The Making Work Pay credit, one of the key tax provisions included in the American Recovery and Reinvestment Act of 2009, will result in more take-home pay for millions of American workers.
Available for tax years 2009 and 2010, the Making Work Pay credit is 6.2 percent of a taxpayer’s earned income with a maximum credit of $800 for a married couple filing a joint return and $400 for other taxpayers, but it is phased out for higher income taxpayers. According to the IRS, most workers will qualify for the maximum credit. Because the credit is refundable (people can get it even if they owe no tax), most low-income workers will also qualify for the full credit.
Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment. Payments will appear in smaller increments in the paychecks of taxpayers. The IRS urged employers to implement this process on April 1, 2009.
Eligible workers will get the benefit of this change without any action on their part. This means that workers don’t need to fill out a new W-4 withholding form to get the Making Work Pay credit reflected in their take-home pay. 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.
Eligible workers will get the benefit of this change without any action on their part. This means that workers don’t need to fill out a new W-4 withholding form to get the Making Work Pay credit reflected in their take-home pay. 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.
According to CNN Money, taxpayers may want to be careful that they are not getting more money then they are entitled to through the Making Work Pay credit, which may affect future tax returns. Specifically, people that work multiple jobs may want to ensure that enough withholding is held to cover the tax for the combined income. Also, married couples that file jointly may want to check that they will not surpass the $800 allotment. The IRS has an online calculator at www.irs.gov/individuals/page/0,,id=14806,00.html to assist taxpayers in figuring out the amount of withholding.
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