Making Work Pay Credit not likely to be extended

U.S. Capitol buildingCongress' effort to stimulate the economy included pushing through a series of tax breaks in 2009. The centerpiece of the legislation was the Making Work Pay Credit, which was intended to provide tax relief for working and middle class families. It may not last beyond this year.

The idea was to allow more taxpayers to have cash in their pocket during the year, as opposed to at tax time, by adjusting the amount of earned income withholding.



Under the current legislation, the maximum allowable credit is $400 for individuals and $800 for married taxpayers filing joint returns. The credit is figured at a rate of 6.2% of earned income. It phases out for individual taxpayers with modified adjusted gross income over $75,000 -- or $150,000 for married couples filing jointly; the phase out is at 2%, which means taxpayers who earn more than those limits still qualify for the credit, but will not receive the full amount. The credit is also refundable, so if you are due a credit that's larger than your tax liability, you qualify for a refund.

That's the good news. The bad news is that those taxpayers who benefited from the Making Work Pay Credit in 2009 and 2010 tax years should enjoy the extra dollars now, because the credit is likely not being extended to 2011 or beyond. As Congress battles it out over extending the Bush tax cuts, they also have to consider the cost of extending other tax credits. The Making Work Pay Credit is expected to cost an additional $600 billion over 10 years. The argument against extending the credit is that it's simply too expensive. Those in favor of extending the credit point out that the primary audience, the working middle class, has been the hardest hit during the recession.

It's not just a question of economics; it also boils down to political capital. The push to extend the so-called "Bush tax cuts" has gathered momentum over the past few months, while the notion of extending the "Obama tax cuts" has barely garnered any attention at all. The only thing that is clear is, semantics and politics aside, taxes are likely edging up next year.

Tax Tips for the Blind

Anyone whose field of vision falls at or below 20 degrees, who wears corrective glasses but whose vision is 20/200 or less in his best eye, or who has no eyesight at all, meets the legal definition of being blind and is eligible for certain tax deductions.

Read More

Brought to you by TurboTax.com

What Is a 1099-G Tax Form?

The most common use of the 1099-G is to report unemployment compensation as well as any state or local income tax refunds you received that year.

Read More

Brought to you by TurboTax.com

Video: What Are Itemized Tax Deductions?

Itemized tax deductions can help save you even more money during tax season if your deductions exceed the standard amount. Learn about itemizing your tax deductions with help from TurboTax in this video on annual tax filing.

Read More

Brought to you by TurboTax.com

Filing Tax Form 2441: Child and Dependent Care Expenses

There are a number of eligibility requirements you must satisfy before potentially receiving a child or dependent care credit, so it's a good idea to familiarize yourself with the rules before preparing Form 2441.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.