Making Work Pay Credit

Why is it important now?

You may have more money to spend each paycheck

Most eligible individuals will not have to do anything to begin receiving the benefits of the Making Work Pay tax credit. The credit is being provided to eligible employees in the form of reduced withholding from your wages and an increase in your take-home pay. To ensure that the credit is applied correctly based on your individual circumstances, you may want to review the level of federal withholding applied to your income. This is especially important if you have more than one job, if you and your spouse both work, or if you are a retiree with earned income. Click here to use the IRS Withholding Calculator.

Many U.S. workers will qualify as "eligible individuals"

The tax credit is available to eligible individuals. This includes many U.S. employees and self-employed individuals. The Making Work Pay Credit is not available to retirees (unless they receive any earned income), individuals who can be claimed as a dependent on another person's tax return, trusts or estates, or non-resident aliens. You also must provide a valid Social Security Number in order to qualify for the tax credit. In the case of a joint return, one of the individuals must provide a valid Social Security Number.

You may see higher wages by April 1, 2009

For employees, the Making Work Pay credit will generally be provided in the form of increased take-home pay spread across the year's paychecks for 2009 and 2010. The IRS has issued new Wage Withholding Tables and employers have been instructed to begin using them by April 1, 2009. If you are self-employed, eligible tax credits can be claimed on your 2009 and 2010 federal tax returns. Consult your tax advisor for more details.

The tax credit applies for 2009 and 2010

The Making Work Pay tax credit applies for the 2009 and 2010 federal tax years. If you qualify for the credit, it should be claimed on your federal tax returns. The maximum available credit is the lesser of 6.2% of earned income or $400 ($800 for joint-filers). Individuals with AGI in excess of $95,000 for single-filers, or $190,000 for joint-filers, are not eligible for the tax credit.

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IRS MWP FAQ

Straight from the Source

Click here to read more information about the Making Work Pay Credit from the IRS.

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The information contained herein is drawn from sources that are believed to be reliable, but it cannot be guaranteed as to completeness or accuracy. The content is not intended to be, and should not be relied upon as, tax, legal, or financial planning advice. Consult your tax advisor for specific advice.

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