Income Tax Withholding 2009 - Chicagoland Sportbikes
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post #1 of 3 (permalink) Old 03-19-2009, 11:08 AM Thread Starter
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Income Tax Withholding 2009

I just received this email from my employer and it just makes me hit my head on my desk. What a mess.

Subject: Notice to Employees about Changes in Income Tax Withholding

The IRS has issued new tax tables to reduce federal tax withholding required by the new economic stimulus law, the American Recovery and Reinvestment Act of 2009. For 2009 and 2010, the Making Work Pay provision of the stimulus bill provides a reduction in withholding of $400 for those claiming Single on the Form W-4, and $600 for those claiming Married on Form W-4.

The new tables will be effective with payrolls paid in April. Eligible University employees will get the benefit of the reduced withholding without any action on their part. The new tax tables will adjust the withholding automatically.

However, there may be situations where individuals will be under withheld if no action is taken:

• If an individual works for more than one employer the new tax tables will provide the reduced withholding for both employers. This would reduce the withholding by more than what an individual would be entitled to.

• Married couples with both spouses working and claiming married on the Form W-4 will also see the reduction in withholding for both spouses. This would reduce the withholding by more than what the married couple would be entitled to.

• Individuals claimed as a dependent on another individual’s tax return are not eligible for the reduced withholding. The reduction is automatic and could result in under-withholding for the year.

• Nonresident aliens are not entitled to the reduced withholding. The calculations are adjusted so that the reduction is not applied to most nonresident alien withholding. However, the calculation adjustment does not apply to students and business apprentices from India. Individuals in this category may be under-withheld in their taxes for the year.

In the situations described above, if you want to make sure the appropriate withholding is applied, you need to file a new Form W-4. You may claim fewer withholding allowances on line 5 or request additional amounts to be withheld on line 6.
So I imagine a lot of people fall into the second bullet. Both husband and wife are working and both complete their w4s as married. So now we are going to owe $400 in taxes unless we recalculate the witholding.


What a mess. Any thoughts or solutions?

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post #2 of 3 (permalink) Old 03-19-2009, 11:10 AM
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I need to change my withholding to $0.00

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post #3 of 3 (permalink) Old 03-19-2009, 11:25 AM
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If you typically get a refund at year end of more then $400 you should be ok. Basically, you are not lending the money to uncle sam without receiving any interest for it. On the other hand, if you typically owe taxes or zero out, you need to lower your exemption number or you might end up owing money at year end.


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