[Ang]

http://finance.yahoo.com/career-work/artic...-Stimulus-Bonus

Here Comes Your Stimulus Bonus
by Jeanne Sahadi
Tuesday, March 31, 2009
provided by

Employers should be ready for the Making Work Pay credit by Wednesday. That means some extra take-home pay. Here's what you need to know.

You're likely to see some more green in the next couple of weeks. Not only on the trees. Very possibly in your wallet, too.

President Obama has asked that all employers adjust their payroll systems by Wednesday so eligible workers can start receiving the new Making Work Pay tax credit through their paychecks. The credit, available for 2009 and 2010, was a part of the economic recovery package lawmakers passed in February.

Just how much extra cash you will see depends on your marital status, your salary and how many allowances -- or exemptions -- you normally take.

As a rough guide, singles eligible for the credit might get between $10 to $15 per paycheck if paid weekly; for those married filing jointly, they're likely to see an extra $15 to $20.


Who Is Eligible?

The credit is available to those with earned income. It's worth up to $400 a year for single filers and $800 for joint filers.

The full credit will be paid to people with modified adjusted gross incomes of $75,000 or less ($150,000 per couple). A partial credit would be paid to those making above those amounts but no more than $95,000 ($190,000 for couples).

What is modified adjusted gross income? It's your adjusted gross income but with some exclusions added back in. In the case of this credit, the only exclusion that would need to be added back is any income earned in a foreign country, in Puerto Rico or in American Somoa.

"For most people, their modified adjusted gross income will be the same as their adjusted gross income, which is on the bottom of the front page of their return," said enrolled agent David Mellem of Ashwaubenon Tax Professionals, who is certified to represent taxpayers before the IRS.

The credit is also refundable, which means that even very low-income families who don't make enough to owe income tax would be able to claim it.


Who Is Not Eligible?

Even if someone works, he won't qualify for the Making Work Pay credit if he is claimed as a dependent on someone else's tax return.

Also, adults who are eligible for Social Security, Railroad Retirement, veteran's compensation or pension benefits will not receive the credit. But if they were eligible for those benefits sometime between November 2008 and January 2009, they will receive a one-time, $250 emergency payment no later than mid-June.

That emergency payment is not subject to income tax, Mellem said.


How Does It Work?

Using new withholding tables from the IRS, employers are supposed to pay out the Making Work Pay credit by reducing how much tax is withheld from eligible workers' paychecks.

"Changing withholding tables is a routine task. It's not difficult," said Scott Mezistrano, senior manager of government relations at the American Payroll Association.

In fact, many employers likely have already done so, said Pete Isberg, the head of the National Payroll Reporting Consortium. That means their employees should already have started to see more cash in their paychecks.

For example, Ron Moser, a human resources director for a school district in western New York, said his district included the credit in paychecks starting in early March.

Lower-income workers may not make enough money to have taxes withheld once their exemptions are taken into account. So they won't see any extra cash in their paychecks. But they may claim their full credit when they file their 2009 tax returns next year.


Is There Anything I Need to Watch Out For?

Possibly. Some people could end up getting a larger credit than they're entitled to. That means they'd have to pay back the excess amount when they file their 2009 taxes -- or, if they're getting a refund, their refund would be reduced by the amount they were overpaid.

If that situation is unappealing, a tax filer could act now to reduce the number of withholding allowances he takes on his W4 at work. The fewer allowances he takes, the more tax that is withheld.

The IRS has a calculator online that you can use to figure out how many allowances you should take if you're eligible to receive the credit and don't want to be overpaid -- or to put it another way, don't want to have too little tax withheld.

Those most likely to be overpaid are:

Anyone who holds more than one job. You will get paid the Making Work Pay Credit twice, up to $400 ($800 for a joint filer) from your first employer and up to $400 ($800 for a joint filer) from your second employer.

Joint filers whose spouses work. Each spouse will end up being paid the credit for married couples by each of their employers.

There's a twist, too. Because of the way the withholding tables were set up, each working spouse may be paid up to $600 this year -- instead of up to the $800, Mezistrano said.

In other words, the husband would receive $600 at his job and the wife $600 at her job, for a total of $1,200. Since they're only entitled to $800 total as a couple, that means they would have to pay $400 back to the IRS -- or see their refund reduced by that amount.

Anyone who receives income from a rental property or investment, such as interest and dividends. Your employer only knows about the income you earn at the company. If you receive other income that increases your modified adjusted gross income -- or even pushes you past the income limits for the credit -- you may end up owing the IRS some or all of the credit you received in your paycheck.

Anyone who started receiving their credit at the end of Febuary or anytime in March. The withholding tables are structured so that payments starting in April will add up to $400 for single filers and $800 for joint filers by year end. If payments start sooner than that a tax filer may actually receive a bit more than he's due by Dec. 31.

Conversely, if your employer doesn't start your payments until the end of April or in May -- there's no penalty if an employer doesn't meet the April 1 deadline -- you may end up getting a little less of a credit than you're entitled to, in which case you can claim the rest when you file your 2009 tax return.

[Tim]

We just got some stimulus from the Japanese gov't - $150 each! Daddy gets a new pair of Levi's!

Seriously, though - oh wait I was being serious. These efforts are gallant - but come on, I can burn thru $150 in a weekend without doing anything really special. Still though, can't pee on free money.

[mcstumper]

Still though, can't pee on free money.

Sigh. Yeah it's all free. Take as much as you like. They'll print more.

[Tim]

Sigh. Yeah it's all free. Take as much as you like. They'll print more.

Um - what?

[Dave]

Um - what?

I guess McStumper is very concerned about inflation effecting the yen.

[IndyTransplant]

My guess is he was leery of the term "free money" which we all know is not truly free.

[mcstumper]

My guess is he was leery of the term "free money" which we all know is not truly free.

Or maybe I am concerned that Obama giving us refund checks in deflated Yen will make Milton Friedman's head explode. Unless he is dead already. I should Google that...

EDIT: Yes, he's dead.

[ChickenCityRoller]

Funny you mention Milton Friedman. While my Dad was earning his MBA at U of C he took some courses being taught by Mr. Friedman as well as George Stigler. They wound up becoming good friends. I met Mr. Friedman a number of times, the most recent in 03 or 04, not too long before his passing.

[Ang]

Whoo-Hoooo!!!!!!!!!!

My stimulus bonus is a whopping $9/week.

Yeah baby! That means I can eat lunch at McDonald's twice a week now.

THANK YOU President Obama for your generosity.

(now, you guys do understand that this will probably mean a smaller tax return at the end of the year considering how we're paying less in taxes now? They make it look like a sweet deal, but in the end they'll manage to screw us anyway)

[Ang]

http://finance.yahoo.com/banking-budgeting...ut-the-Stimulus


7 Misconceptions About the Stimulus
by Kimberly Lankford
Thursday, April 9, 2009

Since President Obama signed the economic-stimulus package into law February 17, I have received many questions about its provisions. And I've noticed that there are a lot of misconceptions about the plan. Here's the lowdown.

Misconception #1: Most people will get their stimulus money as a check this year.

Instead of receiving a check from the government, most single taxpayers will see an adjustment to their tax withholding in their paychecks in 2009 and 2010, giving them about $45 extra per month for the rest of this year (married workers will receive an extra $65). If you're self-employed, you can adjust your quarterly tax payments to benefit from the tax credit. Then you will claim the credit when you file your 2009 tax return next spring, bringing your tax bill in line with your reduced payments.

The stimulus also provides a one-time payment of $250 to recipients of Social Security, Railroad Retirement and Veterans Administration benefits.(People who applied for any of these benefits for the first time after January 31 don't get the money; only those on the rolls in November and December 2008 and January 2009 are eligible.) You'll get the money electronically or by check, depending on how you receive those benefits. Retired government employees who don't receive Social Security will also get a $250 credit when they file their 2009 returns.

Misconception #2: The adjustment to withholding will have to be paid back when you file your tax return next year.

Wrong -- the stimulus is actually a tax credit of 6.2% of taxable wages in 2009 and 2010, to a maximum each year of $400 for single taxpayers and $800 for married couples filing jointly. The credit is refundable, which means that you can still receive the full credit even if it is worth more than your total tax liability.

Paychecks are being adjusted now to get more money into the economy faster. You'll claim the credit when you file your return next year, so your tax bill should adjust in line with the stimulus money (and you might get some extra money at tax time if your withholding wasn't adjusted enough to account for the extra credit during the year, which may happen for some married people in single-earner households).

But not everyone qualifies for the credit. It begins to phase out for single filers with adjusted gross incomes of $75,000 or higher, or $150,000 for married couples filing jointly, and it disappears entirely for single filers with AGIs of $95,000 or more, or $190,000 for joint filers.

Misconception #3: The first-time home buyer's credit needs to be repaid.

You may not have to repay the credit, depending on when you bought the house.

If you buy a house between January 1, 2009, and December 1, 2009, you could receive a credit for 10% of the home's purchase price, up to $8,000. This credit does not have to be repaid as long as you own the home for at least three years.

If you bought a first home between April 9, 2008, and December 31, 2008, you are eligible for a tax credit of 10% of the home's purchase price, up to $7,500 -- but the credit must be repaid over 15 years, starting two years after you claim the credit. If you sell the home before you finish paying back the credit, the balance is due in full the year of the sale.

The 2008 and 2009 credits begin to phase out if your modified adjusted gross income is more than $75,000 (or $150,000 if you're married filing jointly). The credit disappears entirely after your income reaches $95,000 if you're single, or $170,000 if married filing jointly. You are considered a first-time home buyer if you (and your spouse, if you are married) didn't own a primary residence in the past three years. The credit does not apply to rental property and vacation homes.

Misconception #4: You can't get the 2009 first-time home-buyer tax credit until you file your tax return next year.

Actually, taxpayers who buy a first home in 2009 do not need to wait until they file their 2009 return (by April 15, 2010) to benefit from the credit. To get the money into the economy faster, the federal government is giving you a choice of claiming the first-time home-buyer credit on either your 2008 or your 2009 tax return.

There's actually a way to benefit from the credit even before you buy your first home. If you plan to buy by the November 30 deadline, you can reduce your withholding on your paychecks right away. The increased take-home pay could help you with the down payment. File a new W-4 form with your employer to adjust your withholding. (And remember to re-adjust your withholding again next year.)

If you have already filed your 2008 return, you can use Form 1040X to amend it. If you purchase a first home after the 2008 tax-filing deadline of April 15, 2009, you can still claim the credit on your 2008 tax return either by requesting a six-month extension for filing your return (which doesn't extend the deadline for paying any taxes owed) or by filing an amended return.

Misconception #5: You need to apply through the government to get the COBRA health-care subsidy.

Contact your former employer, not the government, to take advantage of the COBRA subsidy. If you were laid off since September 1, 2008, and are already receiving COBRA coverage, then you'll pay 35% of the COBRA health-insurance premiums, and your former employer will pay the remaining 65%. The government will then reimburse your former employer for the subsidy through a payroll tax credit.

If you were laid off on September 1, 2008, or later but didn't sign up for COBRA coverage, you'll get a second chance to elect COBRA and benefit from the subsidy. You should receive a notice from your former employer soon, or contact your former employer to find out about the steps for signing up.

Misconception #6: You can receive the COBRA subsidy the entire time you're covered by COBRA.

Federal law requires most companies with 20 or more employees to let former employees keep group health-insurance coverage for up to 18 months after they leave their jobs. But the 65% COBRA subsidy lasts for only nine months. After that, the premiums will jump back to the full price - and the average employer health-insurance plan costs $12,680 per year for family coverage, according to the Kaiser Family Foundation.

If you have health issues, COBRA may still be your best bet despite the hefty price tag. But many people can find a better deal by buying their own health insurance. You can get price quotes for individual policies at eHealthInsurance.com, or find a local health-insurance agent at the National Association of Health Underwriters Web site. Check out your options at least one month before your COBRA subsidy expires so you'll have plenty of time to find out how much an individual policy would cost.

The subsidy ends if you find a job and your new employer offers health-care coverage or you become eligible for Medicare. And COBRA does not apply if the company stops offering health coverage to current employees or shuts down entirely.

Misconception #7: The number of weeks you can receive emergency unemployment benefits has been extended.

The stimulus does not provide additional weeks of benefits for people who use their 33 weeks of emergency unemployment-compensation benefits; it just expands the dates that the program will be available.

A federal law passed last year provides an extra 20 weeks of emergency unemployment compensation to workers who exhausted their regular unemployment benefits, plus an additional 13 weeks of extended benefits for residents of states with high unemployment rates (contact your state unemployment-benefits office for details about your state's rules).

The emergency unemployment-compensation program was scheduled to expire on August 27, 2009, and the last day to apply for benefits was originally set to be March 31, 2009. As a result of the stimulus law, unemployed people who exhaust their regular state benefits now have until December 31, 2009, to apply for extended benefits and can receive compensation until May 31, 2010.

Copyrighted, Kiplinger Washington Editors, Inc.ADVERTISEMENT