Making Work Pay Credit

For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act provides a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. This tax credit is 6.2 percent of earned income, and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment. Instead, employers will begin decreasing the amount of federal tax withheld from employees' paychecks. Most employees will receive an additional $33 per month from the credit. (Try not to spend this cash windfall all at once.)

The IRS released new withholding tables to reflect the credit, and requests that employers start using these new tables as soon as possible but not later than April 1.

For information on the credit and access to the new withholding tables, visit: http://www.irs.gov/newsroom/article/0,,id=204521,00.html