Applying for a Making Work Pay Tax Credit

If the holidays are "the most wonderful time of the year" then April 15th is the most dreaded time of the year--and it's fast approaching.  You might be wondering about how the stimulus bill might affect your personal tax rate.  The bill has been sold as a "job creation" bill, but that's not the only thing it does; it's also aimed at putting money into individuals' pockets. 

If only it were that easy.  Though the Making Work Pay tax credit sounds like a good idea, it has some red tape complications (quelle surprise) making applying for the credit somewhat difficult.  First, what is it? 

From Walletpop comes this primer on the Making Work Pay credit:

Most of the taxpayer relief for American Recovery and Reinvestment Act of 2009 (ARRA) focused on the Making Work Pay credit. The Making Work Pay credit allows up to $400 per individual worker and $800 per working married couple and is figured on your tax return. Those who did not work during the year are not eligible for the credit.

The Making Work Pay credit did not provide for the retired and disabled. As a result, Congress included the Economic Recovery Payment (ERP). The payment, which has been referred to as a "stimulus check," is only available to:

• Retirees, disabled individuals, and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration;
• Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs; or
• Railroad Retirement beneficiaries.

Those who meet the criteria should have received a one-time check in the amount of $250 during 2009 directly from the agency that normally provides their benefits.

Put simply, everyone is eligible for a $400 tax credit if they're currently employed--meaning millions of people are eligible.  Sounds good, but the trouble with this tax credit is that people haven't been sent their checks, even though no specific action was necessary in order to receive the check.  The reason in some cases is that the credit was given via a paycheck, rather than a separate check straight from the IRS.  Also, it may be the case that you owe money to the IRS for back taxes or another reason, so the credit was absorbed into your overall tax amount.  Other times, it was not sent out regardless.

If this is the case, claim it on line 40 of your 1040A or line 63 of a 1040 (aka Schedule M).  If you do not receive the check, do not contact the IRS.  Instead, contact the corresponding agency:

• Social Security Administration: 800-722-1213
• Veterans Administration: 800-827-1000
• Railroad Retirement Board: 877-772-5772

As taxes seem to be getting even more complicated, hiring an accountant is a good idea--though obviously that raises some financial concerns, as CPAs are not cheap.  If this is an issue, check Savings for tax deals to help you navigate the new requirements.