Making Work Pay Credit
Thursday, March 10th, 2011
The Making Work Pay Credit is an income tax credit available to most taxpayers with earned income. We’ve talked to several folks who were unfamiliar with the Making Work Pay Credit, which is available only on your 2010 individual tax return. One of them was surprised when her refund was $400 more than she calculated, and she wanted to make sure the IRS was not mistaken before she cashed the check!
The credit is calculated as 6.2% of earned income, which for most taxpayers is W-2 wages. Self-employment income (or loss) also is factored into the earned income total. The maximum credit is $400 per person; married couples filing joint returns may be eligible for up to $800. If your earned income is more than $95,000 for single filers or $190,000 for joint filers, the credit is phased out. You are not eligible for the credit if you can be claimed as a dependent on someone else’s return.
The Making Work Pay Credit is claimed in the Payments section of the tax return, rather than the Taxes and Credits section. This may be why some filers miss claiming the credit. Form 1040 (long-form) filers also must submit Schedule M to calculate the credit. Make sure you claim it if you are eligible.
One friend who filed her own 1040-EZ return overlooked the Making Work Pay Credit, and she was surprised when her refund was greater by $400. The IRS had recalculated her overpayment to include the credit. It’s nice to know that the IRS computer adjusted her return, but will it catch them all?
As always, there are details that we cannot cover here, so check with your tax adviser to find out how the Making Work Pay Credit applies in your particular situation.