Overly Generous Gov't May Bite Taxpayers

Millions May Be Surprised with Higher Tax Bill Next Spring after U.S. Doles Out Too Much in Tax Credits

(AP)  More than 15 million taxpayers could unexpectedly owe taxes when they file their federal returns next spring because the government was too generous with their new Making Work Pay tax credit.

Taxpayers are at risk if they have more than one job, are married and both spouses work, or receive Social Security benefits while also earning taxable wages, according to a report Monday by the Treasury Department's inspector general for tax administration.

The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was President Barack Obama's signature tax break in the massive stimulus package enacted in February.

Most workers started receiving the credit through small increases in their paychecks in April. The tax credit was made available through new withholding tables issued by the Internal Revenue Service.

The withholding tables, however do not take into account taxpayers with multiple jobs or married couples in which both people work. They also don't take into account Social Security recipients with jobs that provided taxable income.

The Social Security Administration sent out $250 payments to more than 50 million retirees in the spring as part of the economic stimulus package. The payments were meant to provide a boost for people who didn't' qualify for the tax credit.

However, they went to many retirees who also received the credit. Those retirees will have the $250 payment deducted from their tax credit - but not until they file their tax returns next year, long after the money may have been spent.

"While implementing a credit through reduced withholding is an effective way to provide economic stimulus evenly throughout the year, it is difficult to account for everyone's circumstances," said J. Russell George, the Treasury inspector general for tax administration. "More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes."

The tax credit is also available for 2010. Russell said the problems will continue in 2010 if they are not resolved.

For many, the new tax tables will simply mean smaller-than-expected tax refunds next year. The average tax refund this year was about $3,000.

The IRS, in a response to the audit, advised taxpayers to check their withholding throughout the year to make sure they don't get hit with an unexpected tax bill.

"The withholding system must approximate the tax liability of tens of millions of Americans, and therefore, cannot be tailored precisely to fit every individual situation," Richard Byrd Jr., commissioner of the IRS' wage and investments division, wrote in the agency's response to the report.

[bann65]

overly generous gov't?!?!? Who is writing this, a moron, a kid? you mean this crazy stimulus crap that WE ARE GOING TO HAVE TO PAY BACK? CBS is a piec of work. I think they hire all dumbo libbies to write their articles. Is it a wonder their news network is in the toilet?!?!

[RandomUser1886]

How dare the writer of this article call this a "Tax Break" when it just delayed the paying of the tax until April 15!!
What a crock of doo-doo this Administration is!!

So if this 'Act' was called "Making Work Pay," then what do you call it in April when you have to pay back all that tax that you wanted withheld so you wouldn't owe tax in the first place?

[mawskrat]

how's that hope and change working out for ya?

// the gubment giveth and the gubment taketh away

[dronemonk]

Government as "generous"? Everyday, I come here to CBS news looking for a piece propaganda to laugh at. I am rarely disappointing.

[RandomUser1886]

dronemonk,
It's not YOUR money. It's Obama's.
He just lets you use it for awhile.

[SeektheTruth]

Let's see how popular the "messiah" is after tax season next year... It is absolutely asinine to raise taxes while trying to stimulate an economy in recession. hello? My third-grader has better economic common sense than that!! lol!!

[bubbadubba]

"In 2010, when all the Bush tax cuts are finally phased in, a staggering 52.5 percent of the benefits will go to the richest 5 percent of taxpayers."

There is the REAL reason for tax increases for working people.
This AP story is propaganda for the rich by the rich and some of you are just lapping it up like brainwashed maggots on manure.
Don't you just hate facts? Darn Google,someone should censor it because it is always letting people look up the truth.
LOL

[ajvw]

what does this have to do with the article?

[californiadreaming]

In 2011, all the Bush tax cuts will have been phased out, not in. The Bush tax cuts were quite big for lower income and middle income taxpayers - despite common misunderstandings that they were only for the wealthy.

The wealthiest 5% pay more than 70% of all income tax revenue - perhaps more. In fact 2009 projections are that 47% or taxpayers will not pay a single dime in income taxes. So when you cut taxes in any fashion, of course you are going to get a skewed distribution toward the high income earners.

[bubbadubba]

Bush's two wars and tax welfare for the wealthy have cost us over 3 trillion dollars, hardly a drop in the bucket compared to tax credits for working people.
I just think of how much lower our taxes would be if Bush had not been elected and the Republicans did not get control of Congress.
I am really glad we kicked the Republicans out of Washington or I would be hit with more income taxes for more corporate and wealthy tax breaks.

[chevyhotrod]

bubba,
Wake up, Bush is no longer in office. The wars belong to President Obama and he can bring the troops home any day at anytime. Fact

Obama ran on Afghanistan being the war of necessity. Fact

The top 1% pay 35% of all the federal revenue. Fact
The top 10% pay 70% of all federal revenue. Fact
The top 50% pay 96% of all federal revenue. Fact
The bottom 50% pay 4% of all federal revenue. Fact

If you paid any taxes at all, you would pay more at the end of the year. Withholding tables were changed, not income tables. Fact

Obama wants you and everyone to pay more in taxes. Bush reduced taxes for everyone across the entire income tax tables, with the lower wage earners getting a larger percentage of tax deductions. Fact

If you make $500,000 and your tax liability is reduced 5%, your tax liability is $25,000 less.

If you make $50,000 and your tax liability is reduced 10%, your tax liability is $5000 less.

This is the claim that tax cut went to the rich, reality is a different story. The lower wage earner actually received a larger percentage of tax deductions. When Bush tax cut are sunset, everyone's tax liabilities go up.

Don't you just hate facts? So why don't you point to some more of your brainwashed maggots on manure? Because I didn't see any facts that you found using Google, you just spewed your left wing propaganda without actually showing what you looked up.

"AP story is propaganda for the rich", give me a break. AP has been in the tank for the left for a long time. You post are a complete joke and make zero sense.

[FauxNews]

Great reply Chevy!

[ajvw]

lol...enough said

[retm-w]

I can't wait to hear, it's all "Bushes fault".

[renonv5]

by stryker54 November 16, 2009 12:20 PM EST
And the ones that got nothing will pay more taxes for those that did. We need to get Robin Hood out of the oval office before the whole system crashes.

I believe it already crashed, way before "robin hood" arrived.

[chevyhotrod]

renonv,
When President Obama declared that 95% of the people will see their taxes decreased he should have said 95% of the people will see their withholding decreased, while never actually changing the income tax tables.

My accountant pointed this out to me when the stimulus was signed. The only people that got a tax break are the ones that do not pay taxes, in actuality they received a new welfare check.

It's funny how you don't see all the leftist that post on CBS not posting here. They don't like reality.

It did crash before Obama arrived, but you should go back and re-read Robin Hood and re-discover what Robin Hood and his merry men were protesting. They were protesting high taxes by their King's and Baron's (government) of their day.

How did the crash happen you ask? Follow the link below and you will see who saw it coming and who didn't. You will also see who tried to stop it and who didn't.

http://www.youtube.com/watch?v=_MGT_cSi7Rs