New for 2009: Differential Wage Payments & Withholding

Keep this new rule about differential wage payments and withholding  in mind when you are figuring out your estimated tax payments.

According to the IRS, beginning in 2009:

Differential wage payments made to active members of the uniformed services are treated as wages and income tax must be withheld.

This new rule was part of the Heroes Earnings Assistance and Relief Tax Act of 2008.

In case you are unfamiliar with the term, “differential wage payment” means any payment which:

1. is made by an employer to an individual with respect to any period during which the individual is performing service in the uniformed services (as defined in chapter 43 of title 38, United States Code) while on active duty for a period of more than 30 days, and
2. represents all or a portion of the wages the individual would have received from the employer if the individual were performing service for the employer.