By: Karen Warnick, The Independent
11/20/2009

It was supposed to be a way for taxpayers to get a tax credit. Called the Making Work Pay tax credit, the Obama administration enacted the credit as part of the economic stimulus package.

 Individuals were to get up to $400 and couples up to $800 in small increases in their paychecks starting last spring. The tax credit was made available through new withholding tables issued by the Internal Revenue Service.
According to a report filed Monday, Nov. 16, the Treasury Department's Inspector General for Tax Administration said that the credit was "advanced to taxpayers through their wages by a decrease in federal income tax withholding for the 2009 and 2010 tax years."
More than 15.4 million people got too much money and will have to pay it back when they file taxes next year. Some of the reasons for paying back the money include having more than one job, married people filing jointly when both work or receiving a pension or Social Security payments while still working.
"More than 10 percent of all taxpayers who file individual returns for 2009 could owe additional taxes," said J. Russell George, the Treasury inspector general.
He also said that the tax credit is available for 2010 and the problems will continue in not resolved.
The IRS estimated that about 65,000 taxpayers could face penalties for not withholding enough taxes in 2009 because of the overly generous tax credits. A IRS spokesperson said that those taxpayers will be eligible to have the penalty waived.
A Treasury Department official was quoted as saying that the "Making Work Pay was designed to deliver much needed boosts to the paychecks of 95 percent of all working Americans. More than 110 million families have benefited from as much as $60 a month in extra take home pay, serving as a steady boost to spending and consumption." The IRS said the report overstated the problem and that for most households, the withholding problem means a reduced refund and "not an out-of-pocket tax liability."
They also advised taxpayers to check their withholding throughout the year to make sure they don't get hit with an unexpected tax bill.

*Reach the reporter at kaykay85901@yahoo.com


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