LUBBOCK, TX (KCBD) - Many people look forward to receiving a tax return around this time of the year as a little extra cash to put towards larger purchases or projects. However, some people may get a surprise when they file their tax return this year, and they won't like what they see.
When the Obama administration put the American Recovery and Reinvestment Act in place, it included a $400 rebate for most Americans. To get that money to you quickly, the government withheld less income tax. Now, in certain scenarios, some will get a smaller tax return than expected or could actually owe the government money.
To offset the money not withheld for income taxes, people need to claim the "Making Work Pay" tax credit. It's $400 for a single person who makes less than $75,000 a year or $800 for a couple who make less than $150,000.
To claim this you need to fill out a form called the "Schedule M". "If you don't do that, you're basically shorting yourself the $400 or the $800 if you're married," said Mark Dickson, Vice President of Mason Warner & Co.
For many people, that's all you need to know. The government withheld less, and now you get a credit to make up the difference. However, the tax tables don't work quite as well for certain groups. "Those scenarios could actually result in somebody getting less of a refund or owing more in tax then what they had anticipated," said Dickson.
Martha Summit receives Social Security, but also has another job. She didn't have enough withheld, and now she owes. "We received a rebate early in the year, but now we're finding out we're going to have to pay that back when we file our taxes," she said. "I don't think it's fair to be punished - to be given something and then not be told you're going to have to pay it back in the long run."
Students whose parents claim them, will find themselves in a similar situation. They also received extra cash, but are not eligible for the tax credit when they file their return.
If you work two jobs, you received the rebate at both jobs, but you're only eligible for the tax credit once. You'll have to make up that extra money you received throughout the year.
Married couples where both spouses work, may have both received an $800 credit. Now they have to pay one of those back. "If you're married, and both spouses are making about the same level of income, it really doesn't know that. It sort of assumes that one spouse is working and one isn't," said Dickson of the tax tables.
Technically, anyone in these situations isn't losing money. They received the larger payments throughout the year. However, if you didn't expect it, the lump sum owed can come as quite a shock. "(I was) very surprised because I had no idea that it was going to be given to us on one hand, and taken back on the other," said Summit.
If you end up owing penalties because not enough was taken out due to this rebate, the IRS will waive those fees if you file form 2210. It's a complicated form, but you can just check the box that says I want the IRS to apply this waiver, and they'll do the calculations for you.
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