U.S. gives too much, but IRS will get it back

Taxpayers who got too much of a windfall will be required to give some of it back

By STEPHEN OHLEMACHER
ASSOCIATED PRESS

May 3, 2009, 8:10PM

WASHINGTON - Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.

At-risk taxpayers include a broad swath of the public: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income.

The Internal Revenue Service acknowledges problems with the withholding tables but has done little to warn average taxpayers.

"They need to get the Goodyear blimp out there on this," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.

For many, the new tax tables will simply mean smaller-than-expected tax refunds next year, IRS spokesman Terry Lemons said. The average refund was nearly $2,700 this year.

But taxpayers who calculate their withholding so they get only small refunds could face an unwelcome tax bill next April, said Jackie Perlman, an analyst with the Tax Institute at H&R Block.

Perlman's advice: Check your federal withholding to make sure sufficient taxes are being taken out of your pay.

If you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers.

If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a Form W-4.

The IRS has a calculator on its Web site to help taxpayers figure withholding. So do many private tax preparers.

Obama has promoted the tax credit as one of the big achievements of his first 100 days in office, boasting that 95 percent of working families will qualify in 2009 and 2010.

The credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly.

Individuals making more $95,000 and couples making more than $190,000 are ineligible.

The tax credit was designed to help boost the economy by getting more money to consumers in their regular paychecks.

Employers were required to start using the new withholding tables by April 1.

By CHRISTINE SIMMONS

(AP) President Barack Obama and first lady Michelle Obama hold hands as they walk along the South Lawn... Full Image

WASHINGTON (AP) - The first couple took full advantage of the cool spring night.

After a date night out on Saturday evening, President Barack Obama and first lady Michelle Obama decided to take a stroll when their motorcade arrived back at the White House.

So they began walking on the driveway of the White House South Lawn while holding hands. First they passed the West Wing, then their children's swing set. They kept walking, swinging their hands together.

There were no Secret Service agents right behind them - the agents stood off, in one of the rare moments that the Obamas had private space outside the White House walls.

As the Obamas walked behind shrubbery and out of sight, the unscripted moment left reporters guessing where they were going. To the vegetable garden? The basketball court? No final word, but they eventually came back the same way from where they started, rounding out their 8-minute walk.

The walk wrapped up one of their first date nights in the District since they've lived at the White House. Before arriving home and taking the stroll, the president and first lady dined out for nearly two hours at a posh Georgetown restaurant.

The stroll was a quiet contrast to their dinner outing. The Obamas' visit to Georgetown attracted thick crowds of onlookers who were held back by police tape, while sirens occasionally wailed and a protester chanted outside the restaurant.