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Wednesday, April 01, 2009

My Lucky Day

Today is April 1st and is the time for traditional pranks to be played on people. There are some delicious ones out there today, played by our friends at Google, at Yahoo, and many others. One place where there is no joke is at PERS. Today is "payday" for all us retirees, and most may have noticed that the "take home" amount of their PERS Benefit Check increased this month. This isn't a joke. It is a result of the "making work pay" stimulus program from Congress. This results in a refigured federal withholding deduction that credits in $400 annually ($800 for marrieds) to the withholding tables. The result is a lower federal withholding.

That's the good news. Now for the bad news. Retirees aren't entitled to the money. You will have to repay in next April when you file your 2009 income taxes. This quirk arises because PERS must treat your monthly benefit as taxable income for withholding purposes, but the "Making Work Pay" stimulus package specifically excludes pension benefits (except Social Security, which gets its own credit next month). So, if you want to avoid a tax hit for 2009, you might want to think about changing your withholding exemptions (IRS Form W-4) and submit it to PERS. I figured that if you do it for the second half of 2009, you should come out pretty close.

If you don't like this, it isn't PERS' problem. They have to follow the IRS rules, even when they are obviously contradictory as this one is. Enjoy all the other legitimate "jokes" out there. They are legion and fun.

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