HOW NEW INCOME TAX WITHHOLDING RULES MAY AFFECT YOU
The IRS has issued new tax withholding tables. Although these tables affect everyone, they are designed to benefit working individuals. As a result, if you are no longer employed and are receiving retirement or survivor benefits, you may owe taxes and penalties at the end of the year resulting from too little federal tax withheld. Read on to learn how recent changes in federal tax law may affect you.

Making Work Pay Credit
The American Recovery and Reinvestment Act of 2009, signed by President Obama in February, includes a provision known as the Making Work Pay Credit that allows working individuals and working families to hold on to more of their paychecks by paying less withholding tax. The credit is “paid” to eligible recipients through a reduction in tax withheld from their paychecks during the year. At the end of the year, that “extra” take-home pay is subject to a tax credit. Those eligible for the Making Work Pay Credit may claim the credit on their 2009 and 2010 tax returns.

How This Affects Retirees and Survivors
In accordance with the new withholding tables, LACERA will withhold less tax from your monthly allowance during the remainder of 2009 and throughout 2010. Therefore, if you are no longer working and you receive a LACERA allowance, you could be faced with an unexpected tax liability on April 15. In such case, you may want to adjust the amount LACERA withholds from your monthly allowance.

Adjusting the Amount of Tax LACERA Withholds
You are not required to change your current withholding amount; however, you are free to adjust your withholding elections as often as you wish. If you don't want the withholding tax reduced on your LACERA allowance, you must file a new Form W-4P tax form with LACERA. The form is available on the Brochures & Forms page of lacera.com.

If You Are Employed
If you are earning wages from employment, in addition to receiving a LACERA retirement or survivor allowance, you may be eligible to claim the Making Work Pay Credit — a refundable tax credit of up to $400 for working individuals and $800 for working families (married couples filing a joint return) — on your 2009 and 2010 tax returns.

Economic Recovery Payment: Payment Affecting Social Security Recipients
The American Recovery and Reinvestment Act of 2009 also includes a provision known as the Economic Recovery Payment, which affects individuals receiving Social Security benefits. If you are receiving Social Security benefits, the Social Security Administration automatically sent you a $250 payment in May.

Those who are employed, eligible for the Making Work Pay Credit, and who received the $250 Economic Recovery Payment should understand that one-time $250 payment is a reduction to any allowable Making Work Pay Credit.

For additional information on the Making Work Pay Credit and Economic Recovery Payment, visit www.irs.gov. Consult with professional advisors regarding tax or legal matters; LACERA does not offer tax or legal advice.

6/24/09