8th District Congressman Announces Key Tax Cut Will Take Effect This Week – Pay Checks for Middle Class Workers Will Start to Get Bigger

$4.8 million      Families in Pennsylvania to Benefit from Making Work Pay Tax Cut
$2.5 billion       Money Received in Pennsylvania from Making Work Pay Tax Cut

(Bristol, PA) – Today, Pennsylvania Congressman Patrick Murphy (D-8th District) announced that workers across the 8th District and the country will start seeing more money in their pay checks. Starting Wednesday, April 1, 2009, the “Making Work Pay” tax credit will take effect and workers will see a much-needed boost in the money they take home. This tax cut is a component of the American Recovery and Reinvestment Act of 2009. It is the largest middle-class tax cut in American history. Rep. Murphy voted for this tax cut so that working families will have more money in their pockets during this economic downturn. By having less federal taxes withheld from paychecks, this will be an immediate boost to those struggling in this economy. The Making Work Pay provision of the Recovery Act provides a refundable tax credit up to $400 for working individuals and $800 for married taxpayers filing joint returns through 2010. The credit will increase middle-class Pennsylvania’s take home pay and will be implemented starting the first of April.

“I was proud to vote for the largest middle class tax cut in history. Working families in Bucks County and across Pennsylvania are the backbone of our economy and these days, a little extra money will go a long way,” said Congressman Patrick Murphy. “In addition to spurring job creation, this legislation puts much needed money back into the hands of 8th District families, and it comes not a moment too soon.”

Because the tax change is retroactive to January 1, in some cases, employees will have no federal tax deducted in upcoming paychecks. For workers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes made by the first of April. If an employee is eligible for the maximum amount of the tax credit, and the employer begins using the revised tax tables starting April 1, an employee can expect to bring home an additional $44 each month as a single filer and $89 as joint filers. Employees with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure there is enough withheld to cover the tax for his or her combined income. IRS Publication 919 provides additional guidance for tax withholding.

More Tax Relief in the Recovery Act

• $250 for Social Security recipients, veterans and railroad retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.
• First-time homebuyer credit expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.
• Money back for new vehicle purchases: Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid.
• Increased transportation subsidy. Employer-provided benefits for transit and parking are up in 2009.
• COBRA: Health insurance continuation subsidy. The IRS has extensive guidance for employers, including an updated Form 941, as well as information for qualifying individuals.
• Up to $2,400 in unemployment benefits tax free in 2009. Individuals should check their tax withholding.
• Net operating loss carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-related provisions is now available.
• Enhanced credits for tax years 2009, 2010. Details available on the earned income tax credit, additional child tax credit and American Opportunity Credit, a new higher education benefit.

For Immediate Release, April 1, 2009
Contact: Adam Abrams, (202) 225-4276