New Federal Withholding Tables Released

IRS has released the new withholding tables for the remainder of 2009 to reflect the benefits of the Making Work Pay credit. They are encouraging businesses to start using the tables as soon as possible, but not later than April 1, 2009.

The IRS News Release 2009-013 also advised taxpayers that those with multiple jobs may want to submit revised Forms W4 with their employers if they need to have more withholding to cover their combined income taxes.

As we predicted, the withholding tables have been adjusted based on the taxpayers’ marital status on the Form W4 they have filed with their employers. A quick check of the weekly withholdings for wages of $300, $600, and $1,000 shows:

If the employer uses the new tables, taxpayers with SINGLE marked on their Form W4 will have $9-10 less Federal withholding each paycheck. Those with MARRIED marked on their Forms W4 will have $15-16 less Federal withholding each paycheck. The biweekly tables show double these amounts.

CAUTION: To repeat our earlier concern – Since the tables for withholding are based on the taxpayer’s marital status as shown on the Form W4 filed with the employer, the lower withholding may mean taxpayers could end up owning at the end of the year.

For example, a married couple who both use MARRIED on their W4 will each have $800 of less withholding during the rest of the year ($1,600 combined), when their credit on the 2009 return will only be $800 total. This will result in a lower refund by the extra $800, which could turn their situation into a balance due. The reduced withholding may also leave some taxpayers shy of their required withholding when it comes to the underpayment penalty (Form 2210) for 2009.

Additional example, a taxpayer who has two jobs would have $400 withholding from EACH job for a total less withholding of $800. The credit on the 2009 return will only be $400. This will result in a lower refund by the extra $400, which could turn the taxpayer’s situation into a balance due.

This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111). [email protected], [email protected], [email protected], [email protected].

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