The following is a summary of those provisions. Retirement Board staff cannot advise you on individual tax matters. We would recommend consulting with your accountant or tax professional with any specific questions.
1. New Tax Withholding Tables / Making Work Pay Credit
The IRS has formally stated its position under Publication 15-T that the new withholding tables are to apply to workers and pensioners. The IRS has also indicated informally that the withholding tables apply also to governmental plan retirees such as retirees of the Massachusetts State Employees' Retirement System. The new withholding tables must be implemented by April 1, 2009.
Please be aware that the Federal government mandates the new tax tables. In the event that you need to make a change to your withholding you must file a Form W4-P indicating your request for a change.
The "Making Work Pay Credit" ("MWP") provides that an "eligible individual" is entitled to a credit against income tax for the taxable year of "an amount equal to the lesser of (1) 6.2% of earned income of the taxpayer, or (2) $400 ($800 in the case of a joint return)." The MWP Credit is a refundable credit available when filing your 2009 federal income taxes and is treated as an overpayment of taxes.
Please note, Governmental retirees whose sole source of income for an entire tax year consists of retirement benefits paid in the form of an annuity or pension will have no "earned income" for MWP Credit purposes and may not qualify, but might qualify for the Federal/State Retiree Credit.
The MWP credit is reduced if a member also receives the Federal/State Retiree Credit or Social Security/Railroad Retirement Payment. (See below)
2. The Federal/State Retiree Credit
Is an uncodified provision that allows "eligible individuals" a one-time $250.00 refundable credit against income tax for the first tax year beginning in 2009. The credit is $500.00 for a joint return where both spouses are eligible individuals.
An "eligible individual" is defined in part as any individual "who receives during the first taxable year beginning in 2009 any amount as a pension or annuity for service performed in the employ of the United States or any State, or any instrumentality thereof. This provision is directed to individuals who receive a government pension or annuity from work not covered by Social Security.
3. Social Security/Railroad Retirement Payment
Provides for a one-time economic recovery payment of $250.00 to people who are eligible for and receive Social Security benefits, Railroad Retirement benefits, or veteran's compensation or pension benefits. The law requires the Department of the Treasury to deduct delinquent child support and debts owed to state and Federal agencies from the one-time payment. The federal government expects to issue this payment later this calendar year.