The Making Work Pay stipulation in the American Recovery and Reinvestment Act passed by the Obama Administration has changed the withholding tax for business employees for 2009 and 2010 effective April 1, 2009.
Working individuals will receive a refundable tax credit of up to $400 and married couples $800 according to the Making Work Pay stipulation. If the individuals or married couples are employees, this will be handled by their employers through changes in withholding. These changes will probably result in an increase in take-home pay. The tax credit will be calculated at a rate of 6.2% of earned income. The credit will phase out for individual taxpayers who make $75,000 or married couples making $150,000.
The IRS has issued new withholding tables to reflect these changes. Publication 15-T gives more details.
