With tax day approaching, Andrea Coombes of MarketWatch.com has written a helpful column about the Making Work Pay credit, a 2009 tax credit given to all working Americans with earnings under a certain amount. To implement this credit, the I.R.S. has issued new tax withholding tables. However, as she notes, implementing the tax credit through withholding tables are a “blunt instrument”, resulting in some workers having too much taken out of their paychecks or having too little withheld.
The I.R.S. has directed that the withholding tables be used not only for workers receiving pay checks, but also for retirees receiving pension checks. However, pensioners who have no earnings will not receive the tax credit. The result will be that affected retirees will have too little money withheld, and may find themselves owing taxes at the end of the year.
The author advises retirees to contact their pension plan administrators and ask to file a new Form W-4P, “Withholding Certificate for Pension or Annuity Payments,” to make sure the proper amount is withheld.”
The Pension Rights Center has written to Treasury Secretary Timothy Geithner, asking him to direct the I.R.S. to clarify that the new tax withholding tables should not be used by retirement plans.