President Obama has issued a target date for the adjusted withholding to begin as part of the stimulus package: April 1.

Obama mentioned the date in his weekly radio address, saying:

I’m pleased to announce that this morning the Treasury Department began directing employers to reduce the amount of taxes withheld from paychecks, meaning that by April 1st, a typical family will begin taking home at least $65 more every month.

The highly touted Making Work Pay Credit was part of Obama’s original campaign promises and was made law as part of the American Recovery and Reinvestment Act of 2009. The credit will provide up to $400 per individual worker and $800 per working married couple. The credit will be administered through cuts in withholding at the employer level. There are income restrictions, phase-outs, and eligibility requirements that apply.

Specifics of how the plan will work for the self-employed and lower-income families that might not have enough withholding to receive the full credit have not, to my knowledge, been made public. It’s widely believed that those taxpayers will be able to apply for the credit, which is refundable, come tax time (next year, people, next year!). I would agree that seems like the most logical solution.

So, come April, check your paychecks. You’ll likely see a few more dollars. But don’t check your mailboxes: no stimulus checks for working families this go-round.

I’ll post more details as they are made available. For more information about the credit and other stimulus package tax breaks, check out my prior article on the stimulus bill.

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Kelly Phillips Erb is a tax attorney, tax writer, and podcaster.

Comments

  1. Wasn’t there some kind of stimulus check or payment to go to those who do not work, but are on Social Security? How and when will that be paid?

  2. Most individuals on Social Security are supposed to get a check for $250 “sometime during 2009,” according to what H&R Block is telling us. Government retirees will get it when they file their 2009 return.

    Urb

  3. If the withholding is lowered but the tax rates stay the same, you must pay it back when you file your taxes. This is no “gift” from the federal government, it is just an advance of your own money. Everyone will be in for a surprise when they file their 2009 federal taxes. We did not need a stimulus package to do this. We could have increased our number of deductions so less would be withheld from our pay check. Then we would pay it back as “taxes owed” when we file our federal income tax return. If the current administration lowers the actual tax brackets, THEN we will see more money each year.

  4. My paycheck calculator already has the cuts figured in. I’m confused about the starting date being April 1. Can someone help me on that one?

  5. Isn’t that spending money we really don’t have? Isn’t that what got us here in the first place?
    People will put the money away to pay the same tax rate at the end of the year.
    The tax table needs to be lowered, so people can keep the money, and not have to worry about having to pay it back to the government at the end of the year

  6. Fred Bishop Reply

    I assume that the tax credit will be a part of the 2009 1040/1040a/1040e. The rates haven’t changed, but after you compute your taxes owed there will be a line to subtract you tax credit.

  7. I AM RETIRED, WILL I GET A CHECK OR NOT, IF SO HOW MUCH, AND WHEN.

    • Qualified retirees should receive a check in the amount of $250. The date has not been definitely confirmed but it has been suggested that those will begin to be mailed in May.

  8. I am confused. Is the cut in payroll taxes just a bait and switch or will the tax rates be lowered. Could someone give a definite answer to this question?

    • It is a credit which should be available on your 2009 tax return, much like the RRC this year. However, rather than send checks out throughout the year, the cuts will happen at the payroll level. When you file, again, much like the RRC, you do not get an additional credit if you were affected by the withholding throughout the year – so in most cases, there is no net difference to you. If you did not receive the credit through adjusted withholding – either because you are self-employed or your income did not allow for the full withholding, you can apply for the credit come tax time.
      There are some cautions – I’ll be posting about those later.

  9. if i am reading the new withholding tables correctly my withholding will be reduced $30.00/pay x 20 pays. so will my wife’s pay. that will be $1200.00 less wittholding. our joint stimulus reduction will be $800.00. i appreciate the reduced taxes but i believe most people don’t understand the sticker shock next spring when they have been under withheld. that is my issue with the withholding game. how hard is it to adjust the withholding tables properly? the government assumed most employers wouldn’t implement the new withholding until april.

  10. I am a retired person claiming married zero on my monthly retirement check. Will my withholding tables be adjusted also? I am expecting to receive an extra $60 /month. Am I correct?

  11. I do not receive social security. This is a retirement check from my employer and taxes are taken out the same as if I was employed. If they do not adjust my tax table, then how do I receive my stimulus???

  12. Brian – I am with you – I process our payroll at work and our reductions in withholding varied from $18 to $22 to $33 per pay period for a total of 18 pay periods. I’m one of the people who will receive $33 more but that is almost $600 – Does anyone know why that is? It’s hard to explain to employees!

  13. We’re basically currently a one income family. I’m self employed with virtually no income right now and my hubby has a job.

    He just got his paycheck and it seems the new stimulus withholding is already in affect. We looked at his stub and there were NO taxes taken out, rather an additional $55 was credited instead. We are worried that we’re going to have to pay next spring rather than get our usual refund. What should we do? I believe he is reported as married with two exemptions (we have 2 children living at home) and withholding at a higher rate. One of the children will be graduating high school this year and will start college in the fall. Should we adjust his W-4?

  14. Due to my income and tax exemptions (HH and 3 dep) I usually don’t have any fed tax withheld – when will I see my recovery reinvestment act money – Do I have to wait to file my taxes jan 2010…. That hardly seems fair!!!!!

    • Unfortunately, that’s probably what you’re going to have to do. Self-employed persons are in the same boat.

  15. I’m sorry, but there is no provision in the 2009 tax code for this so-called stimulus. It is nothing more than a postponement of your tax liability. When you file your 2009 tax return your refund (if you are due a refund) will be approximately $400 less, or you will owe approximately $400 more if you owe additional tax. Your best bet for this “stimulus” is to put it in the bank so you will be able to pay it back next year.

  16. I am the only employee on the books I haven’t seen a increase in my pay. When i asked about it my employer didnt respond and then said he didnt really know what the new schedule to take out was. Is it manditory they do this or will i be able to just have this adjusted at the end of the year.

  17. angry american Reply

    RIPPING OFF AMERICA ! we’ll be paying this back and then some.

  18. Just as I thought. This has been going on since April, and I still haven’t found one person who is getting this so-called stimulus. And just wait until those energy taxes start hitting. Obama fans, look what you’ve done.

    • Joe, I think if you poke around the blog, you’ll see a number of folks who have been affected (some good, some not so good) by the stimulus.
      If your employer has not made the necessary adjustments, you need to contact your employer. All employers should have received a revised withholding schedule (I know we did) from the Treasury.

  19. Margetta Stinson Reply

    I have been getting questions from employees about the tax table for 2010. There should be NO reduction in withholding in 2010 as I understand it. Thus, the withholding will be whatever it should be W/O and “stimulus” adjustment. Is that correct?

  20. Yea, got my tax book… they withheld 14 bucks less each week totaling 560 bucks, yet the tax table is only 60 dollars lower than last year for my income.. spiffy.. thanks for the screw obama.

  21. i am on disability and my husband who worked at same job for 43 years, he get ss and retirement check. that is what we live on and it is a heck lot less than when he was working, we are both almost 63.
    I did not vote for Obama nor would I ever. if he had given all that money to the americans and let those other big wigs sink or swim. so many homes could have been saved and people wouldn;t have to decide between prescriptions or food, shoot peple would have been SPENDING would that not seem logical?

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