WAVE 3 TV Louisville, KY | Tax credit snafu could cost you at tax time

Tax credit snafu could cost you at tax time

By Connie Leonard - bio | email
Posted by Charles Gazaway - email

LOUISVILLE, KY (WAVE) – It is the news most taxpayers don't want to hear in this economy as more than 15-million people who got a tax credit as part of the economic stimulus package apparently got too much.

If you're married and both spouses work, or you have more than one job, you may have received more money than you were supposed to get and now, you have to cough it up.

In an age when most married couples work and an economy where many people have more than one job, the tax credit is like a back handed gift from Uncle Sam.

"It's a great example of a great idea not being implemented as efficiently and effectively as possible," said Bill Carroll, a Louisville CPA and partner with Strothman & Company.

Carroll said the stimulus tax credit was a good idea to give working families money back in their paycheck so they could spend it now instead of later. The credit is $400 for individuals and $800 for married couples. But in the rush to do it, Carroll said the IRS and members of Congress did not think about the effects it would have on people's income taxes come the end of 2009. 

According to Carroll, the IRS adjusted the withholding tables, but did not make the adjustment for working couples, people with more than one job or working social security recipients.

“People used to getting refunds may find that $800 less refund in 2009 and individuals may have a $400 lower refund in 2009," said Carroll.

The credit started coming in April with about 40 weeks left in the year. Because it is only about $10 a week or $20 a paycheck and people may not have noticed it. Carroll said the problem is most people will notice what they are not getting back at the end of the year. He said those with two jobs may be hurt the most because those folks usually cut their withholding close anyway because they need the money in their paycheck.

"If they are very close on their tax return at the end of the year, they may get a surprise and owe 400 dollars back to the government," Carroll said.

An IRS spokeswoman told WAVE 3  the number of Americans impacted is overstated as most Americans will still get a refund. But Carroll said that refund will still be less than what they are used to. Carroll advises taxpayers to take a look at your withholding and compare it to what your actual tax was in 2009, then you can decide if you want to change it for 2010.

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