Hi Everyone,

For all of you who are not considered wealthy by our government should see a little bit of an increase in the take home pay starting April.  It could be as much as $35 to $40 if you get paid monthly, less if you get paid more frequently.  Here are some pitfalls to look out for so you will have no surprises coming April 15th, 2010:

• If you have more than one job, you might get too much stimulus from the government and you will have to pay back the excess with the tax return by either a reduced refund or by writing a check.  You might want to increase your withholding to account for the decreased withholding due to the stimulus. I know that defies the purpose, but bureaucrats wrote the law, so what can you say.
• If you pay estimated taxes in addition to a W2 income, and your income is equal or higher in 2009, you will have to make sure you still pay enough taxes so that you don’t owe a penalty.  Since the stimulus will decrease your withholding, your estimated taxes might not suffice.  This could create a penalty and an interest charge by the government, so make sure you or your tax adviser does the calculations.
• You could potentially also owe the government money for the stimulus money that you are receiving now if your income goes up during the second half of the year and you suddenly no longer qualify for it.

Be careful with that extra spending money, it might be best to save it if you fit into some of the questionable categories.  Otherwise that stimulus will come to hunt you in the not so distant future.

Please feel free to comment or if you have questions.

Cheers,

Patrick