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Although
every employee will see a slight reduction in the amount of federal
income tax withheld, not everyone will receive the resulting credit. This
credit, up to $400 per person and $800 per married couple, is equal to
6.2% of income. Those that receive the credit will find some extra cash
in their pockets. Those that do not receive it, may have to pay it back
when they file taxes their taxes next year and their actual credit amount
is calculated.
Those
that are eligible include:
1.
Single employees with one job and
minimal unearned income
2.
Couples with one working spouse with one
job and minimal unearned income
3.
Self-employed individuals
4.
Employees who do not earn enough to have
tax withheld from their paycheck
Those
that are not eligible include:
1.
High-income households - the credit
phases out between $75,000-$95,000 for single filers and
$150,000-$190,000 for joint filers, so if your adjusted gross income
exceeds those amounts, you are not eligible
2.
Dependents
3.
Nonresident aliens
Because
the calculations determining who is eligible is somewhat complicated,
taxpayers may receive it by mistake and be surprised by a
smaller-than-normal refund or a bigger-than-normal tax bill. If you think
you are receiving some credit in error, consider filing a new W-4 with
your employer.
Those
that might receive some credit in
error include those:
1.
Working two jobs - both employers may
adjust withholding, but you are still only eligible for $400
2.
Where both spouses work - the system
deducts $600 for married couples per person, totaling $1200, even though
the maximum is $800 total
3.
Who work and receive Social Security -
since recipients of Social Security, Railroad Retirement, and Veteran's
Affairs are scheduled to receive a payment of $250, if they also receive
the $400, they might have to pay some back
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