down liability to equal withholding? Point to consider is if wh is reduced and TP doesn't qualify because of income then won't he owe more tax? I read examples in ThetaxBooks explanation and it doesn't make sense to me. The one with the $250.00 SS payment, will it be identified on their 1099? If anybody has a good explanation to this I would really appreciate this as I see a NIGHTMARE about to happen. Thanks to all that respond. Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted March 7, 2009 Report Share Posted March 7, 2009 I must be having brain cramps on this NEW $400.00 work pay credit. If tables are reduced TP gets this in higher pay by reducing withholding. When filing 2009 return his taxable income reflects a $4000. tax liability. Wouldn't this make my balance due higher or my refund less? or do we claim a credit against tax thus bringing down liability to equal withholding? Point to consider is if wh is reduced and TP doesn't qualify because of income then won't he owe more tax? I read examples in ThetaxBooks explanation and it doesn't make sense to me. The one with the $250.00 SS payment, will it be identified on their 1099? If anybody has a good explanation to this I would really appreciate this as I see a NIGHTMARE about to happen. Thanks to all that respond. I posted this same questions a few days ago...Because I am also thinking that...from what I read...this approx $400 will help now in the form of larger pay-checks (because less Fed tax withheld) but lower refunds/higher balance due on next years taxes....because in the end, they will owe the same amount in Fed taxes, but will have had less withheld from their pay....I really hope I am wrong Many people added their thoughts...and in the end I was still confused...maybe more will reply to this one Quote Link to comment Share on other sites More sharing options...
David1980 Posted March 7, 2009 Report Share Posted March 7, 2009 The making work pay credit will be a $400 credit on the 2009 tax return. The withholding adjustment is supposed to provide the benefit now so that we aren't waiting a year for any stimulus. So for example if someone would have had a $9,000 liability on their 2009 tax return before the credit and would have had $10,000 withheld they would have received a $1000 refund. With the change, they should have $400 less withheld and will have $400 less tax liability on their 2009 return. So they would owe $8600 and have $9600 withheld and receive a $1000 refund. That is of course assuming the numbers all end up being exact. In practice there will be some difference just because of variations in weekly pay, etc. The bigger problems will arise when people work more than one job or file MFJ. It's entirely possible someone working multiple jobs will have the $400 reduction multiplied by the number of jobs they work resulting in much less withheld than they are going to make up with the $400 credit. Quote Link to comment Share on other sites More sharing options...
Ray in Ohio Posted March 7, 2009 Report Share Posted March 7, 2009 the plans are: $400.00 less withholding from paychecks in 2009. $400.00 Credit on 2009 tax return. Net refund/balance due should be same as before this whole mess started. (Note that I said... "plans are". Now if it'll only work out that way) Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 7, 2009 Report Share Posted March 7, 2009 Speaking of plans, keep in mind the old military axiom - "No battle plan ever survives initial contact with the enemy." Quote Link to comment Share on other sites More sharing options...
LindaB Posted March 7, 2009 Report Share Posted March 7, 2009 The $400 credit is calculated as 6.2% of the first $6452 of wages (or earned income?), so I assume someone has to make at least $6452 to get the entire $400. Say that someone makes $7000 for the entire year, spread out at $134.62 at week, will file single and with only his own exemption. Under the old withholding tables, he would have $1 a week withheld in federal tax. With the new withholding tables, he will have zero withheld. If the employer starts using the new withholding as of April 1, he would have had $13 withheld for three months, then nothing for the rest of the year, so he gets $1 a week extra for 39 weeks. When he files his 2009 tax return, will he get his $13 in withholding, plus the $400 refundable credit, for a refund of $413? Low wage earners will not get the benefit of this credit spread throughout the year. Quote Link to comment Share on other sites More sharing options...
Ray in Ohio Posted March 7, 2009 Report Share Posted March 7, 2009 Linda... So lets get a mental image of his 2009 W2...$7000.00 in wages... $13.00 Fed withholding. If that is what you are saying, I think you are correct in your example above. He would get a $413.00 refund. (key words here are.. "I think") Quote Link to comment Share on other sites More sharing options...
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