Dude, Where's my Withholding?
(sure, the government knows what's best for you)
slightly revised on 7/20/10
Just when you thought you figured out the best withholding to fit your taxes, the Feds decided to help. They forced an adjustment to your Federal withholding. They adjusted the already archaic tax tables* (Single & 0, Married & 1, etc.) to withhold less money. Of course, this was to help you get more money in your pocket for the 2009 "Making Work Pay" credit.
You 'get' the credit when you file your 2009 tax return. But, since you were forced to withhold less during the year, you got your lollipop early. However, you’d better check to make sure that there is a lollipop in your future. The beneficent action of the Fed might have dealt you a bum hand.
Amount of the Credit
The credit is worth 6.2% of an individual's earned income, with a maximum credit of $400 per person. Married couples who file a joint tax return thus have a maximum credit of $800.
Other Tax Credits Can Reduce the Total
There is a one-time-only tax credit of $250 for Social Security recipients, retired railroad workers and disabled veterans. So, if you're getting Social Security payments and you're also working, you would be eligible for a Making Work Pay credit of only $150 (that's $400 minus the $250 economic recovery payment).
Credit phase-out: No Lollipop if you make "too much" money
The Making Work Pay credit starts to be reduced for individual filers making $75,000 in modified adjusted gross income, or $150,000 for joint filers. The credit is reduced by 2% of the amount of income in excess of the $75,000 (or $150,000) threshold. The credit is completely phased out for individuals making $95,000 or more, or $190,000 for joint filers.
No lollipop if you are a dependent
Anyone claimed as a dependent is not eligible for the credit. That means kids who are working, including college students who are still claimed as dependents, are not eligible for the credit.
Arizona steps in, too
AZ saw a drop of revenue (from your pocket) because the AZ withholding was a percentage of your Fed withholding. So, AZ changed the withholding method. Now the AZ withholding is a percentage of your income. A change for the BETTER!!
You're not a robot - you can change your withholding!
Because your employer was forced to adjust your paycheck withholding, working dependents, working retirees, multiple job holders and those of you evil people that make "too much" money (you are a tax target) may need to adjust your withholding to avoid owing tax at the end of the year. So, if you want to withhold more, then you must lower the number. If you are currently at Married & 2 (Married filing status with 2 exemptions) and you want more withheld, then change it to Married & 1. You can also have a specific amount of money added to your withholding.
Fun, eh?
* wouldn't it be easier if the Feds allowed you to use a percentage for your withholding like AZ? They could learn a lot from us here in the sticks.
You 'get' the credit when you file your 2009 tax return. But, since you were forced to withhold less during the year, you got your lollipop early. However, you’d better check to make sure that there is a lollipop in your future. The beneficent action of the Fed might have dealt you a bum hand.
Amount of the Credit
The credit is worth 6.2% of an individual's earned income, with a maximum credit of $400 per person. Married couples who file a joint tax return thus have a maximum credit of $800.
Other Tax Credits Can Reduce the Total
There is a one-time-only tax credit of $250 for Social Security recipients, retired railroad workers and disabled veterans. So, if you're getting Social Security payments and you're also working, you would be eligible for a Making Work Pay credit of only $150 (that's $400 minus the $250 economic recovery payment).
Credit phase-out: No Lollipop if you make "too much" money
The Making Work Pay credit starts to be reduced for individual filers making $75,000 in modified adjusted gross income, or $150,000 for joint filers. The credit is reduced by 2% of the amount of income in excess of the $75,000 (or $150,000) threshold. The credit is completely phased out for individuals making $95,000 or more, or $190,000 for joint filers.
No lollipop if you are a dependent
Anyone claimed as a dependent is not eligible for the credit. That means kids who are working, including college students who are still claimed as dependents, are not eligible for the credit.
Arizona steps in, too
AZ saw a drop of revenue (from your pocket) because the AZ withholding was a percentage of your Fed withholding. So, AZ changed the withholding method. Now the AZ withholding is a percentage of your income. A change for the BETTER!!
You're not a robot - you can change your withholding!
Because your employer was forced to adjust your paycheck withholding, working dependents, working retirees, multiple job holders and those of you evil people that make "too much" money (you are a tax target) may need to adjust your withholding to avoid owing tax at the end of the year. So, if you want to withhold more, then you must lower the number. If you are currently at Married & 2 (Married filing status with 2 exemptions) and you want more withheld, then change it to Married & 1. You can also have a specific amount of money added to your withholding.
Fun, eh?
* wouldn't it be easier if the Feds allowed you to use a percentage for your withholding like AZ? They could learn a lot from us here in the sticks.
| Fed W-4 withholding |