The Making Work Pay provision of the American Recovery and Reinvestment Act (ARRA) provides a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns. The credit is being distributed through reduced withholding. The federal tax tables were reduced for single income tax filers making under $75,000 and joint filers making under $150,000.
The purpose of the IRS Withholding Calculator application is to help employees to ensure that they do not have too much or too little income tax withheld from their pay. It is not a replacement for Form W-4, but most people will find it more accurate and easier to use than the worksheets that accompany Form W-4.
You should use the withholding calculator to ensure that the reduced withholding will not result in under withholding (possibly causing you to owe taxes next year) if:
- You are an employee with two concurrent jobs,
- You and your spouse both work, or
- You can be claimed as adependent (since youare not eligible for the MWP Credit).
- You may use the results of this program to help you complete a new Form W-4, which you will submit to your Payroll department.