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Paychecks to increase thanks to federal stimulus package.

Byline: Whitney Malkin The Register-Guard

Workers should notice a little extra cash in their paychecks in coming weeks, courtesy of a tax credit included in the federal stimulus package, and the resulting decreased federal tax withholding.

The Internal Revenue service is taking less from workers' paychecks through 2010 in an effort to boost the economy.

The series of small kickbacks follows the larger separate check mailed last spring.

The tax credit is capped at $400 per person and $800 per married couple, Oregon IRS tax consultant Kathy Howell said.

The average increase from the Making Work Pay credit is about $38 per paycheck, or 6.2 percent of a taxpayer's income, the IRS said.

The credit is for the tax returns to be filed next spring, but employers are taking it into account in their current withholding rates for employees.

At Springfield City Hall, payroll administrator Jeanette Riopelle is working to ensure that her software is ready to handle the switch.

"We're definitely hoping to make the change by the next pay date, which is March 20," she said. "When that happens, we'll send out an e-mail explaining to people what's going on, that they're going to be seeing some changes."

Depending on how much tax an employee already has instructed their employer to withhold, the results of the new credit will vary, Riopelle said.

According to the IRS, many higher-income taxpayers won't notice much of a change in the paychecks because the credit is phased out for couples whose adjusted gross income is between $150,000 and $190,000. Single taxpayers who make between $75,000 and $95,000 also will not notice much change.

Taxpayers who are self-employed or who do not have taxes withheld by their employer can claim the credit by adjusting their estimated tax payments and claiming the credit on their 2009 tax return next spring.

People receiving Social Security, veterans' benefits or railroad retirement will have reduced credits, Howell said.

Although no new paperwork is required to receive the credit, she suggested that people review their withholding rate to ensure that enough income is withheld throughout the year to satisfy their tax obligations.
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Title Annotation:City/Region
Publication:The Register-Guard (Eugene, OR)
Date:Mar 10, 2009
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