09-P-037 IRS Information on Federal Tax Withholding
|DATE:||May 18 , 2009|
|SUBJECT:||IRS Information on Federal Tax Withholding|
Information on Federal Tax Withholding as a Result of the American Recovery and Reinvestment Act (ARRA) of 2009
Recently the IRS issued updated withholding tables to implement the withholding adjustments required by the American Recovery and Reinvestment Act of 2009. The new Wage Withholding and Advance Earned Income Credit Payment Tables were implemented for the State of Kansas effective for paychecks issued on or after March 20, 2009. Refer to informational circular 09-P-025 issued on February 27, 2009 http://www.da.ks.gov/ar/infocirc/fy2009/IC09p025.htm to view the revised tables.
The IRS has subsequently issued additional information encouraging employees in certain categories to review their withholding to determine if enough tax is being withheld. Please provide the following information to your employees and encourage them to seek advice from their personal tax accountant or to visit www.irs.gov to utilize the on-line withholding calculator to determine if it is necessary to file a revised W-4 to ensure adequate wage withholding to meet their estimated income tax liability. State of Kansas Payroll and Human Resources staff members cannot make recommendations to individual employees regarding personal income tax withholding. Employees can revise their Federal W-4 withholding allowances or request an additional Federal withholding amount via the Update W-4 Federal Tax Data page in Employee Self Service www.kansas.gov/employee.
Below is a summary of information per the IRS website:
In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
Wage earners will benefit immediately with a larger paycheck as a result of the changes made to the federal income tax withholding tables to implement the Making Work Pay tax credit. Some individuals may find that the changes built into the withholding tables result in less tax being withheld than they prefer.
Depending on your personal situation, you may have less withheld from your paycheck than you need or want. If you believe your current withholding is not appropriate for your personal situation, you can perform a quick check using the IRS withholding calculator which can be found at http://www.irs.gov/individuals/article/0,,id=96196,00.html. Adjustments can be made by filing a revised Form W-4, Employee's Withholding Allowance Certificate, with your employer.
The following groups should check their withholding to see if enough is being withheld:
- Individuals who work two or more jobs,
- Married couples who both work,
- Dependents who work but who are not eligible for the making Work Pay tax credit due to their dependent status, and
- Non-resident aliens, and some resident aliens, who do not have valid Social Security numbers and who are not eligible for the credit.