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TELL CITY - People enjoying an extra few dollars in each paycheck now should look at how it might affect them later, according to a Tell City accountant.
Jerry Hoagland said the average worker's withholding was reduced by $13 weekly under an Obama-administration effort to stimulate the economy.
The Associated Press reported April 30 millions of Americans "enjoying their small windfall from President Barack Obama's 'Making Work Pay' tax credit are in for an unpleasant surprise next spring. The government is going to want some of that money back."
On an average joint tax return where both members of a couple are working, Hoagland explained, they'll receive an extra $1,352 under the credit's reduced withholding. When they file their income-tax return for 2009, however, they'll find they're entitled to a credit of only $800, he said, "so they'll come up $552 short."
That shortage will reduce their refund or increase the amount they have to pay.
For a single worker, Hoagland added, withholding is reduced by $676, but the credit is only $400.
"People need to watch their withholding," he advised. Those who want to avoid the deficit should fill out a new Internal Revenue Service Form W-4 to change the amount withheld from their pay. It can be obtained from employers or www.irs.gov.
The IRS offers an online calculator at www.irs.gov to help taxpayers determine correct withholding amounts. Click on "More Online Services" from the main page to find it. Information posted there notes anyone with more than one job or who can be claimed by someone else as a dependent should also ensure they're not having too little withheld.
Recent changes may require anyone who pays quarterly estimated tax to pay a penalty, Hoagland also cautioned. He advises taxpayers to get the amount due at the end of a tax year as either refund or payment as close to zero as possible. For those who'll pay, the reason is obvious. For those getting refunds, "if the IRS has $5,000 of your money all year, they've used it without paying for it."