The Treasury Department acknowledged yesterday what a lot of taxpayers figured out months ago: the Making Work Pay Credit, which reduced withholding for most taxpayers as an economic stimulus, did not include all the variations in taxpayer situations. As a result, Treasury estimates that over 15 million taxpayers will likely have to pay back not only the 'advance' (tax rates did not change, just withholding rates) but also additional taxes. That is more than 10% of all taxpayers.

We've had many clients call over the past several months, concerned that their take-home pay had increased too much and they might owe money to IRS in April 2010. In some situations, adjustments to withholding rates were made.

If anything about this realization by the Government surprises me, it's their belief that only approximately 15 million taxpayers will be caught in the anomolies; I believe it will be many more, if our client mix is a representative sample.

What can you do now? It's late in the year to fix 2009, but we can check your amounts for you and give you a guesstimate of where you stand. An Estimated Tax payment in January can help.

More importantly, the issue will recur in 2010 unless changes are made by the taxpayer.

Since the withholding table changes were required of all employers, it's possible (the issue has not be addressed) that IRS will be flexible on any underpayment penalties caused by this program. Wait and see...

So if you're used to a refund, expect a lesser one. If you tend to come out where withholding equals taxes with little due or refunded, you may well owe.