Did you know this new tax credit? Thought you might be interested.
General Information
In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
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 will be computed 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 is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or a married couple whose combined income places it in a higher tax bracket should consult the IRS withholding calculator and, if necessary, submit a revised Form W-4 to ensure enough tax is withheld. Publication 919 provides additional guidance for tax withholding including a special Making Work Pay worksheet.
Consult the IRS for more information.
# posted by
Anna-Lise Troup @ 11:28 AM
