15 Million Taxpayers to Repay Tax Creditby Tim Manni
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.
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 the 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!