STIMULATING NEWS from the IRS. New Federal Tax Tables Making Work Pay Credit From the American Recovery And Reinvestment Act signed by President Barack.

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Presentation transcript:

STIMULATING NEWS from the IRS

New Federal Tax Tables Making Work Pay Credit From the American Recovery And Reinvestment Act signed by President Barack Obama in February – part of what’s commonly known as the Stimulus Package

WHEN? Starting with the biweekly payroll 20092R20 that pays on April 3 and all payrolls thereafter

WHAT? Annual tax credit of $400 for employees filing ‘Single’ on their W-4 (approximately $44/month) Annual tax credit of $600 for employees filing ‘Married’ on their W-4 (approximately $66/month) No credit for taxpayers in higher tax brackets

Good News….. Good news for employees filing ‘Single’ who only have one job and fall in one of the affected tax brackets! Good news for employees filing ‘Married’ who is the only wage earner in the family and fall into one of the affected tax brackets

Bad News….. An employee claiming ‘Single’ who works more than one job concurrently (separate employers) and receives the $400 tax credit at all jobs, may end the year with a tax liability Same goes for an employee claiming ‘Married’ who either works multiple jobs or whose spouse also works and gets the $600 credit

How Can That Be? Annual credit for single taxpayer = $400 2 $400 each = Net effect = excess credit of Annual credit for married taxpayer = $800 Spouse #1 who works= Spouse #2 who works= Net effect = excess credit of

More Bad News…. Since the tax table is NOT “One Size Fits All”, there are other victims: some of our students. If he/she can be claimed as a dependent on someone else’s tax return, the student will not be eligible for the credit when they file their return, although they probably received it via reduced withholding.

And another thing: Most foreign nationals, who are not eligible for the standard deduction that is built into the tax tables, will actually see higher federal tax withholding from their checks

What Can We Do? Consult a tax professional for guidance Claim fewer allowances on your W-4 to increase the withholding; or, Claim an additional amount to be withheld on your W-4 If you make a change to your W-4, USE EMPLOYEE SELF SERVICE!

Payroll Math: 1 < 3, Save a Tree! We’re giving you a shortcut – a New Hire Insert - to save paper and time In the New Hire Packets, please replace the paper W-4, NC-4 and Direct Deposit Enrollment form with this New Hire Insert From HR’s website, navigate to Forms>For Departments>Other Resources>New Hire Insert (MyPack Portal)