March 31, 2009

Today, Rep. Perlmutter announced that middle-class Coloradans will begin to feel the effects of the largest middle-class tax cut in American history. Starting on April 1, 2009, American workers will have less federal income tax withheld from their paychecks.

“This tax relief comes at the right time for the people of Colorado. Putting more money directly into the pockets of hard working Americans through a simple change in the tax code is long overdue. This will help ease the squeeze Americans are experiencing during these tough economic times,” said Perlmutter.

The Making Work Pay provision of the American Recovery and Reinvestment Act (ATTA) of 2009 provides a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns through 2010. For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes in early April. These changes may result in an increase in take-home pay.

In an effort to ensure timely refund benefits, the IRS reports it is not necessary toa submit a W-4 form to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure enough withholding is held to qualify. IRS Publication 919 provides additional guidance for tax withholding including a special Making Work Pay worksheet. This tax provision is retroactive to January 1.