We live in North Carolina. My wife gets paid every 2 weeks from a private investigating firm of which she is the Office Manager. Her last 3-4 payroll checks did not include any Federal witholding tax which is good for us as her take home pay has increased BUT does this mean that she will be owing the IRS when it comes time to file our 2009 Federal tax returns in 2010? We file joint returns as husband and wife. Have the tax tables recently changed? If not, will we be penalized for failing to pay Federal taxes during the year? I (husband) receive a pension and social security income. I'm confused. Can someone please explain if there is some action I should be taking now to prevent owing the IRS?

Thanks so much, Jim

Yes the tax tables changed so her income might be below withholding limits, but you can ask payroll to confirm that.

If you are underwithheld for the year you could incure penalties. What I would suggest is getting something like turbo tax to do some what if projections. Then you may need to adjust her W4.

The taxes are figured on the W-4 filled out by the employee. If you claim less exemptions on the W-4 more tax will be withheld.

If your wife makes more than 32,000 a year you may have to pay taxes on a portion of your social security taxes.

There is a spreadsheet you can fill out to find that out you can get that and other information on the IRS.GOV website. It is explained in the instructions for 1040 income taxes.

The new stimulus package did lower the tax tables, however, no one knows how it will affect the refunds at the end of the year. Most of my employees are claiming one less exemption so more taxes will be taken out just in case.

Shirley