Contributed by:
Oppenheimer & Co. Inc.
Daniel J. O’Dell, AAMS®
Branch Manager
Park 80 West – Plaza One
Saddle Brook NJ 07663
201-845-2301
daniel.o’dell@opco.com
Do you qualify for the new Making Work Pay tax credit?
The American Recovery and Reinvestment Act of 2009, signed into law February 17, 2009, created a new refundable personal income tax credit for 2009 and 2010–the Making Work Pay tax credit. For those who qualify, this credit equals 6.2 percent of earned income, up to $400 ($800 for married couples filing jointly).Do you qualify? Most working Americans will, but nonresident aliens and individuals who can be claimed as a dependent by someone else aren’t eligible (estates and trusts aren’t eligible, either). And to claim the credit, you’ve got to include a valid Social Security number on your tax return; married couples filing jointly have to include at least one valid Social Security number. Assuming that you make it past these initial hurdles, whether you benefit from the credit depends on your income level.If your modified adjusted gross income (MAGI) is greater than $75,000 ($150,000 if you’re married and file a joint return), the credit that you’re eligible for is reduced. If your MAGI is $95,000 ($190,000 if you’re married and file a joint return) or more, you don’t qualify for the credit at all. And there’s one more factor–if you receive a $250 economic recovery payment under the American Recovery and Reinvestment Act because you were eligible for Social Security, Railroad Retirement, or veterans benefits, the amount of the Making Work Pay credit you’d otherwise be entitled to is reduced by that amount.If you qualify for the credit, you don’t really have to do anything. The IRS has issued new federal income tax withholding tables that reflect the Making Work Pay credit. When your employer begins using the new tables, you’ll see an increase in your take-home pay. Don’t expect to see the full amount of the credit in one paycheck, though. The credit is effectively being paid to you evenly over the balance of the year. (If you’re self-employed, qualify for the credit, and don’t want to wait until you file your federal income tax return, you’ll have to adjust your quarterly estimated tax payments.)One final word of caution–special rules may apply if you live in one of the U.S. possessions, including Puerto Rico and the Northern Mariana Islands.