Making Work Pay Credit
Download this document as a PDF
The new, fully refundable Making Work Pay Credit, in effect for 2009 and 2010, is equal to 6.2 percent of earned income, up to $400 for an individual and $800 for a couple. The credit applies to joint, not individual, earnings. Thus, a married couple could qualify for an $800 Making Work Pay Credit even if only one partner in the couple works.
The credit begins to phase out for those with modified adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Individuals with income above $95,000 and couples with income above $190,000 will not get the credit.
Workers will see larger paychecks beginning April 1, 2009, if not sooner, because the IRS has released new withholding tables. Many workers will receive about $10 extra each week (totaling $400 for the year). Weekly paycheck increases will be smaller in 2010 because the payments will be spread throughout the year. Workers who do not receive the full credit through reduced withholding will receive the outstanding amount when they file their tax returns the next year. They will not receive a separate check from the U.S. Treasury the way they did for the 2008 Economic Stimulus Payments.
Workers who hold multiple jobs, high-income workers for whom the credit phases out, and both single- and dual-income married couples should be alert for the need to adjust their withholding throughout the year so that they do not face penalties for too little prepayment of tax.