Image courtesy of MVI
President Obama signed into law the American Recovery and Reinvestment Act of 2009 this week. One of the provisions of the ARRA is the Making Work Pay tax credit.
For 2009 and 2010, the credit will provide a refundable tax credit of up to $400 for individuals and up to $800 for married couples filing joint tax returns. The tax credit is calculated at 6.2% of earned income and will phase out for taxpayers who earn over $75,000 for singles and $150,000 for married couples who file a joint return.
What do you have to do?
Absolutely nothing. Your employer will make the changes automatically based on the new withholding tables sent out by the Internal Revenue Service.
When will the increase happen?
The IRS is asking that employers use the new withholding tables no later than April 1, 2009. The increase in your paycheck should come shortly after.
What should you do with the increase?
No matter the amount of the increase, it should be put to good use.
Two good uses that immediately come to mind are:
- Paying off debt
- Boost your savings account