Vision Payroll

August 1, 2010

IRS Releases Information Letter on Making Work Pay Tax Credit

Senator Amy Klobuchar questioned IRS on Making Work Pay tax credit and payroll withholding
Senator Amy Klobuchar (D-MN)
In response to a letter from Senator Amy Klobuchar (D-MN), the Internal Revenue Service (IRS) recently released Information Letter 2010-0144, which includes a response to her constituent about the effect of the Making Work Pay tax credit on his employees’ annual withholding for 2009. The constituent was concerned that the reduced withholding would either reduce his employees’ refunds or increase the tax they would owe when they filed their 2009 and 2010 income tax returns. The IRS recommended that concerned employees consult the IRS withholding calculator and submit a revised Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado. Additionally, they should consult Publication 919, How Do I Adjust My Tax Withholding? Vision Payroll recommends that employees regularly review their income tax withholding to ensure the proper amount is paid in so that underpayment penalties may be avoided.

April 1, 2009

Tip of the Week: Use New Worksheet to Help Calculate Correct Withholding

The Internal Revenue Service (IRS) has released a revised version of Publication 919, How Do I Adjust My Tax Withholding?, to reflect changes from the Making Work Pay credit implemented as part of the American Recovery and Reinvestment Act of 2009 (ARRA). The IRS was concerned that two-earner families, employees with multiple jobs, and pension recipients may be under-withheld due to the changes in withholding tables mandated by ARRA. As a result, taxpayers could owe several hundred or thousands of dollars when filing their 2009 tax returns next year. The IRS recommends that taxpayers use new Worksheet 12, Making Work Pay Credit Worksheet (Including Special Credit for Government Retirees), from Publication 919 to adjust their withholding if necessary.

Contact Vision Payroll if you have questions on this topic.

March 13, 2009

Question of the Week: Do Employees Need to File a Revised Form W-4?

This week’s question comes from Jerri, an HR director. I know federal income tax withholding is supposed to change because of the new tax law. Do employees need to file a new Form W-4? Answer: Employees are not required to file a revised 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 American Recovery and Reinvestment Act of 2009 (ARRA). The Internal Revenue Service (IRS) provided new tax tables in Publication 15-T that adjust withholding for most workers. Employers must begin using the tables no later than April 1, 2009.

Workers may file a new Form W-4 or Formulario W-4(SP) if they do not wish to have their withholding reduced. Employees may wish to review Publication 919, How Do I Adjust My Tax Withholding or use the IRS withholding calculator. The IRS also recommends that employers provide a copy of the notice on page 73 of Publication 15-T to employees to help them understand the changes.

Contact Vision Payroll if you have further questions on the impact of ARRA on federal income tax withholding.

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