WHAT YOU DON'T KNOW ABOUT TAXES

It's called the American Recovery and Reinvestment Act of 2009 (ARRA). If you haven't heard of it yet, I'm sure you've heard of parts of it. Like the first time home buyers credit of $8000 or the 'Cash for Clunkers' deals at car dealers right now. But there is a lot more to the ARRA then that. It also gives effected individuals up to $2400 in Unemployment Benefits tax free in 2009, Health Coverage Tax Credit which is increasing from 65% to 80% for qualified health insurance premiums, enhanced Tax Credits for 2009 and 2010 on Earned Income Credit, Child Tax Credit and American Opportunity Credit (for those returning to school). It also has a 'Making Work Pay Tax Credit'.   Not knowing about the 'Making Work Pay Tax Credit'  could hurt you come April.

In February The Federal Government issued updated withholding tables for Employers. This resulted in more take home pay for many. But there is a catch. If you fall into any of the following categories :

Married with at least 2 incomes

People with more then 1 job

If you can be claimed as a Dependent

You received Social Security and also work

Receive a Pension

A Making Work Pay Tax Credit of up to $400 for individuals and $800 for couples will be reduced by the amount of any Economic Recovery Payment you received (if you received Social Security, Supplemental Security Income, Railroad Retirement or Veteran's benefits, your Tax Credit will be reduced by $250 per each eligible person who received an Economic Recovery Payment).

If you are not eligible for this Tax Credit you may receive a smaller refund next year or even owe.

The IRS has a withholding calculator that you can use to figure if what is being taken out of your checks now will be enough to cover what you'll owe in April. You'll need the following information when using the calculator ~

Most recent pay stubs

Most recent tax return

This handy little calculator will let you know if enough is being taken out. If not, it will tell you how much more you'll need and give suggestions on how to remedy the situation.

If you need or want to, you can have a set amount taken out of all future checks over and above what is taken out for Federal Taxes.. This is done by asking your Employer for another W-4 form. On it you can specify how much you would like in addition to what is withheld for Federal Taxes. Line 6 of the W-4 form says 'Addtional amount you would like withheld' Fill in the amount you'd like taken out. Give the completed form back to your Employer.