WASHINGTON --- More than 15 million taxpayers may owe the government $250 or more because of how the IRS last spring set up President Obama's tax break that was designed to help consumers spend the U.S. economy out of recession.
Individuals with more than one job and married couples in which both spouses work may have to repay the government $400, either through a smaller tax refund or a larger tax bill, according to a report released Monday by the Treasury Department's inspector general for tax administration. Social Security recipients who also earn taxable wages might have to repay $250.
The tax credit has increased weekly paychecks for 95 percent of working families, giving them cash to help boost consumer spending during the worst economic recession in decades.
Most workers started receiving the credit through small increases in their paychecks in April.
"More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes," said J. Russell George, the Treasury inspector general for tax administration.
Sen. Chuck Grassley of Iowa, the senior Republican on the Senate Finance Committee, called it "another unfortunate example of what can happen when Congress and the White House rush through legislation like the stimulus without thinking through the consequences."
REPAYING THE IRS
- A worker with two jobs gets a $400 boost in pay at each job, for a total of $800. That worker, however, only is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time -- either through a smaller refund or a payment to the IRS.
- A married couple is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them each a $600 boost -- for a total of $1,200.
- A single student with a part-time job gets a $400 boost in pay. However, if students are claimed as dependents on their parents' tax returns, they don't qualify for the credit and would have to repay it when they file their returns.
- More than 50 million Social Security recipients received $250 payments in the spring as part of the economic stimulus package. Many also received the tax credit. Those retirees will have the $250 payment deducted from their tax credit -- but not until they file their tax returns next year, long after the money may have been spent.
ON THE WEB:
- IRS Making Work Pay tax credit: http://tinyurl.com/ah7hfq
- IRS withholding calculator: http://tinyurl.com/3eorb
-- Associated Press