Additional Guidance on Income Tax Withholding and the Stimulus Package
Apr 17 2009
As my colleague Shane notes below, DFAS is required to use the adjusted withholding tables on military retired pay. For additional guidance on your options, please listen to the audio below.
Before you begin, it is helpful to have your 2008 Retiree Account Statement in front of you…
Hopefully this helps provide you with some options as to the effect this change will – or won’t – have on your 2009 taxes.
Federal and military retirees and Social Security beneficiaries may also receive a one-time payment of $250. This payment may complicate the withholding issue for working retirees since it will be a reduction to any allowable Making Work Pay credit to which the person would be entitled.
Would appreciate someone commenting on the effect on FSPA former spouce implications.
when I called DFAS, they told me I could not go into My Pay and reset the FITW to the pre April amount due to FSPA deduction implications.
Regarding FSPA witholding, at least in my case, my former spouse gets a percentage of my retired pay: Gross pay, less VA and FITW times the percent reflected in the court order due to the former spouse. the less FITW witheld, the more the former spouse gets.
Phil – a ver. informative audio – thanks.
I like to put this new tax withholding mess in the category of “unintended consequences”. While it’s true that a person receiving military retired pay can cure the ills of the new withholdinag as you instruct, many of us depend on more than retired pension need to deal with each accordingly. I, for example, am blessed with three pensions as the result of AF retirement and two other retirement plans. Each assumes that the $800 withholding scenario (married, filing jointly). So the total impact on my pension income is $2400 unless I adjust each pension accordingly. I also found it simpler to use the new IRS pub 15-T withholding tables to make the adjustments, using the monthly wage/witholding tables.
Thanks, though for helping get the word out on this. It’s a topic the IRS has not openly addressed and the word needs to get out before too many retirees (military or not) find an unexpected tax bill come next april 15.
Question? Does the Stimulus-Tax Withholding-IRS-DFAS process only apply to this year? In other words, on January 1st 2010, the IRS and DFAS will automatically change everything back to the way it was on January 1st 2009? Or, once I change my W-4 form for this year taking out the additional estimated $89, will I have to go back into the system for next year and resubmit another W-4 eliminating the additional $89 so they don’t take out too much?
Very well said. I spent twenty years protecting the right for most currently in office to tell me that I am not worth the money I receive for my disability and my retirement. I only wish that those who say that could have followed in my footsteps.