Federal Income Taxes Went Up (Answer in 4th post)

[tim43]

Got my Army Retiree Account Statement in the mail today and withholding taxes are going up $47.00 a month starting 1 March. Guess they are trying to keep up with the rising fuel costs.

[H. John Kohl]

I thought so to until I remembers that during the Bush administration they reduced the withholding but of course did not reduce the real tax rate for income tax. It gave us more money through the year but they still got it back at the end of the year.
So they are just getting it a little sooner instead of letting us draw interest on it. LOL

[ols1932]

quote:Originally posted by tim43

Got my Army Retiree Account Statement in the mail today and withholding taxes are going up $47.00 a month starting 1 March. Guess they are trying to keep up with the rising fuel costs.

Mine went up the same amount.

Orv

[tim43]

Found the answer as to why the increase:
It's because the two-year Making Work Pay (MWP) tax relief program enacted in 2009 expired at the end of 2010. MWP cut tax withholding rates from checks in 2009 and 2010. The program wasn't extended to 2011 so the tax tables reverted back to the old higher levels.

The MWP program was designed to act as a special stimulus payment to help kick-start the country out of recession by putting some extra money in citizens' hands right away. Technically, the MWP provision was intended only to apply to qualifying taxpayers still earning wages. However since DFAS uses the same tax tables and pay systems for retired pay as it does for active duty pay, the system didn't discriminate between retired pay and wages.

This doesn't mean that you owe more or are paying higher taxes - it's just that DFAS has returned to withholding the pre-stimulus amount from each deposit. If this results in too much money being withheld, you will receive any overpaid amount via a tax refund.

[mail2us]

Tim, you have given an excellent portrayal of the Making Work Pay issue. I can only add that anyone retired from Military thru DFAS can refile withholding up to 10 deductions I believe that may bring you back to the pre-MWP foreclosure? Does that sound correct?

[tim43]

Dennis, Not sure about filing for deductions, but as I remember now, when they started that MWP I had them up my with holding tax another $75.00 so I would not get slammed for end of year taxes. If I need to, I'll just reduce that $75.00 by a few dollars.

[jjackflash]

quote:Originally posted by tim43

Got my Army Retiree Account Statement in the mail today and withholding taxes are going up $47.00 a month starting 1 March. Guess they are trying to keep up with the rising fuel costs.

Mine went up that amount February first!

[Rondo]

Here is what I received from a friend that is retired from the Postal Service and also prepares taxes for a lot of people I know! I sent it to numerous members of MOC that I knew were Fed retirees but here it is for all now that the subject has been brought up!


>
> While all of the attention recently was on Congress extending the Bush era tax cuts – which happened – a lesser known Federal tax credit for employees and retirees was allowed to expire.
> The Making Work Pay credit expired December 31, 2010, which could mean higher federal tax withholding amounts in monthly annuities for federal retirees.
> The IRS issued a notice in December saying withholding tables for 2011 would no longer be adjusted for the Making Work Pay tax credit and there is no longer an optional additional withholding adjustment for pensions.
>
> The Making Work Pay credit was created with the passage of the American Recovery and Reinvestment Act, PL 111-5 signed into law February 17, 2009. The credit equaled 6.2% of a taxpayer’s earned income up to a total credit of $400 for individuals and $800 for Joint filers. Last year the IRS asked employers to use the new withholding tables to adjust workers’ take-home pay to account for the new credit as soon as possible and they emphasized that employees did not have to fill out a new W-4 withholding form; that the adjustments would be automatically made based on the 2010 withholding tables. Those withholding tables also affected federal retirement payments. With the expiration of the temporary credit, IRS tax withholding tables have changed for 2011 and many retirees may see an increase in the amount of federal tax being withheld from their monthly annuity payments as a result.
>
> It is important to keep in mind that like all employers, OPM uses tax withholding tables that are provided by the IRS and questions about changes to those tables must be referred to the IRS, not OPM.
>
> As a reminder, federal annuitants receiving payments from OPM can change their tax withholding amounts for both federal and state taxes, by contacting OPM. Retirees can call OPM at 1-888-767-6738 or make changes using Service Online at www.opm.gov/retire. We would also suggest retirees use the OPM on-line tax withholding calculator at the same site before making a change to their monthly tax withholding to make sure they do not under withhold which could result in paying out of pocket additional federal tax that may be due at the end of the year.
>

[5rvers]

Mine went up $50.00.

Lou

[washley1]

It's not just Federal retirees that got hit with this. Our withholding on our private industry pension went up January 1st.

[richfaa]

tim43 and Rondo got it correct. We increased our withholding for 2010 understanding that this would happen. It is important that you go to www.opm.gov/retire and recalculate your withholding for 2011 as it still may not be accurate.

[Captain Joe]

Mine went up as well; however, I filed a new W-4 and adjusted it back down.

[mail2us]

Joe, that is the other alternative that I was trying to convey earlier post. Tks.