A few weeks ago I wrote a short piece explaining that while even if you think the “Making Work Pay” tax credit of $400 is a bad idea, at least we’re saving money this time by not sending out two letters and a check to every household in America. In short: the stimulus process could’ve been dumber.
In the comments of that article, Laura said:
Yes but now the government will have to reprint and mail out the employee withholding schedules that small employers use to figure up those weekly paychecks. This is why it will take a few months to see that $13. It goes both ways.
I wasn’t sure if Laura was correct about that. I work for a small company, so I figured I’d wait and see.
This morning, my co-workers and I saw our Federal Withholding decrease for the first time as a result of the “Making Work Pay” tax credit. My personal take-home pay is $33 more (we get paid twice a month).
So I asked our Accounting department about the process, and I got this in reply:
It’s actually a change in the Withholding Table. The Table is downloaded from the IRS electronically and then based on your W4 elections and pay scale, the amount will automatically adjust.
Granted, there are probably some companies who don’t do everything electronically, and as a result might need a paper form to be sent, but in our case, and I suspect most other companies, this process didn’t cost anything.
So, in short: the stimulus process could’ve been even yet still dumber.
(More about the Tax Credit from the IRS.)
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{ 10 comments… read them below or add one }
Hmmm….this article just reminded me about the extra money. I just checked mine and no difference (I am paid 15th and last day of each month). I thought we weren’t supposed to see this increase until after 4/1?
Employers can start whenever they like, before April 1 or after. But the tables are based on dividing the credit over April 1 through December 31, so employers who start early might credit an employee more than they should (so they’ll owe some of the credit back) and employers who start late might not credit an employee enough (so they’ll receive a larger tax refund or owe less tax when they file next year).
Most small businesses that aren’t fully electronic got paper copies of the new tables.
Hopefully all small businesses that aren’t fully electronic got a paper copy, or instructions for downloading a PDF, or something.
Yes, after I said that it occurred to me that a lot of companies can access that info online now and still more businesses use payroll companies now more than ever. Although, it still surprises me how many small companies still pay their bills with handwritten checks and invoice their customers with barely typewritten bills. So I’d venture to say that the government still prints a few, but not to the cost that I had invisioned. It hasn’t been that long since I was doing a manual payroll for a small company with less than 10 employees and used the Schedule that the govt mailed to me each year prior to Jan 1. It is actually a 8-1/2 by 11 booklet (not a “simple paper form” as you put it) with every possible withholding table in it and instructions on how to use it etc. So, yes, they had to reprint a bunch of those schedules unless Obama had an inside source that put a halt to it all last October or so. But you are right, it was pennies relative to the new budget.
And btw, my paycheck increased by $33 as well which multiplied by 24 is almost $800. This is because I file my w-4 as married. So if you and your spouse both file a W-4 form as married you will get an extra $1600 for the year. I realize this is a “short” year but you get my drift. It’s still more than $800 per couple for the remainder of 2009. How many people will not realize that until tax time? The tables in that schedule assume you are married but your spouse does not work. Nice but you will pay some of that back come tax time.
Publication 15-T contains 77 pages. Sorry, I just had to look it up – online.
No apology necessary; it takes more than one person to document the truth, most of the time.
It’s a shame about the $400/800/1600 thing. I plan to use the IRS’s withholding calculator in the next few days to make sure we don’t get a big surprise next April, like we did last year.
Uh oh….hubby and I both claim married….and we always owe money in April. I’m going to have to start putting some money aside for this! It would actually be awful if this credit puts me into the area where I have to do estimated taxes!!
I haven’t seen a small business do manual payroll in years. With Quickbooks costing so little every month, most businesses just use that (even if they’re still paying invoices with checks — Quickbooks makes it super easy to pay anything with a check!)
With Quickbooks, it’s downloaded and figured automatically. You don’t have to do anything other than open Quickbooks and read a couple of dialog boxes.
-Erica