Tax Talk With Jim – The ‘Making Work Pay’ Credit
By James A. Horchak, Esq., C.P.A.
Have you noticed more money in your paycheck lately? This increase was the result of the “making work pay credit.” This federal tax credit provides up to $400 for individuals and up to $800 for married taxpayers filing joint returns for 2009.
The credit is designed to give you more money in your pocket today. It is an advance of a credit you may be entitled to claim when you file your income tax return. However, your individual circumstances dictate whether the taxes withheld from your paycheck will satisfy your ultimate tax obligation. For example, the credit will not apply if you are single and earn more than $75,000, or married and jointly earn in excess of $150,000. Other instances where the credit becomes complicated are if your marital status changes during the tax year, if you change jobs, or if you or your spouse have multiple jobs.
If you are self-employed or have other earned income not subject to withholding, you will be entitled to claim the credit on your 2009 tax return.
It is a good idea to consult the IRS website withholding calculator and, if necessary, submit a revised Form W-4 to your employer(s) to ensure that enough tax is withheld. The IRS withholding calculator can be found at http://www.irs.gov/individuals/article/0,,id=96196,00.html