Making Work Pay Tax Credit Eligibility

A refundable tax credit for 2009 and 2010 entitled Making Work Pay Tax Credit was created by the American Recovery and Reinvestment Act of 2009 and the following guidelines will help you determine if you have Making Work Pay Tax Credit eligibility. Your earned income determines the amount you will receive and you must file for the credit on your 2011 tax return for 2010.

Things you'll need:

• Income under $75,000 (individuals) or $150,000 (couples)
• Schedule M form

1. Income The Making Work Pay Tax Credit is available for individuals with incomes under $75,000 and couples with income under $150,000. For incomes from $75,000 to $95,000 (individuals) and $150,000 to $190,000 (couples), the credit is reduced and is completely phased out from that point.
2. Percentage The Making Work Pay Tax Credit is equal to 6.2 percent of your income for up to $6,451 for individuals and $12,903 for couples to receive the maximum payments. The maximum of $400 ($800) is reached at this income.
3. Reduced Income Taxes Many workers received reduced federal income tax during 2010, so it is important to fill out a Schedule M to figure out the amount of your Making Work Pay Tax Credit. You may already have received the full credit with the reduced tax on your paycheck. If you did receive reduced taxes, you still must claim the credit on your income tax return to reduce your tax liability.
4. Retired or Disabled If you were retired or disabled, you may have gotten an economic stimulus payment of $250 during the year. If you worked at some time during the year and are eligible for the Making Work Pay Tax Credit, the amount of your stimulus check must be subtracted from the amount of Making Work Pay Tax Credit you are eligible for.
5. Self-Employment People who are self-employed may decide to receive the credits early to reduce their self-employment tax. You still must claim the credit to reduce you tax liability.
6. Social Security Number You must have a valid Social Security number and be a resident in order to claim the tax. Nonresident aliens are not eligible for the credit.
7. Dependent If someone else is claiming you as a dependent on their tax return, you are not eligible for the Making Work Pay Tax Credit. An example of this would be a student who is being claimed on their parents' tax return.