BSI Integrates new Federal Credits

On February 10 2009, the United States Senate passed the American Recovery and Reinvestment Act. This act of legislation includes provisions for federal tax relief, expansion of unemployment benefits, social welfare programs as well as other spending measures. BSI has adopted new ways to integrate these changes with our existing tax management solutions.

Making Work Pay Credit

The Making Work Pay credit allows taxpayers to take a credit against income tax in an amount equal to the lesser of 6.2 percent of earned income or $400 ($800 for married couples filing joint). The credit will apply retroactively to the start of 2009 and extend through 2010.

The Making Work Pay credit applies in full for individuals whose modified adjusted gross income does not exceed $75,000 ($150,000 for married couples filing joint) and is phased out at a two percent rate above that limit.

The employer's share of its 6.2 percent FICA equivalent remains unchanged.
Qualified taxpayers can take the credit through a reduction in wage withholding or in a lump sum when filing their returns for the year.

	The credit will apply to both wages and pension distributions
	The credit will not apply to Puerto Rico or American Samoa
	Nonresident aliens are not eligible for the credit
	Individuals who can be claimed as a dependent by another taxpayer are not eligible for the credit

Transit Benefits Parity

The Transit Benefits Parity provides a temporary increase in the qualified transportation benefits for 2009 and 2010. Qualified transportation benefits, such as van pooling are not included in an employee’s income up to specified dollar amounts. Increases transit pass / van pool income tax exclusion from $120 per month to $230 per month, starting in March 2009. This benefit increases with inflation in 2010.

COBRA Benefits

COBRA benefits have been enhanced by allowing workers who have been involuntarily separated from their employment to pay a portion of the COBRA premium, while the former employer would pay the remaining portion of the premium. The employer is able to credit its share of the subsidy against wage and withholdings and payroll taxes.

For more information:
Making Work Pay Tax Credit
Making Work Pay FAQ
Tax Withholding Calculator
COBRA Continuation