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Change in withholding rules likely to take a bite out of tax returns
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John Gurzinski/LAS VEGAS REVIEW-JOURNAL
Sign spinner Chris Hutchison stands with a mannequin Thursday in the window of a Liberty Tax Service on Tropicana Avenue near Pecos Road. » Buy this photo
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LAS VEGAS REVIEW-JOURNAL
Updated: Mar. 26, 2010 | 5:19 p.m.
Las Vegans who have yet to file their tax returns could be in for a surprise.
A change in federal withholding rules could mean some local filers will unexpectedly net small or nonexistent refunds or even end up owing Uncle Sam money, local tax accountants say.
At issue is 2009's Making Work Pay Act, which required employers to deduct $400 less in withholding from April through December. The modification means that many workers already received most or all of their tax refund, distributed through most of 2009 in increments averaging $10 to $12 a week. The government matched the $400 drop in withholding with a $400 tax credit on returns, so most people's tax math should even out and leave them with few changes overall, said Jeannette Burnett, general manager of Jack's Tax Service in Las Vegas.
But Burnett added that some groups, including seniors living on pensions, workers holding down two or three jobs and double-income families, are feeling the pinch at refund time. That's because the tax credit that counters the missing withholding doesn't apply to everyone.
Pensioneers, for example, qualified for the $400 withholding change, but they aren't getting the tax credit to balance it.
Las Vegans who work more than one job -- and that's a lot of people these days, Burnett said -- could also owe money or miss out on a refund. A banquet staffer who worked two to three part-time jobs at different hotels got the withholding break on all positions, but he can claim the tax credit only once.
Double-income families with couples who file joint returns could also see less money. Though each spouse saw the cut in withholding, the couple can claim the $400 credit only once per return.
Tim Koch, director of accounting and auditing at Kondler, Chavez & Koch, CPAs in Las Vegas, said some clients who own small businesses have had to cash in stock or dip into savings to make up the difference.
"The most common comment I hear is that the government steps in and tries to say they're helping you, but at the end of the day, they hurt you," Koch said. "They're not paying more in taxes; the amount they owe or should have gotten back equals out. But they didn't know about the (withholding change), and they're getting the message too late in the game."
Burnett said most of Jack's Tax Service clients who do owe unexpectedly because of the withholding rule don't typically owe more than $400 or so.
"But most folks need every penny they can get," Burnett said. "When they're hoping for a refund or at least hoping to break even, owing even just $300 can hit them pretty hard. For a lot of people, their tax refund is their savings plan, right or wrong. They count on it at the end of the year."
A good number of consumers also use their refund each year to replace big-ticket items such as appliances, so the withholding tweak could mean slower business for retailers who plan sales or bargains targeted at refund-wielding shoppers, Koch said.
Tax advisers urged taxpayers to do their taxes as soon as possible. If you owe money, your return must carry an April 15 postmark. If you don't have the cash to cover what you owe, consider working out a payment plan with the Internal Revenue Service. The agency typically charges annual interest rates of around 9 percent, which is cheaper than sticking it on most credit cards, Burnett said.
Withholding tables will revert to their pre-2009 levels for 2010. There's talk of bringing back smaller withholding, but some accountants said they and their clients aren't too keen on seeing the change return, because its benefits didn't always outweigh its pitfalls.
"Most people don't see that extra few dollars a week," Burnett said. "That's a couple of gallons of gas. It doesn't stimulate the economy."
Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.
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In order to receive the new changes, please bend over!
Who makes these new rules every year? I bet they have a staff that gets paid to think up new ways to stick it to the American people.
I also think poor people are poor because they want to be. I'm not talking about people who have become unemployed through no fault of their own, but the one's with all the kids and who refuse to even attempt to find work and live off the system instead.
Everyone has their hands in our pockets.
Why not just quit working and use the welfare system like everyone else.
This country is too liberal, we should kick out all muslims and illegals for a start, put a two term limit on the public servants in washington dc, instead of having these guys in there for 20-30 years running the system.
Get some new blood in there with new ideals, that might actually benefit the people of America.
So we have two choices, keep working hard for our money and keep having to hand it over to these goons in washington, or just quit, move to mexico and live the good live on the backs of the mexican people. Besides I'm sure there's lots of room because they're all over here.
You may think your vote counts, and what you think and feel mean something,
but it doesn't. They do whatever they want to do.
Obama, Reid, Titus---they need your money. Now!
Didn't the media report that this year's tax refunds were the biggest in recent years?
So which is it?