Understanding the Making Work Pay Credit
January 26, 2010
Do you remember last April when your paychecks got a little fatter? That was due to the Making Work Pay Credit which was the government’s 2009 method of stimulating the economy. This credit is similar to 2008’s Recovery Rebate Credit in that it was a way for our federal government to get more money in your pocket in hopes that you would spend it to stimulate our economy. Rather than sending out paper checks or depositing money in your bank account, this credit was given to you through fatter paychecks.
Now when you file your 2009 tax return you will attach a Schedule M to calculate this credit. The credit will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns. The credit phases out if your AGI exceeds $75,000 or $150,000 for married filing joint.
So will the MWPC make your 2009 tax refund bigger. First of all if you don’t work you won’t get the credit. Retirees will get a reduced $250 credit. Second, your refund is a function of the tax withheld from your paychecks in 2009. Some taxpayers may be dismayed to learn that the withholding adjustment was more than the credit and now their refund is smaller than expected.
Now is also a good time to determine if your 2010 withholding is enough to cover your expected 2010 tax. Having too little tax withheld from your paycheck will result in a smaller refund or a balance due at filing time. The Making Work Pay Credit is also in effect for 2010. The adjustment to withholding is spread out this year over all 12 months rather than 9 months. Ask your tax professional to help you determine if your 2010 withholdings are going to cover your 2010 tax. You can also perform a quick check of your withholding using the interactive IRS Withholding Calculator.
Also find out more about the American Recovery and Reinvestment Act of 2009.
January 26, 2010 at 9:26pm | Permalink
I like the idea of getting more money on the return. Good thing I have a good accountant.
December 20, 2010 at 9:16am | Permalink
Is the same true about the new payroll tax just passed?
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May 26, 2011 at 2:06am | Permalink
Paying taxes is like a hot room without air conditioners. So uncomfortable.
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The people should have stable earnings for taking credit. It’s necessary for banks.
August 12, 2011 at 6:50am | Permalink
The Making Work Pay tax credit will need to be claimed on the 2009 and 2010 tax returns to ensure that the amount of the credit is properly calculated. This is true even though tax withholding is being adjusted now to reflect this new tax credit. The IRS explains it this way, “Though all eligible taxpayers will need to claim the credit when they file their 2009 income tax return next year, the benefit will generally be spread out over the paychecks they receive beginning this spring and continue until the end of the year.”
August 18, 2011 at 7:15pm | Permalink
I just finished my taxes today and don’t quite understand why my refund was much larger than expected. I’m wondering if I filled out something incorrectly. What exactly is the “Making Work Pay Tax Credit”? Who qualifies for it?
August 22, 2011 at 8:12am | Permalink
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October 1, 2011 at 2:09am | Permalink
In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act of 2009 provided a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns. Most wage earners benefited from larger paychecks in 2009 and 2010 as a result of the changes made to the federal income tax withholding tables to implement the Making Work Pay tax credit.
October 16, 2011 at 10:19pm | Permalink
So testament the MWPC neaten your 2009 tax refund large. No. of all if you don’t line you won’t get the title. Retirees testament get a low $250 commendation. Gear, your refund is a answer of the tax withheld from your paychecks in 2009. Whatsoever taxpayers may be dismayed to instruct that the withholding standardization was author than the assets and now their payment is smaller than expected.
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