Making Work Pay Credit with 2008 return

[jmc]

As I read the new law about Making Work Pay Credit & $250 Recovery payment to SS recipients, I have one thing to confirm.
The credit applies from 2009, but it will not be based on 2008 tax return amounts, rather on 2009 amounts. Correct?

[Gretel]

As I read the new law about Making Work Pay Credit & $250 Recovery payment to SS recipients, I have one thing to confirm.
The credit applies from 2009, but it will not be based on 2008 tax return amounts, rather on 2009 amounts. Correct?

I would say, neither. The way I understand it is that $250 Recovery payment is made by SS admin. and other agencies, max. $400 Making Work Pay is received by getting a bigger paycheck each pay period or take a credit (if laid off, self-employed, etc.) on 2009 tax return based on earned income.

[ChEAr$]

more

I would say, neither. The way I understand it is that $250 Recovery payment is made by SS admin. and other agencies, max. $400 Making Work Pay is received by getting a bigger paycheck each pay period or take a credit (if laid off, self-employed, etc.) on 2009 tax return based on earned income.

yes, the 250 payments will be made independently of tax returns.
The $400 amount is a reduction of FICA or SE tax on earned income up to $6,452.
(remember; it's social security tax of 6.2%; not 7.65!)

But for some workers also drawing social security already, there will be the $250 payment
in late May, and regardless of lesser withholding starting in April (yes; April!) the 'credit'
will be limited to only $150. So I'll still get only $400 total.

[jmc]

Great details. Thank you.

[Mike Mac]

What about taxpayes with multiple jobs

The following was a blurb in the IRS E-News for Tax Preparers that I got this evening related to the Making Work Pay Credit:

"For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes in early spring. These changes may result in an increase in take-home pay. The amount of the credit must be reported on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return."

It looks like maybe there will be an extra entry on W-2's next year for employers to report the amount of Making Work Pay advance credits if it must be reported on the 09 return???? How about a client who has several different jobs, will there be a chance that each of the employers will be chipping in to the Credit and come 2009 the client will find out that they may OWE money because of the credit. I see headaches ahead of us.

Mike

[ChEAr$]

Ka CHING!

$$$$$
need I say more? grin