Q: In the time since the tax withholding tables were adjusted, I have yet to see an explanation as to why. Has the tax rate gone up, or just the tables? When the tables were lowered, I raised my withholding amount to compensate. Now my question is, should I lower it?
-- Jack Kerwood, Rome
A: The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, enacted on Dec. 17, included several changes that impacted take-home pay for workers and net pension checks for retirees for 2011, IRS spokesman Mark S. Green told Q&A on the News. The Tax Relief Act extended the income tax rates that were scheduled to expire at the end of 2010, which prevented a large increase in federal income tax withholding. It did not extend the Making Work Pay (MWP) credit that was available in 2009 and 2010. While most workers qualified for the maximum MWP credit, pension recipients did not qualify for it unless they also had wages or other earned income. However, under the Tax Relief Act, Social Security tax withholding for all wage earners was reduced from 6.2 percent to 4.2 percent. Medicare withholding, at 1.45 percent, did not change. For most employees, less total tax is being withheld from their checks. Most employees would have noticed a net increase in take-home pay when the changes were implemented by their employers, Green wrote in an e-mail. The withholding calculator at IRS.gov allows individuals to review their withholdings and, if necessary, fill out a new W-4 or W-4P form.
Lori Johnston wrote this column. Do you have a question about the news? We’ll try to get the answer. Call 404-222-2002 or e-mail q&a@ajc.com (include name, phone and city).
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