Discussion:Making Work Pay Credit - Why Now?

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Discussion Forum Index --> Advanced Tax Questions --> Making Work Pay Credit - Why Now?


Discussion Forum Index --> Tax Questions --> Making Work Pay Credit - Why Now?

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Umk395 (talk|edits) said:

30 December 2009
I am preparing a few preliminary 2009 tax returns (more like "analysis at this point) and am noticing that the Making work Pay tax credit is showing up on line 63 ($400 in this case for a single taxpayer). He is eligible for the credit but my question is....why would this credit even show up on the 2009 Form 1040 if he already received the benefit of the $400 via lower withholdings from his payroll throughout the year?

Seems like the purpose of this credit was to give taxpayers the credit via their (higher) paychecks during 2009. I'm trying to reconcile in my mind why the credit would also appear on the tax return as well (double benefit). Maybe it's been a long year! Any input would be appreciated.

Outwesttax (talk|edits) said:

30 December 2009
Remember, the drop in withholding due to the new tables has not affect on the tax calculation on the return, it just reduces the prepayment amount through the paycheck.

Kirthe (talk|edits) said:

30 December 2009
Tax tables have remained the same (and since not everyone is eligible for the credit). Therefore your 'credit' is actually the [eg, $400] that will show up as if you did not have the reduced withholding, which must be reported as is.

TP liability is always $1000, for which he always has 995 withheld, BD $5. 2009TY he has 595 withheld (400 less), without the credit appearing on the return, BD is 405. Therefore, 400 credit as if extra less w/h did not occur, brings BD to $5 again.

Waynecpa (talk|edits) said:

30 December 2009
I wonder if we can tell clients that this is an additional credit we found for them :-)

Jmcdon00 (talk|edits) said:

30 December 2009
Definetly not double dipping. Those that did double dip(have 2 jobs, 2 pensions etc) will be paying the IRS back, and blaming us.

JR1 (talk|edits) said:

December 30, 2009
Thanks for confirmation. When the papers kept saying a drop in withholding, I wondered...that ain't the same as a tax cut or rebate! So the cut/rebate MUST be dealt with on the return. The only upside is that we don't have to hit the IRS website to confirm rebates paid this time. Except for the elderly, perhaps, who got the 250.

Umk395 (talk|edits) said:

30 December 2009
OK -- so if the TP qualifies for the credit, then it shows up on the return -- no questions asked.

I noticed that the SS website does NOT show whether a senior citizen received the $250. We may just have to assume that eaach of them received it -- unless they just started getting SS benefits in 2009, because I believe the rule was that you had to be getting SS benefits as of 2/1/09 in order to get the $250 rebate check (maybe someone can confirm). Not sure how many citizens will remember if they received the money (notwithstanding that every dime helps!)

Ksnoopytax (talk|edits) said:

31 December 2009
I asked the question at a rather large tax conference whether or not there will be a way to find out if a taxpayer received the $250 and I was told there was none. That's too bad considering the IRS website was so handy last year.

Umk395 (talk|edits) said:

31 December 2009
I agree -- I will make an effort to ask my senior citizen clients whether they received the $250, but for the ones that don't recall, I'll assume they received it (and therefore not claim the $250 as a credit on the 2009 tax return). If they did receive it, and their refund check is larger, then I'll still look like a good guy!

Jeff-Ohio (talk|edits) said:

31 December 2009
SO are we saying, the $400 really isn't a credit? It's $ you would have had anyways (as W/H) should the tables not have dropped...confusing. I.e. I had a staff member come into omy office and say "I'm getting an extra $400 back!"...

Umk395 (talk|edits) said:

1 January 2010
See page 47 of the IRS Form 1040 instructions.

http://www.irs.gov/pub/irs-pdf/i1040gi.pdf

It says that "even if the Federal taxes withheld from your pay was reduced because of this credit, you must claim the credit on your return to benefit from it."

That solves that question!

Jeff-Ohio (talk|edits) said:

4 January 2010
It's solves the question, but the way it was explained in January of 2009 was that there would be no credit and employees would just see an increase in pay due to a change of w/h tables.

If an employee received $120/week instead of one's normal $100/week salary for twenty weeks - why would there be an additional $400 credit? What am I missing?

Eric1979 (talk|edits) said:

4 January 2010
This credit wouldnt do you any good if you didnt get to take it on your return. For example, you could tell someone that they didnt have to have any withholding from their pay but if you do not reduce their taxes on their 1040 then you really didnt benefit them.

Jeff-Ohio (talk|edits) said:

4 January 2010
Not if the entire federal wage payroll w/h reflected the change...if the rates were lowered, you would see more income in your paycheck and it would have no affect on your return.

Natalie (talk|edits) said:

January 4, 2010
"Not if the entire federal wage payroll w/h reflected the change...if the rates were lowered, you would see more income in your paycheck and it would have no affect on your return."

I'm not even sure I understand your comment. The credit simply has to be on the 1040 or, as already pointed out, there would be no impact on taxpayers' income tax actually paid.

Tax Lady (talk|edits) said:

4 January 2010
I just had a senior citizen call me to find out if she would be getting another $250 credit. She had just read in the newspaper that seniors were getting another $250. (She could not remember if she got the $250, but then said OOOHHH YYEEAAA I did.) Are they getting another $250 or did the reader misunderstand the newspaper.

Also how do you know if someone got the $400 or $800 if they only worked up to April 01, 2009? Is this something we should be asking?

Tax Lady (talk|edits) said:

4 January 2010
And did the payroll software know if your MAGI would be to high to get the work credit ($400 - $800)

Waynecpa (talk|edits) said:

4 January 2010
No, the payroll software will not "know" - that is the reason for Schedule M.

And people did not "receive" the $400 or $800 - their withholding was less and the credit to offset will "offset" this.

Whenever Congress puts in an AGI or MAGI limitation, the credit/deduction HAS to be on the return.

Belle (talk|edits) said:

January 4, 2010
"...And did the payroll software know if your MAGI would be to(sic) high to get the work credit ($400 - $800)"

And exactly how would it?

I do payroll for more than twenty different clients - so probably more than 300 W-2's. Are you suggesting that there is some possible way for me as the payroll preparer to have know the MAGI of all those employees?

Basically, anyone employed (after 4/1, I think - can't remember when the tables changed), received the $ 400 extra in their paychecks. When doing the tax return, they now (maybe) get the $ 400 credit. So the figures offset; no harm, no foul, no tempest in a teapot.

IF (and a big IF), you don't get the credit (due to MAGI being greater than the limits) and assuming you did get the $ 400 extra spread over your paychecks, you now either 1) get $ 400 less in your refund, or 2) owe $ 400 more.

Unless, your client, as an informed taxpayer (informed due to the fact you discussed this with them ?!?!), chose to keep their withholdings the same by talking to their employer's payroll department.

Belle (talk|edits) said:

January 4, 2010
Here's a good one from months ago....

Discussion:Making Work Pay credit new withholding charts problems

Nice recap

Deback (talk|edits) said:

January 4, 2010
Here's a simple explanation. I'm sure someone explained it above, but I have no time to read all the comments.


The decrease in withholding was to give taxpayers the actual credit (as in, extra cash in their paychecks) throughout the year, instead of making them wait until they file their tax returns. If taxpayers did see extra cash in their paychecks, the credit on the tax return will pretty much offset the lower Federal tax withholding. If their withholding didn't change earlier in the year, their refund will increase by the amount of the credit.

Umk395 (talk|edits) said:

5 January 2010
Right -- good basic summary Deback.

Good luck to all this tax season. Take a little honey to keep the throat coated.

Larpra (talk|edits) said:

8 January 2010
"unless they just started getting SS benefits in 2009, because I believe the rule was that you had to be getting SS benefits as of 2/1/09 in order to get the $250 rebate check (maybe someone can confirm)."

My wife starting receiving SS benefits in July of 2009 and got the $250 rebate. However she also was awarded back benefits which covered the whole year, so may be considered as "getting SS benefits as of 2/1/09".

Rudy102 (talk|edits) said:

21 January 2010
I assume that the $250 payment will be reflected in the Form 1099-SSA that clients receive, but I know it's always dangerous to assume anything -- do you know if my assumption is correct?

I dread having to deal with all the clients who I know will INSIST that they never received the payment -- and then will want me to call Social Security for them to check on it.

Whenever it comes to any tax or tax-related issues, the motto seems to be: "Why simplify when you can complicate?"

Blrgcpa (talk|edits) said:

21 January 2010
There is a new sched m which has to be attached to the 1040 pertaining to the credit. I suggest that you go to irs.gov and print out the instructions and the form and do a practice on it. Many questions will be answered.

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