Possible Changes to Your Pay Check

On February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act into law.  Two pieces of this legislation are important to you, as they may affect your net pay.

The “Making Work Pay” tax credit provides up to $400.00 for single filers and $800.00 for joint filers.  This credit will be incorporated into employees’ pay checks as a reduction in federal income tax withholding and phases out for taxpayers with an adjusted gross income of more than $75,000.00 or $150,000.00 for married couples filing jointly.

New federal tax withholding tables reflecting this change have been released by the IRS to reduce the amount of federal income tax withholding for those who qualify.  These tables have been pro-rated for 2009 so that workers will receive the full amount of the credit between now and the end of the year.  You do not need to submit a new W-4 form to receive the benefit of this credit.

Employers have been asked to implement the new withholding amounts as soon as possible, but no later than April 1, 2009.  We are pleased to announce that we have already updated our tax tables and that all pay checks issued on or after March 12, 2009 will reflect this change.

In addition, the act increases the amount that benefits-eligible employees are allowed to contribute to their Mass Transit Flexible Spending Account (FSA) from $120.00 per month to $230.00 per month.  A communication from Human Resources containing details of this change, and instructions for enrolling or increasing your current election amount, has been distributed to eligible employees in a separate e-mail.

Employees who have chosen to increase their Mass Transit FSA amount may see the impact of their federal tax withholding reduction offset by the increase in their FSA election amount.

If you have any questions, please contact payroll at payroll@drexel.edu.