Unless you’ve been living under a rock, you know that new stimulus legislation has been passed and signed by the President. The American Recovery and Reinvestment Act of 2009 includes some new tax provisions. The biggest question being asked by most people is what does that mean for me?
The Making Work Pay Tax Credit creates a refundable credit of $400 for a working individual and $800 for working couples for the 2009 tax year. This will be implemented by a reduction in federal income tax withholding in paychecks beginning in early spring with automatic payroll withholding adjustments which are expected to increase take home pay. For those who do not have sufficient payroll withholding required to allow the adjustments it can be claimed on their 2009 tax returns filed in 2010. The adjusted withholding related to the stimulus credit will have to be reported on the 2009 return as well. The IRS has already released the new withholding tables that will be needed to implement the stimulus withholding changes. This tax credit will be calculated at a rate of 6.2% of earned income and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
An Economic Recovery Payment of $250 will be paid to retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration. Railroad Retirement recipients will be eligible to receive this benefit and disabled veterans receiving benefits from the U.S. Department of Veterans Affairs will also be entitled to this payment. These payments will not be issued by the IRS. They will be handled by each respective paying agency.
Most of the tax provisions will not have any impact on the filing of the 2008 returns due April 15th of 2009. According to the IRS taxpayers should continue to file their 2008 returns as usual.
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