Stimulating $400 Per-Worker Tax Credit for 2009 and 2010

POSTED ON FRIDAY, FEBRUARY 13, 2009 BY Debbie Dragon

The $789.5 billion stimulus package was approved by the house without Republican support. President Obama is expected to sign it into law Monday morning. What does it mean for individuals? The stimulus package includes a $400 per-worker tax credit for 2009 and 2010, which will reduce the amount of taxes withheld from your paycheck by about $13 per week in 2009 and about $7.70 per week in 2010. (The difference in 2010 is due to the $400 being spread out over the full 12 months).

What will you do with your $13 per week this year? Most people are scuffing because $13 a week seems like nothing, but if you look at it on a monthly basis you're looking at about $52 more in your pocket each month for the rest of the year. That's $52 you can use to reduce your high interest debt faster, or $52 a month you can use to boost your savings or money market account.

It would be very easy to absorb the $13 a week into your regular spending, so you'll need to set up an automatic transfer to move that money into your savings account of choice before you have the chance to use it. If you transferred $26 every other week into an account earning 2.8% interest, you'd have $686 at the end of the year. Use the savings calculator to see how different savings rates impact the savings.

Everyone has a different opinion on whether or not the stimulus package will do anything to improve or stimulate the economy, but if you plan to use your piece of the multi-billion dollar pie to your advantage, at least it can stimulate your own financial situation.

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Previous Comments

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cheryl | Feb 17, 2009 | Comment #1

so we're not getting a check in the mail like last time??????????//

tera | Feb 17, 2009 | Comment #2

that would be a resounding "no"

Laurie | Feb 18, 2009 | Comment #3

More money is more money, and every little bit helps!

cookie | Feb 18, 2009 | Comment #4

i'm a waitress and to me getting cash in hand to pay help get my bills will give me more releif so i can spend money on other things then to continue living with one meal a day that is tuna fish sandwiches because all my money has to pay bills that are already a month behind.

princess | Feb 18, 2009 | Comment #5

My gosh.. yes money is money and this time if you notice you are getting a little more than $600. Do the math, $52 a month extra in your pocket for a total of 12 months gives you $624 a yr. You are getting your money up front.

Funny about Money | Feb 18, 2009 | Comment #6

Hilarious. If I add that to my monthly self-escrow, it will almost cover either the increased property taxes (on a house whose value has dropped almost $100,000) OR the increase in auto & homeowner insurance. Not both. Besides, hello? We're getting furloughed. That will cut $480 a month out of my salary.

-1

Valerie | Feb 21, 2009 | Comment #7

Note to princess--it will be only $400 this year, since the money will not be spread over the entire 12 months. Based on my estimates, we should begin to see the credit in May.

Casey | Feb 25, 2009 | Comment #8

I just spoke with a CPA, and he told me the $13 is NOT a tax cut. It is still taxable income you must pay taxes on at the end of the year. All they have done is lowered the amount withheld from each paycheck, but you are still taxed on it.

Mary | Feb 28, 2009 | Comment #9

Does this mean I will get back less or owe when I file taxes next year?

BobG | Mar 2, 2009 | Comment #10

Casey, You hit the nail right on the head. The CPA is right. To all, don't be bambooozled by the Obama tax cuts. It's mostly BS.

Jill | Mar 6, 2009 | Comment #11

How it works is they are reducing the federal withholding rate. So your weekly paycheck is higher but you will still owe the same federal tax at the end of the year. So if you make 50K and on a typical year before the stimulus your tax due was 10K. And lets say your withholding is perfect so you owe 10K and and you typically withhold 10K so when you file your return you pay Zero. Now same person but they decide they want to get the extra 13 or what ever amount per check. Now they still owe 10K at the end of the year but they have only withheld 9600. In the section on the return where is shows withholding, there probably will be a line for the "worker credit" showing $400 so in the end total W/H is 10K. so again this person owes nothing but got the extra $ per paycheck. If the same person opted out (which there is no opt out you have to fill out a new w-4 and increase your W/H back to pre-stimulus amount), they would still owe 10K, they withheld 10K and then they get the $400 as a refundable credit.

B | Mar 6, 2009 | Comment #12

If a person still does payroll the old fashioned way and looks at the tax table for a person's amount of withholdings, how do they figure this new way?

Jill | Mar 7, 2009 | Comment #13

@B If you look at the tax table then you should be able to go online and print a new tax table. All they did was lower the rate on the tax table so they issued new ones. try IRS.gov?

MILAGROS RODRIGUEZ | Mar 8, 2009 | Comment #14

PLEASE WE REALLY NEED THAT MONEY ITS ALOT OF HELP

john | Mar 10, 2009 | Comment #15

does this only apply to people working 40 hours a week??

tc | Mar 13, 2009 | Comment #16

with this reduction on our federal withholding and more in our take home, will we end up paying more on taxes in april 2010?

OLIVER | Mar 17, 2009 | Comment #17

My husband andI both work. We have just started to receive the credit in our paychecks. It is amounting to about 18 for him and 16 for me. I estimate that we are overpaying by more than 600.00 based on the 800 per couple rule. Thats correct right? I will have to increase my withholding so we don't under pay.

SandyAnn | Mar 18, 2009 | Comment #18

WHO'S getting $13 per week? I just got my check, with the increase. Mine is $8.50 per week. My unanswered question is this: is this a reduction in our tax base OR is it simply more money put into our pockets, therefore decreasing next years Federal Income Tax Refund?? Does anyone have the CORRECT answer to this please?

Jill | Mar 20, 2009 | Comment #19

@sandyann The change in the amount additional in your paycheck depend on whether your w-3 is on file as single 0, married 0, married 1...etc. This is a change in the witholding tables. How it is supposed to work is you get an extra $400 in your pocket by the end of the period, which yes reduced the amount of withholding you paid the federal government. But when you go to file your taxes, on the bottom section of page 2 where it shows the taxes you paid to date, there will be a $400 tax credit which will count as tax paid. If you opt to have the extra money in your check the credit will make you even as if it never occurred. if you adjust your w-3 to not have the money then you get the additional $400 at year end. This is how it has been interpreted by my firm.

Patsey | Mar 21, 2009 | Comment #20

Thanks Jill, I think you've explained it very well.

stefanie menendez | Mar 25, 2009 | Comment #21

if me and my husband file jointly claim 2 each and get the extra money in our paycheck will we have to owe at the end of the year?we usually never owe.we actually get a good amount back.infact were first time homeowners this year so were entitled to the 8000 dollar tax credt

Roger Beehler | Mar 26, 2009 | Comment #22

The term "worker" gets tossed around a lot in the description of this credit. It is confusing. I assume my pension's withholding will be reduced also, so I help stimulate the economy too. But for other purposes, like contributing to an IRA, I must have 'earned income" for which my pension payment does not qualify.

cheryl | Mar 28, 2009 | Comment #23

I still have not received mine. When is to start&

cindy | Mar 30, 2009 | Comment #24

I just received my Florida Retirement System pension check and it is for $66.00 more (for the month). They withheld $74.00 instead of the usual $146.00. So, yes, the pension credit is applicable also.

R.k. | Apr 3, 2009 | Comment #25

My husband and I own a business, and my husband works a reg job also. We did receive a check for the 1200.00 last year from the government to stimulate the economy. Will I receive any checks this year even though I work just as hard as others just for myself. My husbands check today did reflect the 13.00 increase and I do know that people on Social Security and others on disability receive a separate check. Just wondering if it would include me for any additional monies for this year?

lori | Apr 4, 2009 | Comment #26

i was told by a h&r block employee that at the end of the year we will have to pay taxes, plus interest on that 13.00 a week. is this true

Linda | Apr 5, 2009 | Comment #27

So what you are saying is we get a cut thru the year, but at the end of the year we still owe the same amount of taxes. Hmmm. Looks we are the losers at the end of the year, Better save that amount to pay the irs instead of spend it.

ja | Apr 29, 2009 | Comment #28

so what about does who stop working since december o f2008?

Robin | May 29, 2009 | Comment #29

This $400.00 is a bunch of crap. Atleast under Bush as a family we got an $1800.00 check in the mail around May of last year. So we traded in those checks for $400.00 tax reduction. Sounds like a good deal to me. NOT!

Jason | Jun 12, 2009 | Comment #30

You are receiving a $400 reduction in the federal taxes you pay. They are spreading it out over the year. As an example if you earned $40,000 and you paid $8000 in tax last year; this year if you earned $40,000 you would pay $7600. Yes you would not receive a lump sum payment but you still will pay less in taxes. If you don't want the $400 because you hate Obama the treasury does allow individuals to overpay them, please just send them an extra $400 when you pay your taxes. Why do I get the feeling these same people would go crazy if there was a $400 tax increase.

Samantha | Jul 23, 2009 | Comment #31

Do dependants also recieve this stimulus?

Joe Batt | Sep 5, 2009 | Comment #32

See the Official Page for correct Information at: http://www.irs.gov/newsroom/article/0,,id=204447,00.html The Taxes for Dummies Book says: If you earn income and get a paycheck you may get an early refund on your $400 from your 2009 and 2010. The $400 may be divided into about 52 weekly payments made to you thru your employer from the IRS. If you get too much or too little it will be corrected when you file your taxes. Self employed people do qualify if they have earnings. Pensioners do not qualify, unless they earn income but they may be under withheld because of problems with the withholding tables issued by the IRS for the early part of the yerar. Retirees do not qualify, unless they earn income. This is a $400 tax refund, this $400 is not taxable, the earnings that qualify you for the refund are taxable as usual, no more - no less.

Joe Batt | Sep 5, 2009 | Comment #33

Deductions, exemptions, and exclusions are directly linked to an individual's tax bracket. So each $1 taxable deduction, exemption, or exclusion drops the taxes owed by 15 cents for a low income person with a 15 percent tax bracket. Each $1 taxable deduction, exemption, or exclusion reduces the taxes by 35 cents for a person with high income with a 35 percent tax bracket. A $1 refundable credit reduces any individual's taxes by $1. Refundable credits are not affected by being in a low or high tax bracket.

bacollier | Feb 10, 2010 | Comment #34

I am a victim of his stimulus program. Had Obama left my withholding tax alone in 2009 My wife and I would have recieved a tax refund this year. Instead I now have to figure out how to come up with the $1500 tax bill I owe because not enough taxes were withheld from mine and my wifes checks. Now I have to get my employer to with hold $50 extra a week from my check so I can cover my 2010 taxes as well as allow the IRS to keep my tax return next year to cover the 2009 taxes I can't afford to pay. My wife will have to do the same so this creates a $400 a month less disposable income in my house hold that truthfully we can't afford. I guess my best bet is to do like the one post said and put it in a savings account so I will atleast earn interest on it then issue it to the IRS at the end of the year.

James | Mar 17, 2010 | Comment #35

IF I HAVE ALREADY FILE, HOW CAN I RECEIVE MY MONEY? WILL THE MONEY GO INTO MY BANK?

Anonymous | Feb 3, 2011 | Comment #36

so does that mean we will get an extra $400 dollars on our taxes this year??

Anonymous | Mar 22, 2011 | Comment #37

Where the hell are you going to find an interest bearing account that yields 2.8%???!! What are you smoking??

Anonymous | Mar 30, 2011 | Comment #38

My mother, father (married) and brother have received an extra $400 for their federal returns....But I haven't. :(

Jessica | Apr 19, 2011 | Comment #39

Its funny to read all the old comments from 2009/2010 with people predicting we would be ****ed come tax filing time. This is absolutely not the case for my husband and I. Not only did we get a lil more cash in our paychecks each week with the same tax exemption 1, we also got an additional $800 in our tax refund!!! This extra money really helped us. We've had the same rate of pay & exemptions for 3 years now (thanks to pay increases being frozen at our companies) so we compared each years taxes and this definitley made a difference. Hope it did the same for others!!

Anonymous | Oct 12, 2011 | Comment #41

They reduced my withholdings by $799.68 in 2009 and my wife's by another $799.92 so instead of getting a refund we had to pay $1463 in April 2010. The same thing happened in 2010 (owed $1500 in April 2011). They do not think through these stimulus acts.

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