As part of the American Recovery and Reinvestment Act of 2009, the Internal Revenue Service (IRS) has released updated withholding tables. Though they won’t be published until new Publication 15-T is made available later this week, the IRS has released Notice 1036, Early Release Copies of New Wage Withholding and Advance Earned Income Credit Payment Tables and encouraged employers to start using them as soon as possible. The deadline for implementation of the new tables is April 1, 2009.

Workers are not required to file a new Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado to see the impact of the tax law change. The Making Work Pay credit is equal to 6.2% of earned income, up to a maximum of $400 for single taxpayers and $800 for those filing joint returns. Phaseouts of the credit begin at $75,000 of adjusted gross income (AGI) for singles and $150,000 AGI for those filing joint returns and the credit is eliminated for singles with more than $95,000 of AGI and joint returns with more than $190,000 of AGI. Taxpayers in this phaseout range or above due to multiple jobs, a spouse’s income, or unearned income should consider an amended Form W-4 or Formulario W-4(SP).

Vision Payroll has already implemented the revised withholding tables and eligible employees should start seeing an increase in take-home pay as early as today. Contact Vision Payroll if you have any further questions on the impact of the Making Work Pay credit.