EMPLOYEE ALERT: Adjustments to W-4 maybe needed under new law

As many of you know that there are many changes taking affect due to the President Obama holding the office, the attempts to revitalize the global economy and to assist with helping the general public ( middle class Americans) keep some money in their paychecks from week to week.

Generally, I write about my experiences within the Accounting world, but this time I wanted to speak to you directly with more so facts based upon the federal government. With that said I have been reading on the new laws taking affect, and thought it would be a good time to advise my readers, supporters and hard workers about the Tax tables that were announced.

Because of the new withholding tables under the American Recovery and Reinvestment Act, some you whho are employees might want to adjust your 2009 FITW (Federal Income Tax Withholding) by submitting a new W-4 now. The Act reduced FITW (Federal Income Tax Withholding) to reflect the Make Work Pay tax credit. But for some employees, that adjustment may result in paying less than the required 90% of FIT (Federal Income Tax) by Dec. 31, 2009, which may lead to penalties.

The penalties for you that receive a refund means less money received back on your refund, the possiblity of actually having to pay money to the government and if maybe even garnishments from your paychecks if you can not afford to pay the IRS (worse case scenario).

Employees most likely to have too little withheld under the new tables are:

• Your Spouse and you both work
• individuals with more than one job;
• You can be claimed as a dependent on someone else’s tax return (since you are not eligible for this credit).
• Pension Income: Non-government pension income is not eligible for the Making Work Pay Credit, and the calculator now accounts for this. If you expect to receive a significant amount of pension income in 2009, you should use this calculator so that you can adjust your withholding appropriately for the second half of the year.
• Unemployment Compensation: The first $2,400 of unemployment compensation an individual receives in 2009 is now tax free. The Withholding Calculator now accounts for this, so enter the full amount into the calculator.

So you may want to use the Withholding Calculator provided by the IRS:

http://www.irs.gov/app/cgi-bin/wh09.cgi/p2/en

The purpose of this application is to help employees to ensure that they do not have too much or too little income tax withheld from their pay. It is not a replacement for Form W-4, but most people will find it more accurate and easier to use than the worksheets that accompany Form W-4. You may use the results of this program to help you complete a new Form W-4, which you will submit to your employer.

2009 W-4 Form: http://www.irs.gov/pub/irs-pdf/fw4.pdf

Here is a link for more information regarding this annoucement: http://www.irs.gov/individuals/article/0,,id=96196,00.html

If you are an employer, here is a notice for your employees (page 73):

http://www.irs.gov/pub/irs-pdf/p15t.pdf