After being bombarded by calls from taxpayers (from the Moon Griffon radio show) about how to get the State Personal Income Tax break beginning on January 1, 2009, House Speaker Jim Tucker responded. (See article here.)

According to Tucker: “It’s a matter of will you take the time to go do it,” …“It’s doable.” The (Baton Rouge) Advocate, August 15, 2008.

Perhaps it is doable, but it is highly unlikely. According to the LA Department of Revenue:

“The new income tax rates will be in effect for the entire year but most of us won’t see that until we settle up when we file our tax returns in 2010,” said Leonore Heavey, senior policy consultant for the revenue department. ibid.

What he said

According to a news release from the Speaker’s Office, here’s how one get the fatter paycheck starting on January 1, 2009, promised by Bobby Jindal and Tucker:

In order to begin taking advantage of this tax repeal in January, an individual may fill out and give to his employer a Louisiana Employee Withholding Exemption Certificate or L-4. To determine the correct amount of withholding, a withholding calculator is available on the Louisiana Department of Revenue’s Web site at www.revenue.louisiana.gov. Once on the site, click on “Individuals.” The Withholding Calculator is the second item listed under “File Online Now” which is located in the center of the page. The Withholding Calculator will be updated in the latter part of 2008 to include the legislative changes enacted by Senate Bill 87.

How does it work?

It’s nice to know that getting a fatter paycheck as promised is doable, but how to do it is another thing.

One finds the “Withholding Calculator” here: http://revenue.louisiana.gov/mis/wthcalculator/taxcalc2006.asp

Step one

a. Plug in their Federal Adjusted Gross Income for 2009. Yes, that’s your future A.G.I.

How does one determine that if one is an hourly wage earner or a seasonal employee or for that matter a salaried employee who might get a raise in 2009?

b. Then, fill-in your LA adjustments to your Federal A.G.I.

c. Next, list your Federal Income Tax liability for 2009. Yep, that’s the money you will owe when you file your tax return in April of 2010.

d. Now, insert your refundable and non-refundable LA tax credits.

e. Put in your current withholding for 2009. That would be zero because you are filling out this form in 2008.

f. Insert the number of pay periods. If you are paid weekly that would be 52.

g. Hit the calculator button and you get how much you should have withheld each pay period.

So far so good.

When you get the figure you will get a warning that states:

This is only an estimate of your Louisiana tax and withholdings based upon the information you supplied - this estimate does not prevail over the final results of a properly filed income tax return.

In other words, if you underpay your withholding by 10% or more, you will be subject to a penalty.

Step two

Fill-out a L-4 Form (Attached below.) which increases the number of dependents you claim on your tax return.

There are a couple of problems with this form:

a. There is no relationship between the amount of tax relief one gets with the Stelly Tax rollback and the number of one’s dependents. In other words, how does one know how many extra dependents to claim to get back the exact amount of your tax reduction?

b. If one is single, how does one increase their number of dependents? If one is married with no children, how does one increase their number of dependents? If one has a spouse and children and claims all currently, how does one increase their dependents?

The answer is simple; one must lie to the LA Department of Revenue. However…..

This statement is found on Form L-4: “I declare under the penalties imposed for filing false reports that the number of exemptions and dependency credits claimed on this certificate do not exceed the number to which I am entitled.”

Does it work for you?

I suggest that you follow the above advice from Speaker Tucker and go to your employer or your employer’s accounting department and see how it works for you. If it doesn’t work call Speaker Tucker at: (225)342-7263.

C.B.

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