The American Recovery and Reinvestment Act (ARRA) of 2009 was signed into law on February 17, 2009 with changes to the Withholding Tables for Federal Income Taxes and to COBRA payments that will be funded by payroll taxes.
MAKING WORK PAY provision:
While previous “stimulus” tax incentives have resulted in one time checks being sent to qualified tax payers, this “stimulus” package will provide the tax break by reducing the amount of Federal Income Tax withheld in employee’s pay checks. New tax tables have been released by the IRS http://www.irs.gov/pub/irs-pdf/n1036.pdf .
Paul Altavena and Michael Young announce that
ConnectPay will be using the
new withholding tables
beginning in March.
- To be eligible for the credit, an individual must provide a valid social security number issued by the SSA, not a taxpayer identification number (TIN or ITIN) issued by the IRS.
- If an individual is currently unemployed, the credit can be claimed on their income tax return for 2009 and 2010.
- A couple affected by the phaseout risks the chance that they might hit the limit of $75,000 for an individual filer, or $150,000 for married couples filing jointly and therefore have tax due when they file thier income tax return at eyars end.
Michael Young therefore suggests that couples may wish to review the impact of the MAKING WORK PAY provision with their tax preparer and consider filing at least one new Form W-4 if applicable. Employees are NOT required to complete new W-4 forms under this stimulus package, but employees with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure enough withholding is held to cover the tax for combined income.
COBRA PREMIUM SUBSIDIES:
An “assistance eligible individual” that suffers the loss of employment unvoluntarily between September 1, 2008 and December 31, 2009 will be able to pay a reduced premium of 35% of the COBRA continuation premium. The remaining 65% will be paid by the employer, but will be reimbursed to the employer by treating the amount that is reimbursable as a credit against its liability for the payroll taxes. The IRS has published a question and answer document to assist employers. http://www.irs.gov/newsroom/article/0,,id=204708,00.html The United States Department of Labor has also published a FAQ’s sheet for employers. http://www.dol.gov/ebsa/faqs/faq_compliance_cobra.html
MASS TRANSIT FRINGE BENEFITS:
The ARRA is making the exclusion from gross income for employer-provided parking and commuter transportation benefits equal in amount. Employer-provided transit benefits will be $230 per month March 1, 2009 through December 31, 2010 and will be equal to parking benefits for 2010.
Paul Altavena warns this change effects exclusion amounts in the calculation of Federal Income Tax calculations and may not represent exclusion amounts for state withholding. Employers should check with their individual states which may have a different exclusion.
EARNED INCOME TAX CREDIT:
The Earned Income Tax Credit (AEIC) for families with three of more qualifying children is increasing to 45% for 2009 and 2010 under the ARRA. New tax tables for Advance Earned Income Credit will be released soon. The Maximum amount of the AEIC for 2009 will remain at $1,826. The finance office of the Senate has published a summary of the entire ARRA. http://finance.senate.gov/press/Bpress/2009press/prb021209.pdf
INCREASE IN UNEMPLOYMENT BENEFITS:
U.S. Department of Labor announces that the final bill includes a nine-month extension of a program that offers an additional seven weeks of unemployment benefits. Benefits would be increased by $25 per week. The proposal would exempt the first $2,400 of unemployment benefits from federal income taxes. http://www.dol.gov/opa/media/press/eta/ETA20090196.htm
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