Skip to comments.Congress Tinkers with Withholding Tax Tables for 2010
Posted on 01/08/2010 8:59:41 AM PST by o_zarkman44
Recently, retired military have received e-mail messages notifying them of a withholding tax increase. The email states: NO ANNUAL COST OF LIVING ADJUSTMENT (COLA) WILL BE ADDED TO MILITARY RETIRED PAY IN 2010. DUE TO RECENT LEGISLATION YOUR FEDERAL WITHHOLDING TAX HAS CHANGED. After much investigating and several discussions with the IRS, it appears the Democrats have played a cash-flow trick on working Americans and are taking more out of Americans paychecks across the boardall the while touting the Making Work Pay tax credit.
The trick, when looking at the new withholding tax tables for 2010 as compared to post-stimulus 2009, buries an increase in federal withholding taxesfor all income categoriesbasically giving the government an interest-free loan until current year taxes are filed next year. Some would blame the increase in withholding on the Making Work Pay tax credit being spread out over 12 months as compared to 2009, which was only over 9 months, but this would be impossible as some middle class wage categories carry an increase in the withholding tax of over $200 per pay period.
Unlike the middle class wage earners, who are going to see huge amounts taken out of their paychecks, unless they increase their exemptions on their W4 form, its an increase that most wouldnt even notice$10 or $20 in some cases. Here are some of the highlights of the new 2010 withholding tables:
1.) Congress has lowered the threshold to capture more wages that qualify to owe taxesacross the board. For example, in 2009 the withholding tax threshold began at weekly single wage levels of $138. In 2010, that same wage is lowered to $116. In short, instead of the taxable wage starting at $138, it is now down to $116which changes the income threshold and taxes even poorer Americans.
For married couples, the change in the weekly base taxable wage changes from $303 in 2009 down to $264 in 2010. These lower wage thresholds can be seen throughout the new withholding charts for weekly, biweekly, semi-monthly, monthly, quarterly, semiannual, and annual, as well as daily and miscellaneous pay periods.
This across-the-board reduction in the initial wage threshold increases the number of wage earners who would have to pay taxes.
2.) Instead of seven (7) wage categories, there are now nine (9) wage categories. The new structure allows for direct taxation on the middle class with these wages broken out into smaller categories. The direct hit on the middle class withholding taxes can be seen on all of the new tables. Additionally, the IRS could not explain these changes. Lets look at the actual numbers for one category and compare them from 2009 to 2010:
2009 Biweekly, Single, Payroll Period, after subtracting withholding allowances
Not over $276: $0 in taxes Over $276 $400: 10% payroll tax Over $400 $1,392: $12.40 plus 15% of excess over $400 Over $1,392 $2,559: $161.20 plus 25% of excess over $1,392 Over $2,559 $6,677: $452.95 plus 28% of excess over $2,559 (Notice the large salary range) Over $6,677 $14,423: $1,605.99 plus 33% of excess over $6,677 $14,423: pays $4,162.17 plus 35% of excess over $14,423
Lets look at the new numbers for 2010 Biweekly, Single, Payroll Period, after subtracting withholding allowances Not over $233: $0 in taxes
Over $233 $401: 10% payroll tax Over $401 $1,387: $16.80 plus 15% of excess over $401 Over $1,387 $2,604: $164.70 plus 25% of excess over $1,387 Over $2,604 $3,248: $468.95 plus 27% of excess over $2,604 (Notice the large salary range is gone) Over $3,248 $3,373: $642.83 plus 30% of excess over $3,248 (Notice the substantial increase and 30% tax rate on these wages) Over $3,373 $6,688: $680.33 plus 28% of excess over $3,373 $14,450: pays $4,169.99 plus 35% of excess over $14,450
These patterns of additional withholding can be seen throughout the new charts for the 2010 tax year for single and married persons. It appears that everyone earning a paycheck is affected, not just retired military; social security payments will remain the same.
Why would the Democrats tinker with the withholding taxes and, ultimately, cause more stress on Americans and businesses? Why would the Democrats create more wage categories and deliberately target the middle class with a huge withholding increase and 30% tax rate? Are the Democrats trying to backfill the deficits they created in 2009? Because taxpayers will have overpaid the federal government payroll taxes, will they be eligible to get back this additional withholding money in a tax refund when filing in 2011? Do taxpayers in the hardest-hit wage categories even realize that their paychecks are going to be significantly lower, unless they make the necessary changes?
Maybe there is a good explanation for the increase in the withholding taxes from 2009 through 2010, but I remain skeptical, because inherently, Democrats do not have the capacity to reduce taxes and typically make up the revenue somehow.
Get your calculators out and you do the math. Go here for 2009; start on page 4. Go here for 2010; start on page 39. And you should remember this and the fact that House and Senate Republicans united against the stimulus bill, which may have been the trigger to all of this. And Obama and Congress should remember this from December 21, 2009:
After years of irresponsibility, we are once again taking responsibility for every dollar we spend the same way families do. Its true that what Ive described today will not be enough to get us out of our fiscal mess by itself. We face a deficit that will take some tough decisions in the next years budget and in years to come to get under control. But these changes will save the American people billions of dollars. And theyll help to put in place a government thats more efficient and effective, that wastes less money on no-bid contracts, thats cutting bureaucracy and harnessing technology, thats more fiscally responsible and that better serve the American taxpayer. ~President Obama
Michael Steele from the GOP should be all over this. Silence. Out of control, rogue congress has so many new taxes and fees included in their back room legislation we are going to be crushed financially. If you haven't changed your tax withholding for the coming year, be prepared for major, major, retroactive increases.
Put me down as being in FAVOR of the IRS withholding the 2010 tax tables.
FAIR TAX........Do it and do it now.
WE GOT our statements from DFAS and I saw a 10 dollar decrease in my take home pay and the hubby 16..I sent this link to a friend who is also retired military but does tax returns to see if she has heard of this inasmuch as she has taken the lit and is working the problems with the software now.
I noticed that when I checked my latest retirement statement. No increase in compensation, which is fine in these current times, but an increase in withholding.
i noticed that my 1st check of the new year had more fed tax taken out of it....
Guess that $250K figure on tax limits Obama threw around just went under the bus, AGAIN! LOL
Btw, Michael Steele is more interested in locating the nearest camera and getting his face on some other talking head show then tackling the GOP's real problems.
Ditto - down $15 per month here.
That is exactly the problem with automatic withholding.
There is no law that compels anyone to automatically allow withholding. It is just a matter of convenience for the taxpayer by not having to cough up all the money by April 15th. If you can put the balance away in an interest bearing account, you might realize some additional income. After all, you earn the money first so it is still your money until you declare taxes on April 15th.
On the other hand, automatic withholding allows government to have use of your taxes all year long. Obviously they tend to spend it all before it goes to the advertised causes. Why give the government any operating capital before they are entitled to anything?
Did you see where Obama and minions are going to start certifying all tax preparers? They will have to pay for it and take annual classes, so tax prep will cost more for everyone beginning 2011.
Time to review the ol’ W-4 Allowances. Maybe bump it from 13 to 14 for this year...
Gee, do you think maybe HR Block and other big tax preparers might have some government officials in their back pockets?
The new rules will exclude CPAs and attorneys. And yes, the big tax preparers are delighted.
No penalty. Income tax is a year to year payment. Unless you are self employed. Then you are required to pay quarterly if your income is above certain thresholds.
One hopes that this “adjustment” further arouses the sleeping citizenry, and swells the April 15, 2010 TEA Party crowd into the multi-millions!
Damn well better - the current govt needs to be ousted and so NOW!!!!
Yes and I talked to my GF who does this work and she is not against it as it may clean up some of these folks who are not good at the task and cause lots of problems with bad returns.
That said, we got out package from our CPA and wow the terms stated are really something but they squarely put the onus on the person for whom the work is being done. They send a copy of your last year’s return to help guide you in the rough draft for this year. There is a lot to it but they make every effort to be as complete as possible.
November 2, 2010!
I just got my first pay check of 2010 and noticed my check went down $20 a a pay period. People aren’t dumb when it comes to how much is in their checks. They’re going to want to know what happen to that extra money. It won’t be hard to trace down the people responsible.
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