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How Does the Making Work Pay Tax Credit Work?
The Making Work Pay tax credit is only available in 2009 and 2010, for returns filed in 2010 and 2011. It gives a $400 tax credit to individuals and an $800 tax credit to individuals who earn a paycheck throughout those years. In most cases, employers will make the correct adjustments to withholding status to ensure the tax payer earns the additional money throughout the course of the year. For self employed individuals, adjustments may be made to estimated tax payments to account for this credit, or it can be filed at the end of the year.
For tax payers who did not receive the entire value of the credit through the withholding adjustments reported on the W-2, the remainder of the credit may be claimed at the end of the year when filing. In either case, the full credit will be available to everyone who earned a paycheck for 2009 and 2010. Anyone who earns $75,000 to $95,000 will receive a reduced credit. Couples earning between $150,000 and $190,000 will receive a reduced credit. Those earning more than $95,000 or $190,000 will not receive the credit at all.
Those who do not have valid social security numbers cannot apply for this credit. Anyone who gets social security or is a retiree will not receive the credit, but instead will receive a $250 credit in the Spring.
Tax payers with two jobs should be sure both employers are not taking out too much to account for a credit from each job, or else they could end up owing taxes. Make sure you're taking out enough for taxes if you have two jobs or are self employed to avoid this problem.
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Do I Have to Pay Back My Making Work Pay Tax Credit?
Maybe, but not exactly. Tax payers won't have to pay it back directly, though it may effect the next tax return, slightly reducing the refund received. Working retiree's will have to pay back their $250 check. Anyone who is claimed on their parents return will not receive a credit, but will see the effect of less withholding, and therefore may end up paying it back the following year if they do their own return.
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This article is intended for information purposes only and should not take the place of advice from a tax professional.