In her post “Obama Proposes Tax Cuts: What’s In It For You?” TAXGIRL Kelly Phillips Erb tells us –
“The tax cuts that are being considered would equal $500 a year for working individuals and $1,000 for working couples. The cuts would be in the form of a payroll tax credit. That’s good news for workers because it’s an immediate benefit - no wait for IRS checks. Employers will make the adjustment during the year by reducing federal tax withholding; workers not subject to withholding will likely be able to apply for a refund at the end of the tax year. And yes, there will likely be phaseouts and caps - meaning at an as yet unmentioned income level, the credits would be reduced or not apply. Whispers are that the income level cap will be around $200,000 but don’t hold me to it.”
Way to go BO! Finally – a way to put money immediately in the hands of Americans without using tax rebate checks! It is similar to the “payroll tax holiday” that had been proposed, and about which I posted, in the past.
I trust that self-employed individuals will be allowed a similar $500 credit on the 2009 Form 1040 – so that they can reduce their quarterly estimated tax payment for the first quarter by $500.
It is touted as a “payroll tax credit”. My question is - Is it a credit against federal income tax or against actual payroll tax (FICA and self-employment tax)? I will be interested to see just how the mechanics of this credit will work, both now and on the 2009 Form 1040.
As Kelly points out, “Don’t get too excited just yet. These are just proposed cuts.” But I expect that BO will not have a major problem getting his “stimulus” package passed.
What do you think of this idea?