You may have read about the Making Work Pay tax credit that is part of the stimulus package Congress passed earlier this year.  Like the 2008 tax rebate, the idea is to boost the economy by putting a little more spending money in people’s pockets.  Unlike the 2008 rebate, which came in a lump sum at the end of the year, the Making Work Pay credit is implemented by reducing the taxes withheld from each paycheck.Unfortunately, there are some problems with the new withholding tables which can result in a nasty surprise for some taxpayers come tax time.  People who work two jobs, or married couples where both spouses work, may find that their refund is not as big as they expected – or, if they are already trying to minimize their withholding, they may get no refund at all and instead have to pay additional taxes.  Anyone who is claimed as a dependent on someone else’s return is not entitled to receive the credit.  And the credit applies only to people with earned income, so retirees who are having tax withheld from their IRA distributions could also run into trouble.  Anyone who falls into any of these categories should use the IRS calculator determine the right amount that should be withheld.

If you’re an employer, you can help by making sure your employees are aware of this glitch.  Let them know they can adjust their withholding if necessary by submitting a new W-4 form.