ATTENTION BUSINESS OWNERS: If you haven’t already accounted for the president’s Making Work Pay credit in your employees’ withholdings, today’s the deadline.
Using new withholding tables from the Internal Revenue Service, employers are required to dole out the Making Work Pay credit — that is, $400 for single filers and $800 for couples filing jointly — by reducing the amount of federal income tax withheld from eligible workers’ paychecks. The credit, which was authorized in February’s economic stimulus bill, will add about $13 a week to most people’s paychecks starting sometime around June. (The credit will phase out completely for single filers and married couples filing jointly with modified adjusted gross incomes of $95,000 and $190,000 a year, respectively).
To make the adjustment to employees’ income tax withholdings, refer to Publication 15 (Circular E) and the revised Publication 15-T , which contains new income tax withholding percentages and wage bracket method tables.
With just a few simple adjustments, the whole process can take a matter of minutes, says Julie A. Welch, an accountant in Kansas City, Mo. Or, no time at all. If employers use payroll companies like PayChex ( PAYX ) or Automatic Data Processing ( ADP ), those changes have already made. If, however, you use bookkeeping software like Intuit ‘s ( INTU ) Quick Books to account for employees’ pay, make sure the program you’re using has been updated, she says.
Employees don’t need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate, to see a boost in their paychecks. However, to ensure that the correct amount of tax is being withheld from their pay, it’s a good idea to do so. For the Form W-4, refer to page 71 and 72 of the revised Publication 15-T.
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