By Dan Bewley and Terry Hood, The News On 6
TULSA, OK -- Businesses have until a week from tomorrow to use the government's new formula for withholding taxes from their employees' paychecks. It's part of President Obama's economic stimulus package. The plan to help you keep from paying more taxes one year from now is put to a News On 6 Reality Check.
The Making Work Pay Tax Credit is designed to add around $15 to an average paycheck. The catch is some workers may get too much extra money now and have to pay the IRS next year when they file their 2009 taxes.
The $400 credit only applies to individuals making less than $75,000. For married couples it's an $800 credit and only applies if the couple is making less than $150,000.
There is a possible drawback for married couples who file jointly. The new formula might push them into a higher tax bracket. If that happens, they could be phased out of the credit.
The same goes for individuals who have more than one job.
Each of their employers may make the correct adjustment but, at tax time next year, the combined effort may slide the individual into a higher bracket. If either of those happens, your federal refund may be less or you may have to pay additional taxes.
"When they file their return before April of 2010 then they'll wind up owing additional taxes that they'll have to pay at that point," said CPA Jim Small.
Most workers will not have to change their W-4s; the business office at work should follow federal guidelines and make the necessary adjustments. But, analysts remind workers to double-check their paperwork to keep from paying more taxes next year.