Last Updated: April 13, 2009
One of the highlights of the American Recovery and Reinvestment Act, otherwise known as the Stimulus Bill, was the "Making Work Pay" tax credit.
According to The Segal Company, that credit was intended to put more money into the pockets of taxpayers as quickly as possible. To implement the credit, the Segal Company said the IRS revised the income tax withholding tables for 2009 to reduce the amount of federal income tax withheld at applicable income levels and thereby increasing take-home pay.
"Although the tax credit only applies to wage and salary income, the IRS has instructed that the new tables are to be used to calculate withholding on pension payments even though pension payments are not earned income," Segal said in a release.
Todd Kading, CFP®, ChFC® Managing Director of LeafHouse Financial Group, recommends that if you are among those who will receive a small increase in your pension because of the "Making Work Pay" credit, you should save the small increases in your post-withholding checks instead of spending it.
Learn more about the "Making Work Pay" tax credit.