Millions May have to Repay Tax Credits
More than 15 million Americans may have to repay tax credits issued by the Obama Administration when they file their taxes next year, according to a report by the Chicago Tribune.
More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes,
according to J. Russell George, the Treasury inspector general for tax administration.
The Making Work Pay tax credit, part of the greater stimulus plan, helped ease the effects of the recession for taxpayers by providing a tax break in each paycheck. Individuals were given a $400 credit, and married couples $800.
However, the Treasury Department failed to consider that many married couples are dual-earners, and gave each spouse the $800 credit. Likewise, those working multiple jobs may have been given a double tax credit.
A similar initiative gave tax breaks to those drawing Social Security benefits. The Social Security Administration sent out a $250 “bonus” payment to more than 50 million Americans. However, seniors drawing an income aside from Social Security also received the tax credit—and will have to repay the SSA credit come tax time.
The irony, of course, is that in devising the new tax withholding tables, the Internal Revenue Service failed to realize that millions of Americans are finding new ways to make ends meet in the down economy—including working multiple jobs, having both spouses work, or working well into their retirement years.
Repaying the $250-to-$800 tax credit may not be welcome news to most Americans, but it shouldn’t have too much of an effect on refunds. The average tax refund for 2008 was around $3,000.
For those who end up owing more on their taxes, take head—taxes are one of the few types of debt that cannot be discharged in personal bankruptcy.