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Both. A new tax credit called the Making Work Pay Credit was enacted. This will reduce the amount of tax you owe at the end of the year based on a percentage of your earned income. To reflect this change, the withholding amounts were reduced.

Some people who may turn out not to be eligible to receive the credit may see their withholding drop, too. For example, the withholding tables for pension payments have been revised the same way even though pension income is not earned income.

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16y ago

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