- Days left

The Hidden $1,000 Bonus Obama Put in Your Paycheck


The Hidden $1,000 Bonus Obama Put in Your PaycheckYou remember what you did with the big bucks you saved last year thanks to the payroll tax cut, right? You don't? Well, you're not alone.

According to a survey by the National Foundation for Credit Counseling, fully 66% of Americans didn't even notice that their paycheck had been padded. A New York Times/CBS News poll supports that, showing that most people (53%) think that President Obama has kept taxes the same for the majority of Americans, while 24% think he has raised them, and only 12% are aware that he has lowered them.

While many have been hoping for some kind of tax cut from the fellows running for president, we've already been enjoying one. The payroll tax cut that President Obama enacted through The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced the bite taken out of our paychecks taken for Social Security by two percentage points (from 6.2% to 4.2%) . For the average American family, that amounts to about $1,000 per year.

Where It Went

The NFCC survey also revealed how those who were aware of the hidden bonus in their paychecks put the surplus funds to use in 2011:

  • 53% paid down their debt
  • 24% paid off past-due bills
  • 12% increased contributions to retirement accounts
  • 9% saved most of the money
  • 3% treated themselves "to something special"

Those who weren't aware of the bonus probably didn't fritter away the money. According to the Bureau of Labor Statistics, the Consumer Price Index rose 3% during 2011, with food prices rising nearly 5%, gasoline rising 10%, and fuel oil surging 18%. So whether you noticed the bump in your paycheck or not, some of it probably helped you fill your car with gas, heat your home, or put food on the table.

Be Proactive -- and Prosper

The good news is that it appears that this tax break will probably stay in effect through 2012, so you'll likely enjoy that bonus in your paycheck again.

Now that you're aware of it, plan for it so that you put it to the best use. Those in the survey who noticed the savings did just that. Most paid down debt, which is a terrific thing to do. If you can trim $1,000 from the credit card debt that you're being charged 20% interest on, you'll save yourself an additional $200 a year. Paying off overdue bills might prevent your credit rating from getting dinged. That's a big deal, since these days it's not just lenders who care about your credit score, but many potential landlords, insurers, employers, and others, as well. And the worse your score, the higher the interest rate you'll be charged whenever you borrow, which adds up ... and up.

Increasing your retirement-account contributions is also a smart move to make with the extra paycheck padding. Sock away an extra $1,000 today and if it grows at 8% annually, on average, over the next 20 years, it will turn into more than $4,500.

Funneling the money into an emergency fund is another wise financial step. It's best to have easy access to at least three to six months' worth of living expenses, in case you lose your job or face some other financial calamity.

These moves are smart for your payroll tax break -- and also for any other windfall you may receive or just for the money you are able to sock away week by week and month by month. Expecting a sizable tax refund soon? Plan to put it to work effectively for you.

Increase your money and finance knowledge from home

How to Avoid Financial Scams

Avoid getting duped by financial scams.

View Course »

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum


Filter by:

You know where my extra money went? To the great State of Illinois. Right after this "tax break", the state raised income taxes 66%. So, not only did they take break, the took a little extra. So no, I didn't notice a bump in my check

April 09 2012 at 3:42 PM Report abuse rate up rate down Reply

Twenty bucks a week isn't equal to "Sock away an extra $1,000 today and if it grows at 8% annually, on average, over the next 20 years, it will turn into more than $4,500."
Many people don't have an extra grand up-front to "sock away...today", and even if they did, it's a big "IF" to get an 8% annual return.

April 09 2012 at 12:51 PM Report abuse rate up rate down Reply

Would someone tell me how anyone would have any extra money with the Consumer Price Index up 3% during 2011, food prices rising nearly 5%, gasoline rising 10%, and fuel oil surging 18%????

April 09 2012 at 9:23 AM Report abuse rate up rate down Reply
Terry Wisland

Carol, please stop the belief that social security is being shortchanged. The 2% is being made whole from general funds. The so called social security fund is not effected by this tax cut. Obama used the social security tax as a way to get the tax cuts mainly to the middle class. It saved me 3 times as much as Bush's tax cuts in 2001, mainly becuase I'm single and had about $30,000 taxable income.

April 08 2012 at 11:13 PM Report abuse rate up rate down Reply
Terry Wisland

Workers in Illinois never noticed the drop in social security tax because the State of Illinois raised the state income tax also by 2% at the same time the Obama tax cut began. If Obama's tax cut is not extended in 2013, I'm sure Obama will get blamed for raising taxes in Illinois.

April 08 2012 at 11:10 PM Report abuse rate up rate down Reply
Carol Sowell

People fail to realize that this so called "tax cut" is actually Defunding their own Social Security retirement. Add to that the Very HIGH UNemployment numbers throughout Obama's term and it is obvious that the Social Security retirement will go belly up even sooner than forecast. His touting that the payroll tax cut will save the average worker over a thousand dollars a year is pie in the sky. You have to know what he considers "average" and I'd bet it's a lot different than most paychecks now. Obama's 2013 budget will raise taxes and will hurt corporations, but will also Hit Hard the small business owners. Taxes will be raised across the board because he won't need to worry about reelection. Expect taxes to rise on everything and what isn't taxed will have a "fee." He will feel he can do Anything he wants! And he will. Beware a second term, my friends.

April 08 2012 at 9:37 PM Report abuse rate up rate down Reply

My personal opinion is - this is a LIE! My husband and I checked his payroll records and his net income did not increase one dime during 2011 until he got his raise in late July. Who do the politicians think they are fooling? I guarantee you - if he got an increase in his take home pay we'd notice it because we have to make every dime count. If they want to stimulate the economy - do the one time stimulus like was done a few years ago. We'd probably take a short vacation and spend the money to help the economy if we got it in a lump sum.

April 08 2012 at 4:36 PM Report abuse rate up rate down Reply

More theft from the Social Security fund to give tax breaks to the bottom 47% of wage earners who already pay no federal income taxes. And if the fees they have tacked on to mortgage applications to make up for it doesn't, then OChavez will just borrow more from China.

April 08 2012 at 3:50 PM Report abuse +1 rate up rate down Reply
Tom Townsend II

The second part of this lesson is that when the citizens available to serve in the military had been so reduced by the Senate that there were not enough citizens left to fill the ranks, they turned to hiring a massive body of mercenaries to serve. (Like with the Soviet Union’s KGB, Mau’s backers and Hitler’s Brown Shirts, enter obama’s Fema Corps and his idea of trading tax payer funded college and military service for illegal alien citizenship over immigration laws enforcement.) If we add to this the obama and democrat supported 99%ers, the likely (for those of us who understand espionage/government staged operations standard procedures and government generated propaganda methodology) secretly government backed, monitored and enabled “Anonymous,” and private deals with the UN, Muslim Brotherhood and their gains made since the Clintons were in the White House and combine all of this with obama’s executive orders, divisive and class warfare methods in conjunction with the laws, policies and many assorted activities quietly undertaken largely out of sight of the citizens of this republic while the media distracts us without reporting actual news, and we have all the makings for a government staged and orchestrated coup under the guise of monitoring (under Echelon and now, Stellar Wind), rounding up (under the current government home / business invasion and indefinite detention laws) and taking any and all perceived enemies (aka obama enemies lists/talk show hosts/those of the Tea Party not liked by this regime/military and veterans and a whole host of others. The writing is on the wall. Are we, the actual voting citizens of this (so far) free and proud republic going to stand by and permit this to happen? Understand, I am not advocating these events, only commenting on my knowledge regarding the lessons of history and my observations regarding current events. Thank you.

(Part 04 of 04)

April 08 2012 at 3:22 PM Report abuse rate up rate down Reply
1 reply to Tom Townsend II's comment
Lukas Clems

WOW.Thank you for your lesson in ignorance. Bwahahahahaha.
The scary part : you really believe what you typed

April 09 2012 at 3:02 PM Report abuse rate up rate down Reply
Tom Townsend II

Now, obama and his regime has even gone so far as to label veterans, U.S. Military returning from over seas and U.S. Military in general under Homeland Security directives as likely domestic terrorists. (Not surprising since even Bill and Hillary Clinton were crass enough to even dismiss the Marine driver of the Presidential car when Chelsea became incensed at the mere idea that a member of the military was driving them around with the clearly anti-military beliefs instilled in her by her parents.) The lesson here is, one that comes from Ancient Rome. As mentioned above, the dictators of Rome (Emperors) and their Senate, had similarly mistreated their military. Under Roman law, no armed military body of men was permitted inside the walls of Rome without permission of the Senate. The situation had become intolerable to the point that citizen soldiers gone on campaign for Rome had returned having (in some cases) fought without promised pay and then found that their wives and families had been taken as slaves and sold and their homes confiscated while they were away. Destitute, they had even, in many cases, lost their basic rights as citizens. (Does the treatment sound a bit uncomfortably similar as far as how (supposedly) our government (especially the Democrat part of government) looks at our men and women in the armed forces?) The two results of this was that, first, a Roman general, later dictator, was so upset at the treatment that he led his armed soldiers into Rome to demand and receive what was due to his men and refused to leave until the Roman Senate complied.

(Part 03 of 04, sorry folks, in breaking my comment into a multi-part document, I have had to add another part in order to get my whole comment posted.)

April 08 2012 at 3:22 PM Report abuse rate up rate down Reply