Workers & Retirees
IRS Lowers Withholding; PBGC Beneficiaries Still Owe Tax
On April 1, new IRS withholding tables for federal income taxes went into effect. The change was made to implement the Making Work Pay tax credit, passed as part of the American Recovery and Reinvestment Act.
This tax credit does not apply to pension income, only to earned income (wages and salaries under the Internal Revenue Code). However, the IRS requires the new tables be used to calculate withholding on pension payments, including PBGC benefits.
As a result, PBGC beneficiaries will see a small increase in their monthly checks. Beneficiaries should be aware, however, that they are still responsible for paying 2009 federal income tax on the not-withheld-for tax credit amounts ($400 for a single individual, $800 for a married couple filing jointly).