The Internal Revenue Service is cautioning some taxpayers that they could end up with far less withheld during 2009 than their tax liability suggests. This is due to the $400 reduction in normal withholding by employers for tax year 2009.

If you work 2 jobs, then both employers will be reducing your withholding by $400, even though you are eligible for only one $400 credit. What this means is that at the end of the year, you could find that you owe more, or that your refund is $400 less than you anticipated.

The Making Work Pay Tax Credit was designed to get the money into taxpayers’ hands during the tax year so that they could spend it and stimulate the economy. This is different from the stimulus payments previously received which arrived after the tax year.

For taxpayers with a single source of income, there will likely be nothing to worry about. However, those working multiple jobs, or those receiving a pension could be affected.

For more information about the potential withholding problems that taxpayers may experience, please see IRS Form 4766 which outlines the various situations where adverse tax consequences could occur.