The new 2009 withholding tables issued April 1st, as a result of the ARRA’s Making Work Pay Credit Act, lowered the amount withheld from our paychecks.  For those claiming the married status on their W-4 form the decrease is up to $600.  A person claiming single status on the W-4 form, the decrease is up to $400.  The decrease begins to phase out as the combination of wages and withholding allowances imply a modified adjusted gross income of at least $75,000 for single individuals and $150,000 for joint filers and disappears completely at a modified AGI of Single $95,000, Married $190,000.  The decrease may be less for lower-paid workers.

When you file your tax return for 2009 you will receive an $800 tax credit for Married filing Joint. If both spouses claim the married status on their W-4 form, withholding will decrease up to $1,200, leaving a potential $400 tax liability.  

Single filers will be entitled to a $400 tax credit on their tax return.  If a single person is working more than one job at a time there is a potential of up to $400 reduced withholding on each job’s wages.  This may create a tax liability on their tax return.  

If you may be claimed as a dependent on another person’s tax return, you will not be eligible for the Making Work Pay Credit on your tax return.  But your withholding may decrease up to $400.

Those receiving a pension with tax withheld are subject to the same reduced withholding rates.  But pensions are not considered earned income and do not qualify for the $800 or $400 credit on their tax return.

If you receive a one-time Economic Recovery Payment of $250 in 2009, this will reduce the $400 or $800 credit on your tax return.  The following individuals will get a one-time Economic Recovery Payment of $250 in 2009.  Retirees, disabled individuals, and Supplemental Security income recipients receiving benefits from the Social Security Administration, disabled veterans receiving benefits from the US Department of Veterans Affairs and Railroad retirement beneficiaries.  The Economic Recovery Payment will be made by the agency that normally pays benefits to the individual, and anyone who is eligible under more than one category is entitled to only one payment.  The payment will reduce the calculation of the Making Work Pay tax credit for which the individual may qualify and claim on his or her 2009 personal tax return.  So if both members of a married couple earn wages and receive social security benefits, they could each see a $600 reduction in withholding and each receive a $250 payment from the SSA amounting to a total assistance of $1,700.  However the total assistance-eligibility is only $800 on their tax return.

What to do if you believe you are under withholding federal tax?  Take the amount you determine to be under withheld and divide by the number of pay periods remaining in the year.  You can file a new W-4 form with your employer listing the additional amount of tax to be withheld.  The Tax department at SS&C Business & Tax Services, Inc. can review your tax liability for 2009 and help you determine your withholding requirements.