Urgent: Check Your Withholdings
Your paycheck has probably been bigger this year because the government stimulus package cut the amount of tax withheld from people who were expected to get the new "Making Work Pay" tax credit. But there's a problem: According to the Treasury Inspector General for Tax Administration, more than 15 million taxpayers may unexpectedly end up owing taxes.
The idea was to get the stimulus out sooner (by workers taking home larger paychecks) rather than later (at tax refund time), but the new tables were applied too broadly. Among the people who may be under-withheld:
- Dependents who receive wages
- Single taxpayers with more than one job.
- Joint filers where one or both spouses have more than one job or both spouses work.
- Individuals who file a return with an Individual Taxpayer Identification Number.
- Taxpayers who receive pension payments.
- Social Security recipients who receive wages
Obviously it's bad for anyone to be unexpectedly under-withheld. It's especially bad for people who pay estimated taxes, as they may be so under-withheld as to have to pay a penalty on top of the extra tax.
If you fall into any of the categories above, you ought to take a few minutes to familiarize yourself with the details in the Inspector General's report, and get your withholdings adjusted while there's still time to catch up. It's got complete details on the credit and the various categories of people who might be under-withheld.