New Tax Credit - Making Work Pay

You may be able to claim a new tax credit on your 2009 tax return if you worked during the year. The making-work-pay tax credit gives up to $400 to individual filers and $800 to those who are married filing jointly. In addition, the new tax law regarding making work pay means fewer taxes are taken out of each paycheck.

When you pick up your tax filing papers, look for Schedule M. You can also see the form online by visiting www.irs.gov and searching for schedule M. This is the form you'll need to take the tax credit. The instructions are fairly straight forward. For individuals who worked and earned over $6,451, but less than $75,000 the full credit of $400 is applied. If you made less, you will multiply your adjusted gross income (agi) by .0062 or 6.2%. For those who file married filing jointly, the amount is doubled. To take the credit, fill out Schedule M and mark the corresponding line on your 1040 form. You cannot take the credit if you earned over $95,000(190,000 for married couples filing jointly).

For those receiving social security, supplemental security income, railroad retirement benefits, or veterans disability payments or pension benefits who received a $250 economic recovery payment in 2009, you may still be able to take the credit, but the making work pay credit will be reduced by $250.

Also there is a credit for former government workers who don't receive social security benefits. This new tax credit is called the government retiree credit. It is also filed by using schedule M. Taking the government retiree credit reduces your making work pay credit. The government retiree credit is designed to give retired government workers the equivalent of the economic recovery payment that was issued earlier in the year.

The making work pay tax credit does mean fewer taxes are taken out of each paycheck. You may want to adjust your W4 filing status to ensure you don't owe taxes at the end of the year, especially if you work more than one job.

I am not a licensed tax professional. Researching new tax credits and laws is something I enjoy, and hopefully, this will help make the new credit more clear for you. This is a new credit, so many may not realize they qualify for it. I recommend sharing your new knowledge of this credit with friends and family. They will thank you for it!