Feature Articles: Taxes
Heads up for workers with multiple jobs:
Making Work Pay Credit
Brenda Procter, M.S., state specialist & instructor, Personal Financial Planning, College of Human Environmental Sciences, University of Missouri Extension
Making Work Pay is a new tax credit. It was enacted in April 2009 largely to stimulate an economy in serious crisis. Congress and the president wanted to move fast. By paying out the Making Work Pay Credit as a reduction in payroll taxes, money was immediately injected into the sagging economy.
That may have been good for the economy, but it has been confusing for taxpayers. Some people still confuse it with the economic stimulus payment that came in 2008, but it works differently. Throughout 2009, workers saw a modest increase in their take-home pay. The Making Work Pay Credit was added to their checks through payroll.
For workers with multiple jobs, this payout method may have created a challenge. Without changes to W4 forms, each employer would have reduced withholding during the year, adding back enough to paychecks to pay out a workers’ total annual Making Work Pay Credit. The problem is that if several employers were reducing withholding at the same time, taxpayers may not have had enough total withholding to cover their 2009 tax bill. Many may be surprised to learn they must pay more taxes, but increases in other family tax credits will cover the difference for some families who could see their refunds increase.
Answers to the frequently asked questions below address some of the issues associated with Making Work Pay.
Q: What is the Making Work Pay Credit?
A: The Making Work Pay Credit is a tax credit that is available for certain working families as part of the economic stimulus programs created during the first year of the Obama administration.
Q: Who qualifies for the Making Work Pay credit?
A: Individuals who are earning income are eligible for the credit. The credit is paid at a rate of 6.2 percent of total income earned, but starts to phase out when a single person earns more than $75,000 or a married couple filing jointly earns more than $150,000.
Q: How much money could I get from the Making Work Pay Credit?
A: A single worker can get up to $400 based on their income, while a married couple could get up to $800.
Q: Will the Making Work Pay Credit come in my refund?
A: Probably not. The Making Work Pay Credit was enacted in April 2009, and most employers adjusted employees’ paychecks to reduce the amount of tax each employee paid. This means that instead of receiving a lump sum at the end of the year, as with other tax credits, the Making Work Pay Credit was paid out in smaller amounts throughout the year in their paychecks. Unless you are self-employed or receive a pension, you will not receive a lump sum through your tax return from the Making Work Pay Credit.
Q: What if I am self-employed? How do I claim this credit?
A: If you are self-employed, or your employer does not withhold your taxes, then you will need to claim this credit on your tax return this year. You can use your earned income worksheet in the IRS Schedule M instructions. To get help, find a local VITA site by calling 1-800-829-1040 or go online to http://extension.missouri.edu/hes/taxed/vitasites.htm.
Q: So the Making Work Pay Credit is not a part of my tax refund?
A: Because the Making Work Pay Credit was a part of the economic stimulus plan, payments made under the program were automatically added to most working people’s regular paychecks. You might have noticed a slight increase in the amount you were receiving in each paycheck. If the credit was included in your paychecks, you will not receive it in your tax refund. However, if you are not sure if you have received this credit, you can check with your employer.
Q: My spouse and I both work multiple jobs. How do we make sure the Making Work Pay Credit works for us?
A: For couples who work multiple jobs, this credit can be hard to navigate. If all of your employers reduced the amount of taxes taken out of each paycheck for the Making Work Pay Credit, you may have reduced your withholding too much during the course of the year. This could mean that you owe more in taxes than you planned. To make sure your employer does not over withhold for next year’s Making Work Pay Credit, submit a revised W-4.
The Making Work Pay Credit offered many working people more money in their paycheck each month. To get more information about this credit or to get free help with your taxes, contact a local Volunteer Income Tax Assistance (VITA) site by calling 1-800-829-1040 or go online to http://extension.missouri.edu/hes/taxed/vitasites.htm.
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Last update: Tuesday, February 16, 2010
