Monday, Feb. 23
Posted 9 a.m. EST
Good news! You should be seeing benefits of the Making Work Pay credit, a key individual tax break in the recently enacted stimulus bill, in your paychecks in April instead of June.
This past Saturday, the IRS announced that it had finished revising payroll withholding tables.
These tables are what employers will use to calculate just how much, or in this case, less, in taxes will come out of your paychecks.
Initial speculation, as noted in my story "Stimulus pays a few more dollars at payday," was that the tables would be ready for June implementation. I guess the weekend-working IRS really wanted to scratch this off its to-do list. I can't blame them.
With most of this tax break being distributed in paychecks instead of separate rebate checks, once the tables are done, the IRS is essentially through with the credit. So from the agency's point of view, the sooner the tables are in employers' hands, the better.
The new withholding tables, along with other instructions related to the new tax law, will be incorporated in new Publication 15-T, which the IRS says will be on its Web site next week. The material also will be mailed to more than 9 million employers in mid-March.
The IRS is asking employers start using these new tables as soon as possible, but definitely by April 1.
Sooner but smaller: Most taxpayers probably won't complain about getting the tax break a couple of months sooner.
What they might complain about, however, is the small amount of the credit. The earlier implementation of it will mean the amounts will be less that what was originally projected.
When it was thought that it would be June before the Making Work Pay credit showed up in checks, the amount that was cited in examples, including in my story, was a pay increase of around $13 per week.
But an April start date will cut the weekly credit amount to just over $10.
The full $400 for eligible workers still applies. But if it began going out in June, that would mean employers had 31 weeks to pay out the credit. $400 divided by 31 comes to $12.90.
Now, however, the $400 credit will be spread out over 39 weeks if it first shows up in early April paychecks. That means you'll receive around $10.25 per week through 2009.
Will such relatively small pay increases make a difference to our struggling economy? Maybe. Maybe not.
But 10 extra bucks might just be a bit of a psychological boost that workers need right now. I know I always enjoy seeing even a slightly larger paycheck.
And at least this type of advance credit distribution is much more cost effective than the rebate checks. Those checks, along with the letters sent both before and after the money arrived, cost millions to distribute. That's definitely not a cost that our deficit-ridden Treasury needs right now.