The ‘good news’ first: your take-home pay probably increased recently. This is due to less withholding tax being taken out, as part of the federal stimulus.
The ‘bad news’ now: withholding tax is like small installments toward your end-of-the-year tax liability. So, if your tax rate doesn’t change, but your withholdings throughout the year go down, then you’ll either owe more at the end of the year (or get less of a refund back) all other things being equal. So, while this is ‘no free lunch’ as they say, if you’re getting a refund in 2008, you may consider just going along with this and not upping your withholdings back to the original amount, as some people are urging. After all, refunds are essentially 0% interest loans to Uncle Sam, so this withholdings change may actually be ‘good news’ for you if you receive big refunds.
See a post from September 2007 on ‘0% loans to Uncle Sam’ here: http://magiccoalcity.blogspot.com/2007/09/are-you-making-0-interest-loans-to.html
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