2009 FEDERAL STIMULUS PACKAGE - "Making Work Pay" Tax Credit

Many LAFPP pensioners and beneficiaries may begin to see an increase in the net amount on their April 30, 2009 pension payment.  The increase is a result of the new “Making Work Pay” tax credit – a key provision of the 2009 Federal Stimulus Package. 

To implement the tax credit, the Internal Revenue Service (IRS) revised the income tax withholding tables for 2009.  Eligible taxpayers will see a reduction in the amount of federal income tax withheld, thus providing an increase in their net pay.  Although the tax credit only applies to wage and salary income, the IRS has instructed that the tables be used to calculate the amount of federal income tax to be withheld from pension payments as well.  LAFPP has complied with the IRS request. 

It is important to note that the “Making Work Pay” tax credit only reduces the amount of federal income tax withheld and may not reduce the taxpayer’s income tax rate.  To learn more about the implementation of the new “Making Work Pay” tax credit, visit the IRS Web site.  

LAFPP pensioners and beneficiaries may also review How To: Change Your Monthly Income Tax Withholding for Your Pension Payments. We encourage you to consult a professional tax advisor to determine whether you should adjust your tax withholding amount, as you may be subject to tax penalties if you underwithhold.