Don't Forget About the Making Work Pay Credit
Unlike the new payroll tax holiday, the number of taxpayers eligible for the Making Work Pay Credit is limited. The credit was intended to provide tax relief for working and middle class families, so phase-outs apply at the top. In addition, since the idea of the credit was to provide an incentive to work, taxpayers must have earned income, meaning wages from working, to qualify for the credit.Additionally, while the new payroll tax holiday is based on a percentage of income, the Making Work Pay Credit was a flat credit of up to $400 for individual taxpayers and up to $800 for taxpayers married filing jointly. And as with the payroll tax holiday, self-employed persons are eligible for the Making Work Pay Credit.
You're likely seeing the benefit of the new payroll tax holiday in your paycheck now. Don't miss out, though: The Making Work Pay Credit was still law for 2010, which means that you'll figure your credit, if eligible, on your federal tax return for 2010 (due by April 18, 2011). In most cases, the credit will be figured using a Schedule M. The credit is refundable, too, so that could mean extra dollars in your refund check. If you have questions about the specifics of the credit and how it applies to you, be sure to ask your tax professional.