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Federal Withholding Q and A

by on February 10, 2011

The AEP Human Resources Service Center has been receiving a number of questions from AEP retirees concerning the change in federal withholding on annuity payments. Here is a brief question and answer to help explain the differences.

Q. Why is my federal income tax withholding on my February 2011 pension annuity payment less than my January 2011 payment?

A. The 2011 Federal Tax tables were not available prior to the issuance of the January 2011 annuity payments. Also, the new 2011 tables reflect an inflationary increase and no longer include the “Making Work Pay” credit that was part of the American Recovery and Reinvestment Act of 2009 and included within the 2009 and 2010 tax tables.

  • With a marital status of “Married” then the Making Work Pay Credit was $800 in 2010, thus your withholding in 2011 would increase by the $800 for the year since the credit has expired.
  • With a single status of “Single” then the Making Work Pay Credit was $400 in 2010, thus your withholding in 2011 would increase by the $400 for the year since the credit has expired.

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