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Money back on your paycheck
Money back on your paycheck
William Sorenson, 38, is a civil engineer.
Question: "The bill includes a tax credit be given out on our paychecks. How will that work? Is the amount we get per check based on the number of deductions we have? How does our employer know if we are married or not to be sure the give us the correct amount? Will we have to pay this back on our 2009 taxes?" -- William Sorenson, Des Moines, Iowa

Expert: Roberton Williams, senior fellow, Tax Policy Center

Answer: The stimulus bill includes the Make Work Pay credit, worth 6.25% of earned income or a max of $400 to individuals making less than $75,000 and $800 for families with a combined income of less than $150,000.

Most likely this will go into effect by April 1, when businesses will adjust payroll taxes, so that people who qualify for the credit get it spread over the last 26 weeks of this year. For those qualifying for the full $400, it's about $15 per week.

Your employer knows whether you're married based on what you filled in on your W4.

Where it gets complicated is for people with multiple jobs. You don't want $400 from each job, or you'll be overwitheld and will owe money come tax time next year. It's also tricky for people with high incomes, or for families where only one person works and exceeds the income limits for a single person but falls within the limits for a married couple.

That's why the IRS can't just do it automatically. They don't really know exactly how it will work. They will make the withholding tables as simple as possible for the most people, but they won't get it right for everyone. It will all sort itself out when you do your taxes next year. But no, this will not be taxable income next year.

I'm really glad they're doing it and not me.

NEXT: Tax credit for families
Last updated February 24 2009: 6:58 AM ET
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