Working taxpayers could be eligible for the Making Work Pay tax credit, a provision of the American Recovery and Reinvestment Act that means more take-home pay for millions.
There are five things the IRS wants every taxpayer to know:
1. The credit, available for tax years 2009 and 2010, equals 6.2 percent of a taxpayer’s earned income. The maximum credit for a married couple filing a joint return is $800; $400 for other taxpayers. Most wage earners have been enjoying a boost in their paychecks from this credit since April.
2. Eligible self-employed workers can evaluate their expected income tax liability and, if eligible, adjust the amounts of their upcoming estimated tax payments in September and January.
3. Taxpayers who fall into any of the following groups should review their tax withholding to ensure enough tax is being withheld:
* Married couples with two incomes
* Individuals with multiple jobs
* Social Security recipients who also work
* Workers without valid Social Security numbers
Having too little tax withheld could result in smaller refunds or even a balance due rather than an expected refund at tax time.
4. Making Work Pay is either phased out or unavailable for higher-income taxpayers. The phase out begins at $75,000 for single taxpayers and $150,000 for couples filing a joint return.
5. The IRS withholding calculator, available at www.irs.gov, can help you decide whether you qualify for the credit. Adjustments also can be made by filing a revised W-4 form. For pensioners, a W-4P.
For more information visit www.IRS.gov/Recovery.