Special Payments & Credits

Three interconnected programs were enacted by the American Recovery and Reinvestment Act.

Making Work Pay Credit (MWPC)

Refundable credit up to $400 ($800 joint) claimed on individual form 1040 for “earned income”.  The credit is actually 6.2% of earned income or $400 ($800 joint) whichever is less.

Economic Recovery Payments (ERP)

$250 checks sent in May/June (no tax filing required) to social security recipients. 

Government Retiree Credit (GRC)

Refundable credit up to $250 ($500 joint) claimed on individual form 1040 for government retirees.

NON-FILERS

Non-filers collecting social security already received a $250 check.  But, there are non-filers that should file for either the MWPC or GRC.  Taxpayer with only a $5000 W-2 normally need not file, but might get a MWPC credit of $310 (6.2%) if the return is filed.  Many government retirees have no filing obligation, but will miss out on the GRC unless they file.

Keep in mind, income from interest, dividends, rents, royalties and civilian pensions do not qualify for any of the 3 programs therefore give none of these benefits.

WARNING:  The largest total benefit is $400 ($800 joint).  Can’t collect on all

WARNING:  Easy to collect TOO MUCH – PAY BACK at tax time.

Congress wanted these credits to go out in 2009 rather than waiting for tax time.  Social security recipients received checks in May or June.  In April, IRS revised withholding tables to reduce your withholding by $400 on “single” tables and by $600 on “married” tables.  Situations come to mind where you may see withholding reductions were greater than the allowable credit.   **Multiple jobs might return $400 for each via withholding, but only $400 calculated at tax time.   **Working spouses might each collect $600 each at work, but only $800 calculated at tax time.  **Unearned income may reduce or eliminate the credit but it was collected via withholding and will need to be paid back at tax time.  **Dependents don’t qualify for the credits, but collected $400 via reduced withholding. **Civilian pensions don’t qualify for any of the 3 programs but withholding tables returned $400/$600 anyway.  There may be a shortfall at tax time.

This entry was posted on Sunday, December 6th, 2009 at 10:58 am and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.