Drawbacks of 'Making work pay' credit

The "make work pay" credit that will be added to paychecks in spring is good news for some taxpayers as it will add up to as much as $400 for single filers and $800 for married couples each year for two years. However, there are others who are under risk of receiving unwanted bill due to their employers adjusting paycheck withholding amounts without knowing worker's tax situation.

The IRS released new tax-withholding tables for employers to use when calculating workers' paychecks and asked companies to use them by April 1. 

Doug Shulman, the IRS commissioner, stated in a press release that “workers will not need to take any additional action” with introduction of the change. Nonetheless, married couples with both of the spouses working are recommended to carefully review their withholding, as there is a possibility both employers will unintentionally adjust withholding for the household as a whole, for a total credit of $1,600. Additionally in the cases when employers don't know what workers' spouses earning, a couple could owe as much as $1,600 at tax time, due to the credit starting to phase out for married-filing-jointly couples with adjusted gross income of $150,000.

There is another group of people who should assess their withholding, as Scharin says, “someone who could be claimed as a dependent on someone else's return, such as a college student who has a summer job.”

Another suggestion in order to avoid an unwanted bill next year is to adjust withholding this year. Moreover, there is a probability that taxpayers, who normally get a refund, see a reduced refund, rather than a bill, come April 2010. 

Frank Keith, chief of communications for the IRS, said, the additional amount paid out this year, would not be the full amount, since the withholding adjustment started close to midyear.