Reduced withholdings may mean no tax refund
By CARRA HIGGINS, Staff WriterA few extra dollars on each paycheck could turn out to be a headache next April if you don't start checking pay stubs now, the Internal Revenue Service cautions. When the federal government reduced withholdings in April, some taxpayers may find there's not enough being taken out to warrant a refund in 2010.
Merllene Yorkey of Yorkey and Associates in Elkins explained that the additional money each week will cause a reduction in federal credits toward taxes due at the end of the year and those who typically owe the federal government could find themselves paying even more.
As an example: a single individual who owes $500 during any given year is receiving an additional $13 per week, which equates $400 for the year. Yorkey said this scenario could mean the individual will owe $900 instead of the typical $500.
"For someone that isn't expecting this it will be quite shocking and maybe a very burdensome issue," she said.
The Internal Revenue Service recommends that taxpayers with more than one job, families with both spouses working, those who can be claimed as dependents by other taxpayers and pensioners review their tax withholding rates to prevent owing additional money or receiving a less-than-expected refund.
IRS Publication 919, "How do I adjust my tax withholding," or the withholding calculator at www.irs.gov can help taxpayers determine if they need to change their W-4 withholdings or W-4P for pension holders. Tax preparers can also pre-calculate a person's tax liability for the year.
For unemployed workers, the first $2,400 of unemployment benefits during 2009 are tax-free for federal income tax purposes, according to the IRS. Those who expect to receive more than $2,400 should consider having taxes withheld from benefit payments, the IRS advises. Form W-4V, Voluntary Withholding Request, can be provided by the payer.
Taxpayers are also advised by the IRS to visit its Web site for more information about the federal income tax withholding. Free tax forms and publications are also available by calling 1-800-829-3676.
