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Thursday, February 10, 2011

Underwithholding of Income Taxes and the Making Work Pay Tax Credit

John J. Topoleski
Analyst in Income Security

Some taxpayers may find that their 2009 income tax refunds are lower than they anticipated or that they owe taxes when they expected a refund. This is because some individuals who were ineligible for the Making Work Pay (MWP) tax credit nonetheless received it. The MWP credit was implemented as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) and will provide a temporary tax credit in 2009 and 2010. Individuals received the MWP credit through lower income tax withholding throughout the 2009 tax year. Ineligible taxpayers will not be able to claim the tax credit on their 2009 income tax filings, resulting in higher tax liability.

This CRS report describes how some taxpayers might be affected and which taxpayer groups might have had their income tax underwithheld.

Date of Report: February 3, 2011
Number of Pages: 6
Order Number: R40969
Price: $19.95

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