Hoosier Army Mom’s Weblog

Conservative Views

Important Tax information to be aware of.

An accountant (posted under the name Heidi) on a forum I was reading, posted this information about the stimulus money that we are now seeing on our paychecks.  On your 2009 return, if you either individually or as a couple make more than $30,000 a year, you really need to be aware of this, and may want to adjust your withholding (W-4) accordingly.  Contractors who work 1099 may also benefit from this knowledge and adjust (depending on the rate change magic the IRS has done).  Not being an accountant myself or being familiar with the tax laws per se, I’m not sure.  Please comment if you understand the 1099 effect, if there is one at all. Knowing the IRS code and rate changes that will effect income taxes for 2009 and tips on avoiding penalties and fees that could result, is in my opinion, very important.  I am grateful to this accountant for this information. I am posting this as a service to my readers.

Comment follows:

sigh… so, for those of you who still have jobs… I don’t know how many people noticed, but in mid-December, the IRS issued a new withholding tax table dropping the withholding tax by approximately $2/exemption claimed on your W-4 form (you saw an additional roughly $13/paycheck in your pocket)… on January 1st they raised the income tax by 2% across the board (for 2008 tax filing) and then gave an additional $1000 of exemption (gee thanks!)… if you made $30,000 or less you saw more money back on your return, otherwise this probably hurt you.  Now they have finished the adjustment for 2009 Stimulus Package  (“Making Work Pay Credit”)  and ALL companies must have it online in your check by 4/15/09.  This credit is $400/person ($800/married joint) and is payable on your 2009 1040 form even if you have no tax due. However, they are giving it out as a reduction in withholding tax. The credit is approximately $2/exemption claimed (again) payable each week for the remaining 40+ weeks of the year. Your paycheck will show (depending on what your W-4 says now) an additional $5-$20 more in your pocket because that same money is no longer going to your withholding tax.  THE PROBLEMS  (yes, there is more than 1):1) If you are claiming married 4 dependents it will be approximately $20/paycheck credit. It will not stop coming to you once it reaches the $800 limit. I repeat – it will NOT stop coming to you once it reaches the $800 limit. And the taxtable WILL NOT take into account whether or not your spouse’s check IS ALSO GETTING THE CREDIT. This credit is designed to FORCE YOU to double dip the credit and have to pay it back next year in April. With penalties and interest. The penalty is 25%. Interest rate for IRS is set at 5%… your double dipped $800 just turned into $1200 that you have to pay back… ouch.2) I received an email from a friend in IRS office in DC… they are raising the tax tables for next year by 4% across the board and raising the bar another $1500 dollars. Again, if you make less than $30,000 this will not affect you – you will probably get more back. If however, you are making more, or COMBINED you are making more, you will be screwed.3) If you have more than 1 job, the credit will be given ON ALL YOUR JOBS. So, if you have a full time job, it will be given there. If you have a part time job, IT WILL BE GIVEN THERE. Both at FULL CREDIT. Again, can you say ‘penalties and interest’?

I know we are ALL hurting for money right now. However, I strongly urge everyone to go in and file a new W-4 form requesting that the additional tax be withheld to negate this new ‘credit’. If the planned raise in rate does not occur, you will get an additional $400/$800 come April next year. But if it does, at least you won’t owe penalties and interest on money you don’t have in the first place… increasing your debt will NOT save you.

I’m sorry if no-one wants to hear this, but as an accountant, I feel a need to pass along the warning… I see the federal government creating a trap to pay for the stimulus and I don’t want to see the unwary walk into that trap blindfolded under the guise of ‘we’re helping you’… friendly fire IS NOT friendly.

An interesting post can be found at GM’s Place!

Hat Tip to Heidi for publicly sharing this information.

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April 5, 2009 - Posted by | Commentaries, Government, Politics | , ,

9 Comments »

  1. Thanks for the tip about the back-door penalty. Very useful, and telling about just how slimy this administration is.

    Comment by cbullitt | April 5, 2009

  2. Absolutely! They act like they are doing you this enormous favor, but don’t tell you that you will be paying it back and more at tax time! I’d rather be dealing with a bookie or protection racket than gooberment!!!

    Comment by hoosierarmymom | April 6, 2009

  3. I just want everyone to know that should you find yourself in an IRS trap, LA Sunset has plenty of money and a very big heart. He’ll bail you out.

    Comment by Mustang | April 6, 2009

  4. LOL!!!! How kind of you to offer LA’s assets for a worthy cause!!!

    Comment by hoosierarmymom | April 6, 2009

  5. This is why we need the Fair Tax or something like it. You know what you’re paying and you make the choices when and if you do. Everybody pays – even thieves and drug dealers – since it’s on consumption vs. income. I’m just getting read up on the Fair Tax, but it seems like a most reasonable proposition. Takes the power out of the hands of the politicians. ff

    Comment by foundersfreedom | April 7, 2009

  6. The penalties will slam taxpayers in 2010 (for tax year 2009). I wonder if people will then understand what this leftista administration is doing to us, the middle class? We’re being enslaved, bit by bit.

    Comment by Always On Watch | April 7, 2009

  7. I have been strongly behind Fair Tax for over a year now. One thing that is rarely mentioned is the fact that since it is on going, you eliminate the expense on tax payers of the IRS employees, the tax return processing expenses (for both individuals and the government) and the only need for audits would be to audit the records of the providers of goods from time to time to make sure the consumption tax is being handled according to law. Jobs would be created within businesses (someone to manage the accounting for the taxes from point of sale to the government!). The reduced burden and expense on taxpayers and the government would be a huge savings. And only those who consume the most, would pay the most. It doesn’t get anymore fair than that! But of course it would eliminate the biggest “power chip” that government has in their arsenal… the IRS!!!

    Comment by hoosierarmymom | April 7, 2009

  8. AOW… this is the kind of thing that has blown up the teaparties into a really huge movement across the country! It is why we have to get this information out there so more people will understand what this administration is doing. Yesterday, the Charlottesville, VA Craigslist posting pointed out exactly what must be done to get people to understand that they merely voted for some fancy rhetoric, and it isn’t for real! I dearly hate to think that “The People” won’t rise up as this travesty becomes apparent. It will have to hit them in the pocketbook of reality!

    Comment by hoosierarmymom | April 7, 2009

  9. From the Charlottesville, VA Craigs List:

    Layoff message from the Boss,

    As the CEO of this business that employs 140 people,
    I have accepted the fact that Barack Obama is our new President and that our taxes and government fees will now
    increase in a BIG way. To compensate for this additional overhead,
    I figure that the clients will have to see an increase in our fees of about 8%. Since we cannot raise those prices right now due to the dismal state of our economy,
    we will have to lay off several of our employees instead.
    This unfortunate economic reality has really been eating at me for a while, as we believe we are family here and I didn’t know how to choose who will have to go.
    After giving it considerable thought, this is what I did:

    I strolled throgh our parking lot and found 11 Obama bumper stickers on our employees’ cars and have decided these folks will be the first to be laid off.
    I can’t think of a more fair way to approach this problem.

    They wanted change; I gave it to them.
    If you have a better idea, let me know.

    Sincerely, The Boss

    * Location: the Bosses office
    * it’s NOT ok to contact this poster with services or other commercial interests

    Comment by hoosierarmymom | April 7, 2009


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