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.

The 10 Most Overlooked Tax Deductions

Don't overpay taxes by overlooking these tax deductions. See the 10 most common deductions taxpayers miss on their tax returns so you can keep more money in your pocket.

Read More

Brought to you by TurboTax.com

How to Find a Good CPA for Your Taxes

Finding a good CPA for your taxes is simple with these seven tips: 1. Ask about their specialization; 2. Verify their identification number, 3. Look up their license, 4. Consider their experience, 5. Confirm their willingness to sign, 6. Ask for advice, and 7. Determine their fees.

Read More

Brought to you by TurboTax.com

Reporting Self-Employment Business Income and Deductions

Self-employed taxpayers report their business income and expenses on Schedule C. TurboTax can help make the job easier.

Read More

Brought to you by TurboTax.com

2018 Tax Reform Impact: What You Should Know

Congress has passed the largest piece of tax reform legislation in more than three decades. The bill went into place on January 1, 2018, which means that it will affect the taxes of most taxpayers for the 2018 tax year.

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.