Making Work Pay

[cathe]

Am I really supposed to figure out if my clients have already received the Making Work Pay credit in their last years paychecks? How do I do that?

Cathe

[BP.]

Am I really supposed to figure out if my clients have already received the Making Work Pay credit in their last years paychecks? How do I do that?

Cathe

No, you don't. Check out Pub 17, p.252, center column, #2. You only need to know if there was an ERP received in 2010.

[Jiggers]

Am I really supposed to figure out if my clients have already received the Making Work Pay credit in their last years paychecks? How do I do that?

Cathe

You don't. You just complete Schedule M.

[cathe]

Doesn't seem right

It doesn't seem right that clients received MWP credit during the year as extra take home from the withholding adjustments, and now receive the full $400 per if they did not receive anything from SSA, VA or RR. Makes me nervous.

Cathe

[Will H]

It doesn't seem right that clients received MWP credit during the year as extra take home from the withholding adjustments, and now receive the full $400 per if they did not receive anything from SSA, VA or RR. Makes me nervous.

Cathe

That was also the case in 2009. No different this year.

[Edsel]

Wrong Approach

Cathe, your conversation sounds like taxpayers are receiving a WMP benefit on their weekly paychecks by virtue of reduced withholding, and then are receiving ANOTHER $400 at the end of the year on their tax return.

What really has been going on: The benefit is only $400 ($800 if married). Period.

In order to compensate for this credit at the end of the year, withholding was reduced. So at least theoretically, he has $400 less taxes withheld on his W-2 but also $400 less taxes on his 1040. A wash.

Of course, that was the theory. Not everyone had the MWP credit, and some families with more than one job duplicated the withholding and various amounts. But the intent was for it to be a "wash" - not a duplication of benefits.

[appelman]

Another way to look at it is this:

The MWP credit is supposed to keep the taxpayer from owing money because of the reduced withholding. It effectively reduces the tax due in order to match the lower withholding.

Also, I believe there is a look-up again this year on the IRS site to check if taxpayers have received anything that needs to be offset against the MWP.

[zeros]

What's A "erp"

No, you don't. Check out Pub 17, p.252, center column, #2. You only need to know if there was an ERP received in 2010.

What does "ERP" stand for?

[taxxcpa]

making work poay

Click this to see if they got a MWP payment:

http://www.irs.gov/individuals/article/0,,id=219514,00.html

[BP.]

What does "ERP" stand for?

That's the economic recovery payment.

[dtlee]

Perhaps the way this works should be compared to the way the George HW Bush payroll tax cuts worked back in 1992 to clearly see what is going on.

For that tax cut, every week, workers received more in their paychecks, but there was no change to the tax rates and no analogous credit to the Making Work Pay credit. Thus, people got more in their paychecks every week and then had to pay it all back when they did their tax return (either with a reduced refund or an increased balance due).

The link Evan refers to for looking up ERPs is here:

https://sa1.www4.irs.gov/irfof-mwp/start.do

[S T]

Link

Thanks for the link to check the 2010 ERP

Sandy