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November 24th, 2009

15 Million Taxpayers to Repay Tax Credit

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Unfortunately, this is rather old news. In early May we had warned readers that those few extra bucks you were receiving in your paycheck each week, thanks to the president’s Making Work Pay tax credit, may need to be paid back come tax time.

Uncle Sam will want your tax cut back,” 5/2/09:

At-risk taxpayers include a broad swath of the public: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income.

Thanks a recent article from our friends The Dolans, we have a little better understanding of who’s to blame, and why this “gift” may have to be repaid (emphasis added):

You see, Congress, in its rush to sign this “gift” into law, failed to dot I’s and cross T’s. So today we learn from an inspector general report that due to a “quirk” in the tax law, as many as 15.4 million Americans may have to pay the money back next April either through a reduced refund or by actually writing a check if no refund is due!

Who Is At Risk for Repayment?

Just as our post from May had indicated, American taxpayers with two jobs, married couples whom both spouses work, and retirees are the main groups at greatest risk for repayment.

Retirees especially need to take note. A $250 stimulus check was sent out to retirees last year to accommodate older Americans who didn’t qualify for “Making Work Pay.” The problem is, some retirement age taxpayers received the $250 stimulus check despite still being employed. “Since they have received the $400 tax credit through decreased withholding they will have to return the $250,” writes the Dolans.

Visit IRS.gov

We advise any readers who are unsure whether or not they will have to pay up in April to visit the IRS.gov and utilize their withholding calculator to find out how much you’ll owe.

From the Dolans:

If you are part of the 10% of taxpayers who will be hit with this April surprise, immediately go to your employer and get a new W-4 form to change your withholding now. There are still enough weeks in the year to mitigate any damage by having more taxes withheld from each paycheck now through the end of the year.

Granted, we knew that a little extra cash from Washington wasn’t going to solve our financial woes or make a meaningful dent in theĀ  economy, but come on — making taxpayers repay the few dollars that we didn’t even ask for in the first place…We declare this: unfair!

For more information, visit IRS.gov for a list of questions and answers as well as “information for individuals” concerning the tax credit.

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One Response to “15 Million Taxpayers to Repay Tax Credit”

  1. denverpilot (Nate Duehr) Says: November 24th, 2009 at 11:46 pm

    15 million taxpayers will owe back the money received from stimulus Tax Credits THIS year. Bend over. http://blog.hsh.com/?p=7076

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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