President Barack Obama’s “Making Work Pay” massive economic recovery package enacted in February, might be more appropriately names “Making Workers Pay” after American’s enjoying these tax credits discover they may have to pay them back next April.

Obama has boosted the tax credit as one of the big achievements of his first 100 days in office, stating that 95 percent of working families will qualify in 2009 and 2010.

The tax credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more than $95,000 and couples making more than $190,000 are ineligible.

The tax credit was designed to help boost the economy by getting more money to consumers in their regular paychecks. Employers were required to start using the new withholding tables by April 1, 2009.

So what’s the problem with the plan? Most workers started receiving the credit through small increases in their paychecks in the past months. But the new tax withholding tables issued by the IRS may cause millions of taxpayers to get more money than they are entitled to under the credit, and this money will have to be repaid next April.

The Internal Revenue Service (IRS) acknowledges these problems with the withholding tables but has done little to warn average taxpayers to date.

Problems for Single Workers with Two Jobs:

A single worker with two jobs making $20,000 a year at each job will get a $400 boost in take-home pay at each of them, for a total of $800. That worker, however, is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time – either through a smaller refund of a payment to the IRS.

Problems for married couples with spouses who both work:

A married couple with a combined income of $50,000 is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them both a $600 boost – for a total of $1,200. (There were 33 million married couples in 2008 in which both spouses worked. That’s 55 percent of all married couples, according to Census Bureau data.)

Problems for college students:

A single college student with a part-time job making $10,000 would get a $400 boost in pay. However, if that student is claimed as a dependent on a parent’s tax return, they don’t qualify for the credit and would have to repay it when they file next year.

Problems for retirees:

The Social Security Administration is sending out $250 payments to more than 50 million retirees in May as part of the economic stimulus package. The payments will go to people who receive Social Security, Supplemental Security Income, railroad retirement benefits or veteran’s disability benefits. The payments are meant to provide a boost for people who don’t qualify for the tax credit. However, they will go to retirees even if they have earned income and receive the credit. Those retirees will have the $250 payment deducted from their tax credit – but not until they file their tax returns next year, long after the money may have been spent.

Retirees who have federal income taxes withheld from pension benefits also are getting an income boost as a result of the new withholding tables. However, pension benefits are not earned income, so they don’t qualify for the tax credit. That money will have to be paid back next year when tax returns are filed. (More than 20 million retirees and survivors receive payments from defined benefit pension plans, according to the Employee Benefit Research Institute. However, it is unclear how many have federal taxes withheld from their payments.)

Tax Tip: Check your federal withholding to make sure sufficient taxes are being taken out of your paychecks. If you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers. If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a form W-4. The IRS has an online withholding calculator to help you check your withholding amounts. You can find this calculator at www.irs.gov or you can call your accountant or tax attorney to ask for assistance with adjusting your withholdings.

This information is provided by the tax professionals at Kingman Winslow LLC