How Does The Making Work Pay Tax Credit Work?
The Making Work Pay Tax Credit is being implemented as a result of the changes that have been made to the federal income tax withholding tables. Some taxpayers may find that the changes which have been built into the withholding tables result in less tax being withheld throughout the year than they would prefer be withheld. The Making Work Pay credit is a provision of the American Recovery and Reinvestment Act and will provide a refundable tax credit to working individuals or married taxpayers who file joint returns.
Eligibility
If you are not eligible for the Making Work Pay tax credit, changes to your withholding could end up meaning a smaller refund next spring. A very small number of taxpayers who normally receive small returns each year, may discover that they now owe a small remaining tax for the year, rather than receiving money back. Self-employed taxpayers can be eligible for this credit as well. Check the required conditions to determine whether you can claim this tax credit or not. Pay close attention to your withholding throughout the year. If you feel that your withholding is insufficient to cover your expected tax liability for the year, request a new W-4 withholding worksheet and adjust your withholding information so that it reflects a withholding rate that you are comfortable with.
Especially vigilant should be:
Pensioners
Married two income couples
Individuals with more than one job or source of income
Dependents
Some Social Security recipients who have jobs
Workers who do not have a valid Social Security Number
The credit and its effect on your tax liability
The value of the Making Work Pay tax credit varies dependent upon your filing status. For single filers it is normally a maximum of $400 if you are employed. The maximum for married couples is normally $800. However whichever status you file under, the Making Work Pay tax credit will be reduced by the value of any Economic Recovery Payment (Stimulus check). Social Security recipients and Railroad or Veteran’s retirement benefit recipients will only get a credit of $250 or less each.
Related posts:
- What Is The Earned Income Tax Credit?
- Why Use a Tax Credit Instead of a Tax Refund?
- How Is The Amount Of Tax Credit Determined?
- Is A Tax Credit The Same As A Tax Deduction?
- Can I Claim The Homebuyer Tax Credit If I Just Bought A Home?