Hannity falsely claims that tax credit correction amounts to “tax hikes”

Discussing a report by the Treasury inspector general finding that millions of Americans may have received more money from the Making Work Pay tax credit than they were entitled to and that they will have to repay the excess on their 2009 taxes, Sean Hannity falsely claimed that the Obama administration “has found a way to disguise tax hikes as tax credits.” In fact, those taxpayers would not be subjected to any “tax hikes” ; they would need to repay only the amount they were overpaid.

Hannity falsely claims Obama administration “has found a way to disguise tax hikes as tax credits”

From the November 17 edition of Fox News' Hannity:

HANNITY: And another key element of the Obama administration stimulus plan is backfiring in a major way. According to a Treasury Department report, millions of Americans may have to repay part of the Making Work Pay tax credit. Now, you may remember the so-called tax break was one of the White House's top talking points on the stimulus plan.

ROBERT GIBBS (White House press secretary) [video clip]:The Making Work Pay tax credit, which gives $800 for a working households, as I said, helps 95 percent of working families. [...] And it is the most workers to -- as the president said -- the most workers to ever receive a tax cut in the history of this country. [...] During the recovery period, Making Work Pay is expected to put more than $100 billion into the pocket of hard-working Americans.

HANNITY: All right, guess what, Robert? Fifteen point four million Americans may soon have all that money taken right back out of their pockets. Now, the Treasury's inspector general for tax administration says because of this credit, taxpayers may have had too little withheld in 2009 and may be forced to repay the IRS when they file in 2010. Now, somehow the anointed one has found a way to disguise tax hikes as tax credits. Simply amazing.

However, taxpayers will need to repay only amount they were overpaid, not any additional “tax hikes”

Treasury report: About 15.4 million receiving more money than they should from Making Work Pay tax credit. The November 4 report by the Treasury inspector general for tax administration that Hannity cited found that “more than 15.4 million taxpayers could unexpectedly owe taxes for Tax Year 2009 as a result of the Making Work Pay Credit” because the credit “was implemented using new income tax withholding tables” and that taxpayers may have received more money from the credit than they were entitled to. As the Los Angeles Times reported, “A person working two jobs, for instance, could have received twice the amount in tax credits and would have to pay back half of it.”

IRS reportedly said most people will see reduced refund rather than owe money. A November 16 Bloomberg News article reported that workers who received a credit in excess of what they were entitled to “will have to return the difference when they file tax returns” and that “to the degree any workers are affected, IRS spokeswoman Michelle Eldridge said, most people will see a reduced refund in 2009 instead of owing money. About three-quarters of Americans got refunds that averaged $2,836 as of Nov. 6, she said.” A November 17 Washington Post article similarly reported, “While the inspector general's report estimated that millions of taxpayers will be negatively affected by the tax credit, a Treasury official said the vast majority will only receive a slightly reduced refund and not an out-of-pocket tax liability on April 15.”

Taxpayers facing penalties due to correction can ask IRS to waive penalties. According to the Treasury inspector general's report, some taxpayers who received a larger credit than they are entitled to “may have their taxes underwitheld to the extent that they will be subject to the ES [estimated tax] penalty.” The Associated Press reported on November 16 that “the IRS estimated that about 65,000 taxpayers could face penalties for not withholding enough taxes in 2009 because of the Making Work Pay tax credit. However, those taxpayers will be eligible to have the penalty waived, IRS spokeswoman Michelle Eldridge said.” In its response to the Treasury report, the IRS said, “For the upcoming tax filing season, the IRS will alert taxpayers that they may qualify for a waiver and provide instructions on how to request a waiver of the penalty.”