Making Work Pay Credit
The economic stimulus act (“American Recovery and Reinvestment Act of 2009,” or ARRA) created the “Making Work Pay” (MWP) tax credit, an Obama campaign proposal to offset part of the Social Security taxes paid by low and middle-income workers. ARRA made the credit effective only for 2009 and 2010. The president proposes to extend the credit for one year through 2011 at an estimated cost of $61 billion.
Five Important Facts about the Making Work Pay Credit
Many working taxpayers are eligible for the Making Work Pay Tax Credit in 2010. The credit is based on earned income and is claimed on your 2010 tax return when you file your taxes in 2011.
On their website, the IRS lists five things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.
1. The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
2. Through larger paychecks, reflecting reduced federal income tax withholding during 2010.
3. Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
4. Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.
5. You cannot take the credit if your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return, you do not have a valid social security number or you are a nonresident alien.