Tax Information Notice

American Recovery and Reinvestment Act 2009

The 2009 Making Work Pay Tax Credit; Will You See a Bigger Paycheck?
University of Wisconsin implements the Making Work Pay Tax Credit provisions.
March 18, 2009

One of the provisions of the American Recovery and Reinvestment Act (Federal Stimulus Package) signed by President Obama on February 17, 2009 is the Making Work Pay Tax Credit. Under this provision, new tax tables have been issued by the Internal Revenue Service (IRS). The University of Wisconsin is implementing the new federal tax tables effective with paychecks issued on and after April 1, 2009.

Eligible taxpayers with adjusted gross income of less than $75,000 may receive up to $400, and married couples filing jointly with adjusted gross incomes of less than $150,000 may receive up to $800. The tax credit will phase out for taxpayers with adjusted gross income in excess of the above amounts. Non-resident aliens for tax purposes are not eligible.

The tax credit will be provided through the new tax tables. If you are eligible, tax withholdings will be reduced. Even if you are not eligible for the tax credit, your withholding may also be reduced under the new tax tables. You may want to consider changing your withholding allowances by filing a new W-4 Form.

Please see the following sections below for more information:
Question & Answers
W-4 Form and Tax Withholding Information
IRS News

Internal Revenue Service | IRS
For Federal tax information, please visit the Internal Revenue web site.

Q:  Will the new Federal tax rate changes affect my State of Wisconsin tax rates?
A:  No. You will not see any change in your State of Wisconsin tax rates.

Q:  If a married couple files jointly, and both individuals are employed, should they adjust their withholdings?
A:  If the modified adjusted gross income of the married couple is below $150,000, one spouse may want to change his or her tax status to increase their tax withholding in order avoid a tax liability.

If the modified adjusted gross income of the married couple is above $150,000, both may want to change their tax status to increase their tax withholding in order avoid a tax liability. Tax withholding may be changed by filing a new W-4 Form. To increase your tax withholding you may exercise one of the following three options:

1. Reduce the number of allowances/exemptions.
2. If you are claiming “Married”, change your tax status to either “Married but withhold at higher single rate” or “Single”.
3. Add or increase the dollar amount in the “Additional Federal Tax to be Withheld” field.

Q:  The new Federal tax rate will not meet my 2009 tax liability. How can I adjust my tax withholding?
A:  Review IRS Publication 919 for guidance (see below). Use the W-4 Form link to access the fillable form; return the completed form to your department Payroll & Benefits Coordinator.

W-4 Form - Employee’s Withholding Allowance Certificate | W-4 Form

An employee with multiple jobs/incomes 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 cover the tax for the combined income.  Submit the completed form to your department Payroll & Benefits Coordinator.

How Do I Adjust My Tax Withholding? | IRS Publication 919

IRS Publication 919 provides guidance for tax withholding. This publication is also available as an online publication.

Federal Percentage Method of Withholding

The following documents describe the Federal Percentage Method of Withholding for the 2009 tax year. The first document covers the first quarter of 2009. The second document covers the remainder of the year and reflects the new tax tables.

For Payroll Paid January 1 - March 31 , 2009

For Payroll Paid April 1 - December 31, 2009

The Making Work Pay Tax Credit

New Withholding Tables Now Available on IRS.gov; Most Workers Will See Bigger Paychecks this Spring

IRS Information Related to the American Recovery and Reinvestment Act of 2009

If you have additional questions after reviewing the above information, please contact your Campus Payroll Coordinator.