Workers in Alabama and throughout the nation will see an increase in take-home pay on their next paycheck.
Effective April 1, workers earning less than $95,000 a year will have less federal tax withheld from their paychecks — up to $44 a month for a single tax filer and up to $89 a month for joint filers.
That is just one of the benefits of the American Recovery & Reinvestment Act, which lawmakers recently approved.
U.S. Rep. Parker Griffith, D-Huntsville, said the middle-class tax cut — one of the biggest in history — won’t cure all the recession ills but it will help.
“These are economically challenging times, and everyone across North Alabama is watching their wallets and worrying about how they are going to keep food on the table,” Griffith said. “This, of course, will not cure all the ills of our current recession, but it will help to know that we will be taking home more pay. With spending levels at all-time highs these days, this is a step in the right direction, but we have to continue to work to return to an America with a healthy economy.”
Griffith said he introduced a bill this month that would place a moratorium on capital gains taxes for two years. He also said he co-sponsored legislation with both Democrats and Republicans to cut taxes on health insurance for small business, starting a family and buying a new vehicle.
Tax credit details
The tax credit amounts to $400 for working individuals and $800 for married taxpayers filing joint returns through 2010. For workers who receive a paycheck and are subject to withholding, their employers through automated withholding changes made by April 1 will typically handle the credit.
Because the tax change is retroactive to January 1, in some cases, employees will have no federal tax deducted in recent paychecks.
Some workers may have already seen the increase in take-home pay because the Internal Revenue Service withholding tables were already updated to reflect the new credit.
If an employee is eligible for the maximum amount of the tax credit, and the employer begins using the revised tax tables starting April 1, an employee can expect to bring home an additional $44 each month as a single filer and $89 as joint filers.
It is not necessary to submit a W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure there is enough withheld to cover the tax for his or her combined income. IRS Publication 919 provides additional guidance for tax withholding.