The Making Work Pay Fiasco
It’s only February 10th, and I’ve already come across this problem dozens of times. If you worked multiple jobs during the year or if you are a student who worked during school, but are still claimed as a dependent on your parents return, you are facing a big surprise at year-end…you owe taxes or have a smaller refund than ever before. Why? It’s all due to the Making Work Pay Credit. This credit, which was established by President Obama back in April, required payroll departments to withhold $6 – $13 less per pay period from each person’s check. At year end, each worker would have $400 less in withholdings and on the tax return, a similar $400 credit would be applied to even it out. No harm, no foul, right? Well, for many working individuals, it’s not that simple.
Here’s where it’s causing a fiasco. If you worked 2 jobs, you had a total of $800 less withheld, but you still only get a $400 credit on your return, so you owe back that $400. If you were a student and worked, your employer would have $400 less withheld, but since your parents most likely still claim you as a dependent on their return, you don’t qualify for the Making Work Pay Credit, so you owe $400.
Unfortuantely, there’s no way around this for 2009, but you can make changes for 2010. Ask your employer for a new W-4 (or, if you are starting a new job, you will get a form when you start), and while you can keep the same Single/O or Married/2 or whatever you normally file as, but you can add an additional amount to withhold on line 6 you should enter an additional amount of $18 for a bi-weekly payroll or $40 for a monthly payroll.
