President Barack Obama’s “Making Work Pay” tax credit is providing many Americans with more money on their paychecks. It started back in April and was able to do so by withholding less of the federal tax.
However, that tax credit may end up costing you more on your tax return.
United Way Financial Stabilization Partnership Coordinator, Amy Davis, says it’s a mistake that wasn’t foreseen.
“Now that it’s coming around the end of the year. Tax season is just around the corner and Christmas. Everyone’s worried about finances and stuff like that. It’s coming to the forefront that this could be an issue with some families, ” says Davis.
Those who will be affected include: people who have more than one job, young people who work but are claimed as dependents by their parents, people who receive social security but earn taxed wages, and married couples where both spouses work.
Davis says there may not be much you can do now to change the amount you will owe come tax time.
“There’s not a lot of time left because credit goes through the end of the year, I believe. You can talk with you HR department at work and see if you can change your withholdings. Have them withhold a little but more so you won’t owe so much at tax time, ” says Davis.
You can also visit the website irs.gov and utilize its withholding calculator function.
Nov. 18 (Bloomberg) — The U.S. government identified $98 billion in erroneous or fraudulent payments made during the 2009 fiscal year, up from $72 billion the previous year, White House budget chief Peter Orszag said yesterday.
Orszag, who heads the U.S. Office of Management and Budget, said in a conference call with reporters that the 36 percent rise in improper payments was due to “stricter methodology” used to identify erroneous disbursements and to the growth in federal spending during the past year.
President Barack Obama will soon sign an executive order, Orszag said, intended to reduce mistaken payments, including subjecting federal contractors to sanctions such as fines or contract suspensions if they fail to disclose significant overpayments in a timely fashion.
Most contractors are now only required to reimburse the government for any overpayments that auditors find erroneous, Orszag said. In cases of suspected fraud, contractors can be criminally prosecuted.
“We need to protect taxpayer dollars because every dollar that goes to the wrong recipient or in the wrong amount is a dollar that is not available to help an unemployed worker or invest in education or other key priorities the administration has,” Orszag said.
As the reported improper payments rose 36 percent in the fiscal year that ended on Sept. 30, federal spending rose 18 percent, to $3.522 trillion, in the same period, according to the Treasury Department. That was up from $2.978 trillion in fiscal 2008, according to the department’s final fiscal-year report released in October.
Medicare Monitoring
Orszag, 40, cited more aggressive Medicare monitoring procedures as an example of stricter methods detecting erroneous payments. He said auditors now verify a patient’s need for a wheelchair with the prescribing doctor rather than with the supplier who sold the wheelchair. Payments made on the basis of an illegible doctor’s signature are also considered erroneous.
At least $54.2 billion in erroneous payments — more than half the total — were made by Medicare or Medicaid, according to data released by the OMB.
The executive order will require each federal agency to report their rate of erroneous payments on a Web site, Orszag said. Under a 2002 law, federal agencies are required to identify the programs that are susceptible to improper payments and audit a sample of disbursements.
The program with the highest rate of erroneous payments identified by OMB was the Earned Income Tax Credit, a benefit available to low-income families with a working parent. The program’s erroneous payment rate was 25.5 percent, according to a chart released by OMB.
Orszag said that in many cases the erroneous EITC payments may not be the result of intentional abuse.
“Many of the reported errors come from the complexity of the relationships and the rules that apply to the EITC, simply whether a child is with you all of the year, part of the year, 6 months,” Orszag said. “What many people would view as trivial or innocent mistakes are counted in the error rate.”
To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net.
