Over the weekend I was reading up on my tax news, and I came across an interesting article on Don’t Mess With Taxes that outlines payroll considerations for Obama’s new Making Work Pay credit. You can find a segment of the post below, or the full article can be found here.
Not too long ago I talked about the possibility that you might need to coordinate your state withholding in light of the recently enacted American Recovery and Reinvestment Act, aka Obama's first stimulus package.
Well, the effects of the new Making Work Pay credit continue to give us a lot to ponder in this area, even before it starts be doled out in April via reduced paycheck payroll taxes.
In addition to the state withholding issues, folks who aren't eligible for the full $400 paycheck payout will face some tax considerations. Below is a quick look at such taxpayers.
Dependents
Work doesn't pay for dependents, at last not when it comes to this new tax credit. They're not eligible for Making Work Pay money, even if they otherwise qualify because they have a job. This could affect students who have part-time jobs.
In most cases, the employers of these workers will go ahead an adjust payroll withholding. That means that the kids who do get the credit will have to pay it back on next year's tax return they'll have to file.
Nonresident aliens
They face the same situation as dependents; that is, they also aren't eligible for Making Work Pay credit.
If they get the credit this year via payroll tax reductions, they also will have to pay it back when they file a return in 2010.
W-4 (2) In both situations, dependents and nonresident aliens might want to file revised W-4 forms to account for the credit.