American recovery and reinvestment act of 2009
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American Recovery and Reinvestment Act of 2009. The Recovery and Your Family. Small Business/Self-Employed Division Date. “Making Work Pay” Tax Credit. Will cut taxes for working families Up to $400 ($800 if MFJ) Refundable

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American Recovery and Reinvestment Act of 2009

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American recovery and reinvestment act of 2009

American Recovery and Reinvestment Act of 2009

The Recovery and Your Family

Small Business/Self-Employed Division

Date


Making work pay tax credit

“Making Work Pay” Tax Credit

  • Will cut taxes for working families

  • Up to $400 ($800 if MFJ)

  • Refundable

  • Phase out for taxpayers with modified AGI > $75,000 ($150,000 MFJ)

  • Claim credit on 2009 tax return

  • Tax withholding decrease (begin by 4/1/2009) to anticipate credit

  • Revised Form W-4 not necessary for automatic withholding change


New withholding tables caution avoid being under withheld

New Withholding Tables Caution: Avoid Being Under Withheld

  • Employee with multiple jobs or married couples whose combined incomes place them in higher tax brackets may elect to submit a revised Form W-4

  • Ensure enough withholding is held to cover the tax on combined income

  • Obtain Publication 919, How Do I Adjust My Tax Withholding?

  • Use the “Withholding Calculator” on IRS.gov


Making work pay example of new withholding tables two jobs

Making Work Pay - Example of new withholding tables: two jobs

  • Jan – March: 13 weeks X $17 = $221 withholding (old tables)

  • April – Dec: 39 weeks X $8 = $312 withholding (new tables)

  • Withholding for Job #1: $533

  • Withholding for Job #2 is the same: $533

  • Total projected withholding: $1,066

  • Total projected tax liability: $2,280

  • Balance due: $1,214


Making work pay example of new withholding tables one job

Making Work Pay - Example of new withholding tables: one job

  • Jan – March: 13 weeks X $17 = $221 withholding

  • April – Dec: 39 weeks X $8 = $312 withholding

  • Total projected withholding: $533

  • Tax Liability: $165

  • Total projected refund due: $368


Important message

Important Message

  • Taxpayers that have more than one job at the same time are at risk for being under withheld, since they are entitled to only one credit

  • Taxpayers who are married with both spouses working may also be under withheld

  • Combined income from two jobs or spouses who both work put taxpayers in a higher tax bracket

  • Pension recipients with no earned income are not eligible for the Making Work Pay Credit and may be under withheld


Economic recovery payment

Economic Recovery Payment

  • SS, SSI, RR, Veterans Disability Recipients

  • $250 – one-time payment (not from IRS)

  • Reduces “Making Work Pay” Credit, if eligible

  • No phase out

  • Not income for income tax purposes

  • Contact respective agency for more information


Credit for certain government federal and state retirees

Credit for Certain Government Federal and State Retirees

  • Certain government retirees will receive a one time $250 refundable credit on their 2009 tax return filed in 2010

  • For government retirees who receive a pension from work not covered by Social Security


Earned income tax credit eitc increase

Earned Income Tax Credit (EITC) Increase

  • New credit percentage for 3 or more qualifying children

  • Maximum credit increase = $5,028 to $5,657

  • Maximum AGI increase = $43,415 to $48,279


Child tax credit

Child Tax Credit

  • $1,000 per qualifying child

  • Refundable portion – eligibility increased

  • More lower income families qualify:

    • 2008 – threshold amount = $8,500

    • 2009 – threshold amount = $3,000

    • 2010 – threshold amount = $3,000


American opportunity education tax credit

“American Opportunity” Education Tax Credit

  • Expands HOPE Credit – available for first 4 years of post-secondary education

  • For 2009 and 2010 maximum credit is $2,500

  • 40% refundable

  • Phase out for taxpayers with modified AGI > $80,000 ($160,000 MFJ)


First time homebuyer credit amended

First-Time Homebuyer Credit Amended

  • Increased to $8,000

  • Refundable

  • Homes purchased from 1/1/2009 through 11/30/2009

  • No repayment (must live in home 3 years)

  • Can choose to claim on 2008 return

  • Phase out for taxpayers with modified AGI > $75,000 ($150,000 MFJ)


Portion of unemployment benefits are nontaxable

Portion of Unemployment Benefits are Nontaxable

  • Temporary suspension of the federal income tax on first $2,400 of unemployment compensation

  • Unemployment compensation over $2,400 will be subject to federal income tax

  • Any requested withholding on unemployment compensation will continue to apply to the full amount paid.


Energy conservation incentives

Energy Conservation Incentives

Federal Tax Credits for Energy Efficiency includes:

  • Tax credits are available at 30% of the cost, up to $1,500, in 2009 & 2010 (for existing homes only) for:

    • Windows and doors, insulation, roofs (metal and asphalt), HVAC, water heaters (non solar), biomass stoves


Sales tax deduction on new vehicles

Sales Tax Deduction on New Vehicles

  • State, local & excise taxes paid in 2009

  • Cars, light trucks, motor homes, motorcycles

  • Purchases after 2/16/2009

  • Taxes paid on first $49,500 of cost

  • Phase out for taxpayers with modified AGI > $125,000 ($250,000 MFJ)

  • Do not have to itemize to take deduction


More information

More Information

  • Go to www.irs.gov

  • Check Web site frequently for the latest updates


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