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August 1, 2009 - Check Withholding to Avoid a Tax SurpriseWith 2009 more than half over, there is no better time to check their 2009 federal income tax withholding levels to make sure they do not face any surprises when returns are due next spring. The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld: multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers and pensioners. Failure to adjust your withholding could result in potentially smaller refunds or may cause you to owe tax rather than receive a refund next year. So far in 2009, the average refund amount is $2,675 and 79 percent of all returns received a refund. Because retirees typically have withholding from their pension payments, pension plan administrators should be aware of the optional adjustment procedure for pension withholding announced in Notice 1036-P, Additional Withholding for Pensions for 2009. Social security beneficiaries, supplemental security income recipients, disabled veterans and railroad retirees that receive this year’s one-time $250 economic recovery payment should be aware that the Making Work Pay credit will be reduced by the $250 payment amount. They may also want to review their withholding. In addition, unemployed workers - the first $2,400 of unemployment benefits you receive during 2009 are tax-free for federal income tax purposes. People who expect to receive more than that should consider having tax withheld from their benefit payments in excess of $2,400. Use Form W-4V, Voluntary Withholding Request, or the equivalent form provided by the payer to request withholding to begin or end.
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