POTENTIAL FOR AN UNEXPECTED TAX LIABILITY

An unexpected tax liability might arise for taxpayers holding down more than one job. The “Making Work to Pay Credit” for 2009 and 2010, authorized a refundable tax credit equal to the lesser of 6.2% of earned income or $400 for each eligible individuals. This could entitle a married couple to receive a refundable credit of $800. Taxpayers whose employers calculate withholdings at the revised tax rates take less withholdings than the ultimate calculated tax. For those taxpayers with multiple jobs; for taxpayer families where both spouses are employed; and for employees who can be claimed as a dependent on someone else’s tax return, this could result in less tax withheld than necessary to cover the actual Federal tax liability calculated when tax returns are prepared. To avoid possible underpayment of tax issues, employees are encouraged to file a new W-4 with their employers.