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Millions Will Have to Repay ‘Tax Credit’

From an unfazed Associated Press:

Millions will have to repay part of tax credit

By Stephen Ohlemacher, Associated Press Writer

WASHINGTON – More than 15 million taxpayers could unexpectedly owe taxes when they file their federal returns next spring because the government was too generous with their new Making Work Pay tax credit.

Taxpayers are at risk if they have more than one job, are married and both spouses work, or receive Social Security benefits while also earning taxable wages, according to a report Monday by the Treasury Department’s inspector general for tax administration.

The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was President Barack Obama’s signature tax break in the massive stimulus package enacted in February.

Most workers started receiving the credit through small increases in their paychecks in April. The tax credit was made available through new withholding tables issued by the Internal Revenue Service.

The withholding tables, however do not take into account taxpayers with multiple jobs or married couples in which both people work. They also don’t take into account Social Security recipients with jobs that provided taxable income

"While implementing a credit through reduced withholding is an effective way to provide economic stimulus evenly throughout the year, it is difficult to account for everyone’s circumstances," said J. Russell George, the Treasury inspector general for tax administration. "More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes."

The tax credit is also available for 2010. Russell said the problems will continue in 2010 if they are not resolved.

The credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more than $95,000 and couples making more than $190,000 are ineligible.

"Making Work Pay was designed to deliver much needed boosts to the paychecks of 95 percent of all working Americans," said Nayyera Haq, a Treasury Department spokeswoman. "Since enactment, more than 110 million families have benefited from as much as $60 in additional take home pay each month to put toward their family budgets, serving as a steady boost to spending and consumption."

For many, the new tax tables will simply mean smaller-than-expected tax refunds next year. The average tax refund this year was about $2,800.

The IRS, in a response to the audit, advised taxpayers to check their withholding throughout the year to make sure they don’t get hit with an unexpected tax bill.

"The withholding system must approximate the tax liability of tens of millions of Americans, and therefore, cannot be tailored precisely to fit every individual situation," Richard Byrd Jr., commissioner of the IRS’ wage and investments division, wrote in the agency’s response to the report.

Once again, this is a change in the withholding tables.

There have yet to be any real tax cuts from the Obama administration.

Even though the fact-checkers checking Palin (falsely) claimed there were.

This article was posted by Steve on Monday, November 16th, 2009. Comments are currently closed.

8 Responses to “Millions Will Have to Repay ‘Tax Credit’”

  1. BillK says:

    I’m shocked – shocked!

    In my opinion withholding is still the biggest fraud ever imposed on the American public.

    There’s no way Americans would ever stand for paying the taxes they do if they had to write a check in full each April.

  2. GetBackJack says:

    “When you subsidize poverty and failure, you get more of both.” – James Dale Davidson, National Taxpayers Union

    Dear BillK – there’s not supposed to be any taxes on income, at all.

    “The more corrupt the state, the more it legislates.” – Tacitus

  3. proreason says:

    It’s ok.

    Universal Health Care is a gazillion trillion times more complicated than a simple tax credit. After all, the Christmas Present bill is about as long as War and Peace….before the tens of thousands of pages of regulations are written to “operationalize” it.

    So little “test glitches” like this are a good training ground for the ever-learning government bureaucracy.

  4. Chuckk says:

    This is what happens when things are so complicated that no one can understand them. Welcome to the world of Obamacare.

  5. retire05 says:

    I’m sorry, I have to disagree with the AP. The number of taxpayers who are going to owe a debt to the IRS next April 15th is going to be much greater than they indicate.

    I had a long talk with my CPA (a former IRS auditor) over this very issue. He said that even those who are claiming 0 dependents, and have claimed “single” but are married with dependents, will still wind up owning taxes. The problem is that Congress has not passed any tax reduction legislation and therefore the tax rates will stay the same, although people think President O-bobblehead has given them a tax cut. Only Congress can legislate a tax cut.

    Perhaps when it comes time to pay those taxes, we could all invoke the Giethner Rule.

  6. Confucius says:

    This from the administration that says spending is a way of saving.

    Makes perfect sense.

  7. MinnesotaRush says:

    Where’s ACORN when you need ’em? (lol, lol)

  8. Reality Bytes says:

    What tax credit? You guys get a tax credit? I didn’t.

    Congress is like a teenage brat. “Dad, I need more money than 20 bucks a week.”

    Here you go, kiddo. How about 30?

    Thanks Dad. But 30 ain’t gonna cut it. I need 50.


    Yeah, how do you expect me to live on less than 50 dollars a week?

    OK but..

    And I need the car too Pop…and what about gas. Better make that another 30.

    So, 50 bucks a week + 30 for gas & the car?!

    Dad, what are you gripin’ about?! You’re just being selfish. You know the Belgiums down the street they give their Laurent that plus weekly trips to the spa AND open credit at Whole Foods.


    Listen Pop. Consider it an investment in your future.

    Son…we have to have a little talk….

    Time to kick the little shit’s ass back into reality.

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