Have you noticed your paycheck is a little larger lately?

[rebeccajo 14]

Depending on how much you make, the recent reduction in your wages due to the Obama Administration giving us all an 'advanced tax credit' could screw you when you file next year.

Next spring when we file, single individuals will get a $400 tax credit and married couples an $800 tax credit. Tax credits are a lot better than deductions because it's an actual reduction of your tax bill, not a reduction of your taxable income.

The IRS published new wage withholding tables which went into effect late March of this year. So if you have seen an extra 30 dollars or so in your paycheck, that's because the IRS in now withholding LESS than it was the first part of this year. What is SUPPOSED to happen (when you file) is that the credit will sort of "wash" itself out because you've paid in less income tax the last nine months of the year. In other words, you won't get a $400 or $800 bigger refund because you were getting it in little dabbles in your paycheck.

BUT if you are a couple earning low or moderate wages, you might find yourself owing next spring. Depending on how you filled out your W4 at the start of the year, you could actually find there is NO Federal Income tax being taken from your check right now.

Example - One of you makes $12 an hour - the other makes $10. You both are paid bi-weekly. You have both filed W4's at the beginning of the year as Married with 0 allowances (this is a CONSERVATIVE tactic - many people will have Married and 1 or Married and 2).

Before the change, the person making $12 an hour had about $66 a pay taken out in taxes. Under the new structure, only $38 is being withheld. The person earning $10 an hour had about $50 per pay withheld - now it is $20.

There's no way that's going to be enough income tax withheld at the end of the year even with a $800 credit, unless you have a bunch of kids to claim as dependents.

We are upping our withholdings this next pay period to cover what I predicted (for us) would have been about a $500 shortfall in taxes. I'd urge everybody else to do the same, especially couples who don't earn a lot.

Edited April 30, 2009 by rebeccajo

[one...two...tree 2,762]

We are upping our withholdings this next pay period to cover what I predicted (for us) would have been about a $500 shortfall in taxes. I'd urge everybody else to do the same, especially couples who don't earn a lot.

Good idea. I received a decent refund this year, but just in case, I'd rather have them take too much out than not enough.

[jundp 191]

I always have an extra $100/month taken out just in case.

[rebeccajo 14]

I always have an extra $100/month taken out just in case.

I've had extra taken out also. About $80 or so. It still wasn't going to be enough.

BUT - Wes had himself at Married and 2 (he didn't understand the W4 thingy - silly Irishman). I'm having that fixed also. They have been withholding NOTHING from him the last three paychecks. Not good.

Edited April 30, 2009 by rebeccajo

[Tygrys 143]

We are upping our withholdings this next pay period to cover what I predicted (for us) would have been about a $500 shortfall in taxes. I'd urge everybody else to do the same, especially couples who don't earn a lot.

Good idea. I received a decent refund this year, but just in case, I'd rather have them take too much out than not enough.

All people who realize that it is not a real tax break, but rather just decrease in witholding rates, shold definitely re-calculate and adjust their W-4 as needed (what was just suggested in posts above)

[rebeccajo 14]

We are upping our withholdings this next pay period to cover what I predicted (for us) would have been about a $500 shortfall in taxes. I'd urge everybody else to do the same, especially couples who don't earn a lot.

Good idea. I received a decent refund this year, but just in case, I'd rather have them take too much out than not enough.

All people who realize that it is not a real tax break, but rather just decrease in witholding rates, shold definitely re-calculate and adjust their W-4 as needed (what was just suggested in posts above)

The credit is a real tax break.

The problem is the tables weren't done properly. If approximately $30 less per semi-monthly pay period is withheld (the example I used) for 21 pay periods that's $630 less withheld - the credit is $400.

If you have two people working, you then have double the damage.

[jundp 191]

Thanks for the info. I'll have a check and see. We don't want to get screwed at the end of the year.

[one...two...tree 2,762]

I just checked with my HR person...it's a difference of $33.33 per paycheck/ bi-monthly. I'll just lowered my number of exemptions which hopefully means a bigger refund next year.

[natty bumppo 297]

twin infant boys ... a non working spouse ...

I'm still waiting for stephen to swap electric bills ...

[Tygrys 143]

I just checked with my HR person...it's a difference of $33.33 per paycheck/ bi-monthly. I'll just lowered my number of exemptions which hopefully means a bigger refund next year.

No, no... It's $400.00/year = $33.33/month = $16.66/bi-monthly = approximately $7.67/week

Hmmm... yeah, now I can see it's a real tax break. Now I just need to think where to spend all this money.

[one...two...tree 2,762]

I just checked with my HR person...it's a difference of $33.33 per paycheck/ bi-monthly. I'll just lowered my number of exemptions which hopefully means a bigger refund next year.

No, no... It's $400.00/year = $33.33/month = $16.66/bi-monthly = approximately $7.67/week

Hmmm... yeah, now I can see it's a real tax break. Now I just need to think where to spend all this money.

Well, my checks show a gain of $33.33 per paycheck, bi-monthly. Probably, if you checked off 'married filing jointly', your amount would be the same.

[natty bumppo 297]

I just checked with my HR person...it's a difference of $33.33 per paycheck/ bi-monthly. I'll just lowered my number of exemptions which hopefully means a bigger refund next year.

No, no... It's $400.00/year = $33.33/month = $16.66/bi-monthly = approximately $7.67/week

Hmmm... yeah, now I can see it's a real tax break. Now I just need to think where to spend all this money.

Well, my checks show a gain of $33.33 per paycheck, bi-monthly. Probably, if you checked off 'married filing jointly', your amount would be the same.

dude ... I'm still offering to swap electric bills ... gonna do this or just ignore?

[one...two...tree 2,762]

I just checked with my HR person...it's a difference of $33.33 per paycheck/ bi-monthly. I'll just lowered my number of exemptions which hopefully means a bigger refund next year.

No, no... It's $400.00/year = $33.33/month = $16.66/bi-monthly = approximately $7.67/week

Hmmm... yeah, now I can see it's a real tax break. Now I just need to think where to spend all this money.

Well, my checks show a gain of $33.33 per paycheck, bi-monthly. Probably, if you checked off 'married filing jointly', your amount would be the same.

dude ... I'm still offering to swap electric bills ... gonna do this or just ignore?

You could do what we did - switch our lights, bought a front loading washer, run our dishwasher once a day. We don't have central AC and the weather is pretty mild here. Perhaps move to a better climate if you don't like it there?

[Tygrys 143]

I just checked with my HR person...it's a difference of $33.33 per paycheck/ bi-monthly. I'll just lowered my number of exemptions which hopefully means a bigger refund next year.

No, no... It's $400.00/year = $33.33/month = $16.66/bi-monthly = approximately $7.67/week

Hmmm... yeah, now I can see it's a real tax break. Now I just need to think where to spend all this money.

Well, my checks show a gain of $33.33 per paycheck, bi-monthly. Probably, if you checked off 'married filing jointly', your amount would be the same.

If you claim your spouse as an dependent, well maybe...

But, see, in this case she's not getting her $33.33/bi-monthly paycheck, so it is still $16.67/per bi-weekly paycheck per PERSON.

Anyway, I wish you a lot of fun with spending that $33.33/bi-monthly together...

[Tygrys 143]

You could do what we did - switch our lights, bought a front loading washer, run our dishwasher once a day. We don't have central AC and the weather is pretty mild here. Perhaps move to a better climate if you don't like it there?

And you bought that energy efficient washer out of this "tax break". Amazing...

Don't tell me you also bought an electric car!?