In 2009, the American Recovery & Reinvestment Plan stimulus package included the Making Work Pay Tax Credit, which provides a refundable tax credit during 2009 and 2010. Most wage earners will receive their tax credit in the form of a reduction of federal income tax withheld from their paychecks. For those individuals receiving social security benefits, veteran’s benefits, railroad retirement, Supplemental Security Income, and some federal government retirement benefits, they will receive a payment of $250.
The stimulus stipulates:
- Wage earners get a tax credit of 6.2% of their earned income, up to $400 for individuals and $800 for married filing joint taxpayers.
- Nonresident aliens and persons claimed as a dependent are not eligible.
- There is a phase out of the credit at 2% of income over $150,000 for married filing joint taxpayers and $75,000 for single taxpayers.
- The credit is eliminated for couples earning more than $190,000 and singles earning more than $95,000.
- The credit is reduced by any other payments associated with the stimulus package, such as, the $250 payment for the individuals receiving social security benefits.
The tax withholding tables were adjusted in February 2009 to reflect the reduction of federal income tax in the hopes of getting the stimulus money in the hands of the taxpayers and thus circulating in our economy.
In doing so there is an underlying issue of potentially underpaying federal income taxes.
Anyone who has a pension with federal income tax withheld based on the tax tables would now have a reduced amount of withholding taxes. Recognizing a problem, the February 2009 withholding tables were revised in April 2009. To further confuse this issue, the IRS released special tables for the pension plans to restore the withholding to the original amounts. The shortfall results will vary based on how long the pension plan used the reduced tax table. Everyone should review their withholding so adjustments can be made for the remainder of the year, if necessary.
Wage earner taxpayers are presented with a different set of issues. If you are single and have more than one job, the reduction in withholding will affect both incomes. This may double your withholding reduction compared to the eligible tax credit amount of $400. A similar problem can occur with married couples who might both receive a withholding reduction. This will double the reduction amount compared to the eligible tax credit of $800 for married couples. The couple could potentially have a balance due of federal income tax for $800 or their refund might be reduced by $800. If a couple’s combined income is in the phaseout area and they are not eligible for the tax credit, the couple will want to increase their withholding rather than continuing to have a reduction in withholding taxes.
Anyone with an underpayment of income taxes can potentially owe underpayment penalties and interest on the amount of underpaid tax. Tax planning is the wisest course of action. Consult with your tax adviser regarding how the withholding reduction might affect you. If you would like further information regarding this issue as well as any other tax related issue, please contact Henssler Financial at 770-429-9166 or at experts@henssler.com
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
With the 2005 Terri Schiavo case, many individuals, regardless of age, became aware of the importance of communicating their healthcare wishes. Her case, which ensued after Schiavo suffered heart failure and subsequent brain damage at the age of 26, involved a seven-year battle between her husband and her parents over a healthcare decision. She had no written instruction—whether she would have wanted to live by being sustained through feeding tubes and life support. As Schiavo did not have a living Will, the courts were required to decide her fate, leaving speculation as to what she would have truly wanted.
Living Will
A living Will is also known as a “health care declaration.” This is a document in which you can express specific wishes with regard to what medical care you wish to receive in the event you are incapacitated or too ill to make decisions on your own.
This document allows you to make your wishes known in advance, regarding specific treatment methods, such as resuscitation, surgery, use of respirators, administration of drugs, food, water and pain relief. This document does not allow you to select someone to act on your behalf.
Healthcare Power of Attorney
To ensure that your wishes are met if you are unable to communicate, you can name a healthcare agent in addition to or as part of your living Will. A Healthcare Power of Attorney enables you to provide authority to a healthcare agent to make decisions regarding your healthcare needs in the event that you cannot. While we strongly suggest that you name a healthcare agent, it is not a requirement.
In some states, this person is called a “healthcare proxy” or “attorney in fact,” even though the person does not need to be an attorney. You are able to give as little or as much control to this person as you wish. For example, you can give this person the authority to make decisions based solely on the wishes stated in your living Will and/or make decisions as he or she deems necessary should unforeseen instances arise. While this responsibility usually ends at the time of your death, it is also possible to give your agent the authority to oversee issues relating to organ donations and body disposition after death.
In some states, the living Will and healthcare power of attorney can be combined into a single document—often called an “advance directive.” In most cases, these documents become effective as soon as your doctor, or other healthcare official, determines that you do not have the ability to understand the healthcare options available to you, and/or you are unable to physically communicate your wishes regarding your care. If there is ever doubt about the level of “incapacity,” then your doctor, in conjunction with your agent or close relatives, will decide the best time for the documents to become effective.
Choosing a Healthcare Agent
You should take into consideration the following factors when choosing an agent:
- Do you trust the person without a doubt?
- Is the person someone you know will assert your wishes, if conflict arises involving family members or your doctor?
- Where does the person reside? This is especially important in a case when you have a long illness, and the agent needs to stay close to you for a period of time to oversee your care.
- Will the person also oversee your finances in the event of your incapacity? If you have separate agents, disagreements could cause interference with medical decisions, especially when payment is needed to cover medical expenses.
It is also important, but not required, to select an alternate agent in the event that your first choice is not able to assume the responsibility. It is possible to have more than one agent.
You must be at least 18 years old to create a living Will or healthcare power of attorney. You must be of sound mind and be able to understand what the documents are and how they work. As with most legal documents, you must sign these documents and have them witnessed and notarized.
It is important to state your specific healthcare wishes in a living Will. Your doctor or medical institution will be required to follow these wishes. At the very least, you should communicate your wishes to those close to you—your family members and close friends. For more information on your options, talk to your estate-planning lawyer or contact
