Many To Pay Back Obama Stimulus Tax Credit

[ILLMAS]

I heard about this last night, this really sucks for many hard working tax payers!!

Many To Pay Back Obama Stimulus Tax Credit

Taxpayers At Risk If With More Than One Job, Receive Social Security

More than 15 million taxpayers could unexpectedly owe taxes when they file their federal returns next spring because the government was too generous with their new Making Work Pay tax credit.

Taxpayers are at risk if they have more than one job, are married and both spouses work, or receive Social Security benefits while also earning taxable wages, according to a report Monday by the Treasury Department's inspector general for tax administration.

The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was President Barack Obama's signature tax break in the massive stimulus package enacted in February.

Most workers started receiving the credit through small increases in their paychecks in April. The tax credit was made available through new withholding tables issued by the Internal Revenue Service.

The withholding tables, however do not take into account taxpayers with multiple jobs or married couples in which both people work. They also don't take into account Social Security recipients with jobs that provided taxable income.

The Social Security Administration sent out $250 payments to more than 50 million retirees in the spring as part of the economic stimulus package. The payments were meant to provide a boost for people who didn't' qualify for the tax credit.

However, they went to many retirees who also received the credit. Those retirees will have the $250 payment deducted from their tax credit -- but not until they file their tax returns next year, long after the money may have been spent.

"While implementing a credit through reduced withholding is an effective way to provide economic stimulus evenly throughout the year, it is difficult to account for everyone's circumstances," said J. Russell George, the Treasury inspector general for tax administration. "More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes."

The tax credit is also available for 2010. Russell said the problems will continue in 2010 if they are not resolved.

The credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more than $95,000 and couples making more than $190,000 are ineligible.

"Making Work Pay was designed to deliver much needed boosts to the paychecks of 95 percent of all working Americans," said Nayyera Haq, a Treasury Department spokeswoman. "Since enactment, more than 110 million families have benefited from as much as $60 in additional take home pay each month to put toward their family budgets, serving as a steady boost to spending and consumption."

For many, the new tax tables will simply mean smaller-than-expected tax refunds next year. The average tax refund this year was about $2,800.

The IRS, in a response to the audit, advised taxpayers to check their withholding throughout the year to make sure they don't get hit with an unexpected tax bill.

"The withholding system must approximate the tax liability of tens of millions of Americans, and therefore, cannot be tailored precisely to fit every individual situation," Richard Byrd Jr., commissioner of the IRS' wage and investments division, wrote in the agency's response to the report.

[jainen]

>>Taxpayers At Risk If With More Than One Job, Receive Social Security<<

There is nothing new about this, and attaching Obama's name to it is simply political rhetoric. Tax withholding tables are applied by each employer. Always have been. Taxpayers with more than one paycheck or pension income have always had to adjust withholding or make estimated payments. Other presidents have reduced withholding, but this time the credit is REAL and will not have to be repaid. Muckraking financial columnists are lying when they say otherwise.

[OldJack]

So far everything resulting with Obama has been somewhat of a joke. The credit was beneficial to taxpayers, but the method has resulting in problems for taxpayers that will be Obama's problem when election time rolls around.

[JohnH]

I don't think muckracking financial writers should be attaching Obama's name to this problem.

They should leave this task to the professional muckrackers when election time rolls around - that's when it will be most effective and hopefully benefit the country the most.

And for REAL tax cuts that definitely don't have to be repaid, it would be helpful to point out that since 2003, each and every person having taxable income has saved a MINIMUM of $300 per year in taxes because the Bush tax cuts lowered the first tier from 15% to 10%. And they will continue saving a minimum of $300 per year as long as they live (thanks to the Bush tax cuts) unless someone in Washington decides they know better what to do with our money and begins to steal it back.