Sep. 5--Enjoy that small part of the $787 billion stimulus package that comes home with each paycheck. But don't let it bite you come April 15.

If you haven't noticed, employers are withholding less from each paycheck these days. It's part of the Making Work Pay tax credit contained in the economic stimulus that Congress passed earlier this year.

Washington hopes that extra pay in roughly 120 million households will get spent and boost the economy.

For most workers, adjustments in the IRS withholding tables will put an extra $400 in this year's take-home pay. A working couple may be taking home an extra $800.

But a couple of quirks could turn that extra take-home pay into a smaller tax refund or even a tax bite when the April 15 deadline for filing taxes rolls around.

Jackie Perlman, a tax analyst at the Tax Institute of H&R Block Inc., explained how.

If you are single and work two jobs, both employers may have reduced your withholdings by $400.

If so, you'll have paid $800 less in taxes. But the credit you can claim against what you owe will be only the $400 available this year under Making Work Pay.

You'll have to cover the other $400 that wasn't withheld but is still owed, Perlman said.

Married? File jointly with the spouse? Both work? Another possible problem, she said, if you both have taxes withheld at the married rate rather than the single rate.

The rate your employer uses is based on the W-4 form you filled out.

Making Work Pay changed the amount withheld at the married withholding rate so that it gives an extra $600 in take-home pay this year, instead of the $400 at the new single withholding rates.

Perlman pointed out that if both spouses have $600 less withheld in taxes, they'll jointly have paid $1,200 less in taxes. But their joint Making Work Pay credits will max out at $800 this year.

And that would create a $400 gap between what they've paid and what they owe on April 15.

There are other factors, but both the IRS and Block offer a solution: Run your pay stub information through a withholding calculator available on their Web sites.

You'll need to enter information from each job's pay stub showing total pay before taxes and how much is withheld for federal, state, Social Security, Medicare, retirement plan contributions, insurance premiums and flexible spending accounts for child care or health care.

Punch in the data and the calculator estimates whether you need to increase your withholdings for the rest of this year to avoid a tax headache in April. You change your withholdings by changing the W-4 on file with your employer.

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Making Work Pay help --www.irs.gov: Listen to an IRS spokesman explain the changes in withholding and describe circumstances that might catch others off guard by the changes.

--www.hrblock.com: Includes the withholding calculator and another showing how much more you're taking home thanks to the changes in withholding schedules.

To reach Mark Davis, call 816-234-4372 or send e-mail to mdavis@kcstar.com.

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