APA’s Open Letter to President Obama
by TedRecommendations for Successful Delivery of an Economic Stimulus Via Workers Paychecks
PDF of APA’s Letter
The American Payroll Association is recommending that to get this credit in the hands of American workers quickly and effectively, they recommend modifying the current income tax and withholding tables.
The current proposal involves a refundable income tax credit equal to 6.2% of the first $8,100 in wages subject to Federal Income Tax (FIT), resulting in a maximum credit of $502.20.
The APA suggests:
“Modify the current income tax and withholding tables to reflect a carve-out of $8,100 of
the 10% wage bracket, to be taxed at 3.8% (10% less 6.2%), and to reflect any additional tax
necessary in the higher wage brackets for anyone for whom the credit is not intended (i.e.,
phase-out for those earning more than a threshold amount of wages).”
“Require employers to apply the new withholding tables ‘as soon as administratively
practical,’ with a specific target date six to ten weeks after enactment. This will allow
employers who are able to immediately apply the change to do so, and it will recognize that
some systems are set up to make these sorts of changes at the first of a month or a quarter.”
“Stipulate that no employee’s FIT withholding for the year may be less than zero. An
employer may try to front the entire credit to some employees (!), but IRS and SSA systems
are not set up to accept negative numbers on Form W-2 and most fields of Form 941
(Employer’s Quarterly Federal Tax Return), and employer systems are accordingly
programmed not to allow such numbers.”
The APA and PayMaster believe that this would be the that this would be the most effective way to get this tax credit in the hands of the masses and reduce the burden on payroll professionals. The other reccomendations being suggested by the administration would require more complex programming, would increase the bookkeeping burden, and different taxpayers would have different experiences in receiving the credit.
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