President Obama's “Making Work Pay” tax credit was an idea he first set forward during his presidential campaign. Unfortunately, it will soon take many Americans unawares and hurt some financially.
The credit has been administered as part of the stimulus package through a reduction in tax-withholding from workers' paychecks. But the reduced withholding, which began quietly this April, might cause up to 15 million Americans to underpay the IRS even though they did nothing wrong.
Thanks to the government's mistake, some of these folks — especially anyone who suddenly loses a jobs near the end of this year — will find themselves without the cash to pay an unexpectedly high tax bill next spring. It will affect many working married couples and also people who have more than one job.
If you want to protect yourself from this, you can always use this IRS withholding tax calculator. It's simple — just five pages of complicated forms to fill in.
I sure hope Tim Geithner hired someone good to do his taxes this year.
UPDATE: The truly incredible thing is that AP saw this coming as early as May and the government did it anyway.