Millions may get surprise tax bills
Taxpayers who didn't have enough withheld because of the Making Work Pay credit will have to pay up when they file.
This post is by Stephen Ohlemacher of the Associated Press.
About 13.4 million taxpayers may be getting unexpected tax bills because they were awarded too much money under President Barack Obama's Making Work Pay tax credit, a government audit said Thursday.
The tax credit, which expires Jan. 1, was designed to increase take-home pay by about $8 a week through new tax withholding tables. The credit was capped at $400 for individuals and $800 for married couples filing jointly.
However, the credit put millions of taxpayers at risk for not having enough taxes withheld from their paychecks, resulting in a tax bill when they file their returns, said the audit by J. Russell George, the Treasury inspector general for tax administration.
Those at risk included people with multiple jobs, married couples who both work, Social Security recipients who also work, and young workers who are also claimed as dependents on their parents' tax returns.
"The Making Work Pay credit is a key tax credit designed to increase spending and stimulate the economy," George said. "However, many taxpayers who are accustomed to receiving refunds when they file their tax returns may have owed taxes and incurred penalties in 2009, and may yet again in 2010, because they were advanced more of the credit than they were entitled to claim."
The Internal Revenue Service reported that the average tax refund was $2,892 in the 2010 filing season, up from $2,663 in 2009. However, the number of refunds dropped by 3.5 percent, to 93.3 million.
The audit says the Making Work Pay credit could have been a factor in the reduced number of refunds.
The credit was Obama's signature tax break in the massive economic recovery package passed in 2009. The IRS moved quickly to start getting the new tax credit to workers, issuing new tax withholding tables four days after Obama signed the law.
About 122 million families and individuals have benefited from the credit, according to the agency's written response to the audit.
The IRS says it undertook an aggressive campaign in 2009 and 2010 to warn at-risk taxpayers that they might not be withholding enough money from their pay, including public service announcements and YouTube videos.
The agency regularly advises taxpayers to check their withholding so they don't get a surprise tax bill when they file their returns.
"This provision was specifically intended to help taxpayers through the severe economic downturn by putting more money into their hands right away, in each paycheck," wrote Richard Byrd, commissioner of the agency's wage and investment division.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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This is crazy! This is not the first time they have done this with the Tax credit tax break garbage. Then the next year you have to pay back how is that a tax break tax credit ect.. Now we might even have to incurred penalties in 2009, and may yet again in 2010.
Dont give it to us if we have to pay it back. If I want a loan I will ask for it!!!!
I agree with most everyone, a flat tax would be the way to go. No deductions everyone pays a sales tax on everything they buy except food. Granted, this will not happen. Our politicians are owned by the wealthy and the corporations. Who all are winning with the tax loopholes. The corporate tax rate is 35 percent but few large corporations pay anywhere close to 10 percent much less 35 percent.
Medicare is underfunded by 76 trillion dollars over the next 75 years. No one is doing anything about this huge shortfall. We are an instant gratification society. When the bills come due for all of this debt spending for so many years it will be interesting. And keep dreaming if you think we can grow our way out of this financial mess, it is impossible.
Reading this, I couldn't help but notice the words MAY, COULD, MIGHT. In other words, this is more hyperbole than fact. AND, don't miss the wording, " may have owed taxes and incurred penalties in 2009, and may yet again in 2010..." So, this is not New News!!
Seems like a waste of space & words.
What's realy kind of them is telling people up front that there may only get 75% back. I can think of many ways my money would be better spent.
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