Watch for extra money in your paycheck
In 2009 and 2010, the Making Work Pay Credit provision of the American Recovery and Reinvestment Act of 2009 will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross incomes in excess of $75,000, or $150,000 for married couples filing jointly.
For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes beginning in early spring. These changes may result in an increase in take-home pay.
Taxpayers who do not have taxes withheld by an employer during the year (such as self-employed individuals) can claim the credit on their 2009 and 2010 tax returns filed in 2010 and 2011, respectively.
It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples pulling in two incomes may choose to submit a revised W-4 to ensure they're withholding enough to cover the taxes due. This is because the full credit amount may be applied to paychecks from each source of income, which could result in the need to make a larger payment at tax time due to under-withholding.
If you have questions about the Making Work Pay Credit, go to www.irs.gov.
Source: www.irs.gov
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Ameriprise Financial and its representatives or affiliates for not provide tax or legal advice. Consult your tax advisor or attorney regarding specific tax/legal issues.
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