By John Fedele

Need a good laugh? Try this: Get your December pay statement and compare it to one in February, paying close attention to the Federal Witholding tax box. It should have gone up. If it didn’t you have a surprise coming in March. Didn’t the prez and congress keep the Bush tax cuts in place? Didn’t the prez say he was keeping his tax cuts in place? Well, it seems the joke is on us. For the record, do not call the IRS. After being on hold for 45 minutes, the answer I received, as to why my income tax went up since I didn’t receive a cost of living increase or any other increase in my retirement check, was, “we don’t know.”

The answer can be found in the Stimulus Package. Contained in the package was the Make Work Pay Federal Tax Credit, which lowered your tax bracket by $400 for single folk and $800 for married folk. Here’s the rub: it had a life span of two years…2009 and 2010. That means the tax you paid on, say $1200, only applied to 400 or 800 dollars- hence a tax cut. As of January 2011, the whole 1200 dollars became taxable- hence a tax increase.

To make things worse, retirees and pensioners were not eligible for the tax credit. Many of those retirees and pensioners work part time, so, if they did not advise those who send them their monthly check, they should not have received the tax credit during 2009 and 2010. However, because of the part time job, the IRS knew, and so their February 2011 check showed an increase in Federal tax with-held. By the way, you still owe for January and maybe for 2009 and 2010.

As far as the IRS goes, I guess the old commercial is still applicable…..”you can pay me now or you can pay me later.”