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$400 or $800 Making Work Pay Tax Credit

Bundled in the 2009 economic stimulus plan is the $400 ($800 for couples) Making Work Pay tax credit that will provide a tax credit in 2009 and 2010 equal to 6.2 percent of your earned income up to a maximum of $400 for individual filers and $800 for couples.

Here’s what you need to know:

The $400/$800 Making Work Pay tax credit took effect in July 2009. Workers who have taxes withheld from their paychecks will see a decrease in the federal income taxes withheld from each paycheck by about $30 per paycheck every two weeks or $60 for couples.

If you are self-employed, you can claim the credit when you file your 2009 tax return or reduce each of your 2009 quarterly estimated tax payments by $100. Software like TurboTax will automatically prompt you to take this credit.

The credit will phase out by two percent of any income over $150,000 for couples and $75,000 for others. Couples earning more than $190,000 and individuals earning more than $95,000 will not benefit from the credit.

Unlike the 2008 economic stimulus tax rebate checks that were mailed to taxpayers in a lump sum, the government is hoping that offering the $400 Make Work Pay tax credit as a reduction in payroll deductions will encourage taxpayers to spend the credit rather than save the money or use it to pay down debt.

According to some estimates, the Making Work Pay tax credit will cost the U.S. government $116.2 billion over 10 years, making it the largest tax provision in the 2009 stimulus plan.

About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Very typical slight of hand by Uncle Sugar for sure. They know now that if they give us a lump sum of money we are going to hang onto it, but if they trickle it into us we will not really see it leave. Just more proof that if a politician is showing you something in his/her right hand you had better be looking at their left hand and behind you at the same time. Screw up their little plan by saving that $13 dollars a week. Stick it in a sock, mason jar, piggy bank……anywhere but back into THEIR economy. At some point these morons are going to have to do like the rest of us and stop spending what they dont have. If we floated bad checks for awhile we would soon have reservations to the Gray Bar Hotel, but when Congress does it they get to vote themselves in a 21% raise. Yeah, that math works for me too. Everyone should be at least 18 on this blog which means you have the right to vote. VOTE these idiots out of office in 2 years and lets start over. Just my 2 cents!

    • I’ll see Your two & raise it two!

    • Eddie, you missed the “stimulus” part of the tax credit. If you save the money it doesn’t get into the economy and provides no stimulus. If you spend it does. That was the plan. It was clearly stated in the article and by the “government”. (You know that we are the government, right?) Talk about idiots.

    • Oregon American says:

      Eddie, You seem to forget quite easily what idiots got us into this mess. One clue; It WASN’T Obama!! 8 years of Repub BS and spending with NO oversight is what f’ed up the whole US and world economy. People like you need to get their heads out of their collective asses and get a damn clue.

      • Once again the moron libs blame everything on Bush. Guess what dingus? Obummer has been in office for 1 1/2 years and has rung up a bigger bill than Bush did in 8! Also remember that before the Democrats took control of Congress in 2007 we were enjoying record levels of growth. Funny how that stopped when the Dems to over….

  2. This doesn’t seem like a very significant amount. I doubt people will even notice the difference in their pay checks. It will be the most stealthy $116 billion ever!

  3. Leigh Anne says:

    Wait! I thought the litmus test for tax relief was anyone making over $250,000 would not get a tax break! Now it’s down to $75,000. Where was I when they changed the numbers????

  4. Could someone please tell me how our “Great Change You Can Count On” President is going to spend $789 BILLION DOLLARS one week and then turn around and say he is going to cut the national debt in half by the end of his term. Now I know I went to a small school in rural Mississippi, but even my math is not that bad. The only way that this President is going to accomplish that, unless the White House comes with a “Harry Potter Wand”, is to raise taxes. Now he can say all day long that he is only going to tax the rich, but hello! there are not enough rich people in the country to tote that load. And Mr. President, who do you think owns all the businesses that create all the jobs???????RICH PEOPLE!!!!!!! This is the biggest bunch of wishwash and nonsense I have ever heard. I almost feel as though I am watching an infommercial when i watch CNN or FoxNews. SPEND YOUR WAY TO WEALTH WITH THE GOVERNMENTS 5 STEP PLAN, the only problem is this ain’t gona cost us $19.95 plus S/H. Wake up people, we are in serious trouble here! Just my two cents.

  5. WOW! $13 DOLLARS A WEEK. Now that will definantly take some of the stress off my sons college bill coming up. I’m sure I can send him to a Division 2 school now. This is an insult to all WORKING AMERICANS. I wonder what the stimulus is for those outsiders who already get tax free and interest free loans (that I can’t get)to open up a hotel or convenient store. Aslap in the face. The only thing $13 dollars a week will stimulate is boiling my blood. I really have to stop now so

    • I feel for you, I really do, back in 02 I was permanently disabled by an exterminator truck while stopped at a red light.
      While not being wealthy I made $93,000.00 in 01 & to add insult to injury it turned out that the Ins. Co. for the exterminator was in bankruptcy leaving me to have to sue some state funded thing run by the state of NJ.
      Needless to say I had to fight Social Security & my Companies Ins. Co. which happened to also be my auto Ins. Co, & by the time I got what I was allowed, it was all owed.
      Anyhow, now I have monthly income from SS & my former employers Ins. Co., enough where I can pay my bills & still have a few beers now & then, Being single with no kids I can only feel sorry for all You folks & I mean it, The Government has screwed you so bad it is not funny.
      I believe if they could read my mind they would assassinate me.
      I remember Rudy ( 9/11 SUPERMAN) GAVE HIMSELF A A 35% PAY INCREASE WHILE DENYING THE NYPD & NYFD PAY INCREASES!
      This has been the norm far too long, I wish I had the answers but I don’t.
      God bless all You married with children People, I especially feel for Your Children.
      If there is a God now would be the time to step in because the next step is Anarchy!

  6. WOW! $13 DOLLARS A WEEK. Now that will definantly take some of the stress off my sons college bill coming up. I’m sure I can send him to a Division 2 school now. This is an insult to all WORKING AMERICANS. I wonder what the stimulus is for those outsiders who already get tax free and interest free loans (that I can’t get)to open up a hotel or convenient store. Aslap in the face. The only thing $13 dollars a week will stimulate is boiling my blood. I really have to stop now so

  7. Sorry, my last message was cut short.continued: so I can refrain from ugly words being said. America better wake up and see what these beurocratic BS’ers are doing before it’s tooooooo late!

  8. Last years check sent out went to the pump, the same time the stimulus checks came out the gas went up, they always have a plan, but alot of people cut back on vacations and spending, and they stayed home like we did, to save on gas and many other things of course. Now, this little bit of money there going to put in our checks, please, makes me sick,
    I’m going to put it into my daughters 529 college plans, have to more at home to go to college. Its automatic deposit, so I won’t miss it, and most of all THE WON’T GET IT!!!!!! HA HA HA.

  9. The good news is that atleast this credit will be extended under the Obama budget plan. Won’t make a huge difference to my financial life, but something is better than nothing.

  10. bill welling says:

    I understand they will not withhold an amount of taxes each pay period. Do I have to make up these taxes when I file my return by April 15, 2010? Is this a real tax credit or just a loan from the iRS on the amount not being withheld and I pay those taxes later?

  11. Put the money to good use, buy lottery tickets. If I hit the mega-millions you can rest assured that I will do my part to stimulate the economy.

  12. I have the same question as Bill Welling: we I have to pay the taxes back in 2010? I noticed that the ruling says we have to report the tax break on our 2010 forms. What does that mean?

    • It means that You are going to lose either way because You will have to pay for Professional help, this is not me poking you in the eye with a hot stick, just the truth.
      I believe that anyone who wants to be a politician should have to do 30 years hard labor “BEFORE” they even run for office.

  13. I’ve heard you can refuse it. I think that’s what I’ll do.

  14. I found out that if both you and your wife work and both claim married on your W-4 the tax tables will lower your withholding by $800 each over the year. But you only get one $800 tax credit at year end. So you may have a nice tax bill come April 15 2010 when you must pay back the second $800. Is this true?

  15. I received $33 extra in my pay today! (I get paid twice a month)…Why is everyone complaining so much? It seems like free money to me!

  16. I also started to receive our “Make it work” credit today, It was only for one week because the pay period only included 1 week of March. We were all a little surprised by this, we thought this wasn’t supposed to happen till later in the spring? Anywhoo I’m so excited to be able to order pizza out this weekend it has been months since we have be able to treat ourselfs.

  17. Jim,

    Yes, it does seem like extra money. However, look at the cost of that money. My company has put on a salary freeze because of the state of the economy. Getting a standard raise would have been better than this.

    And the future acts that will need to be implemented by the government to get this bigger deficit down.

    If the Making work Pay Tax Credit had been the only thing done, it would have been good. But it carries very liitle weight to the rest of the “Stimulus Bill”.

  18. This is a joke. What they are not telling you is that while you may have less withholding from your wages, the tax table(thus the amount of tax due)isn’t going to change. The government is “adjusting” everyone’s W-4 for them and adding one more exemption. You still have to pay the piper.

  19. For all of you complaining about $13 a week being a joke, if you don’t want the money simply give it back. Or better yet, give it to someone who appreciates it. $13 a week to some families may mean eating today. Just think about that and be greatful it’s anything at all.

  20. Let me know next April when you get your tax refund if you’re still so grateful! You’ll be surprised I’m sure. But enjoy it while you can.

  21. Wait. “grateful?” “enjoy it?” “free money?”
    Fellow citizens, you might recall that this is YOUR hard earned money being taxed. The government cannot give YOU YOUR money. As much as the federal government wants to cast this as some kind of favor, the reality is that the pork barrel spendings continue. Capitol Hill continues to party with YOUR blood and sweat money.

    Oh, and nevermind “fairness”. that word got twisted so many times it won’t recognize itself. Do what’s right. To see the truth thru the spin, apply the golden rule: do onto others what you would want done onto you.

  22. Brenda Hermes says:

    Here’s a little exercise for those of you who are grateful for this free money. Pretend your payroll check was written for your gross amount. Then sit down and write out checks on your bank account to all the different government entities (federal, state, local, etc.)for the taxes on your earnings. Do you still feel the same?

  23. Fitiwalt says:

    Employers who need to make tax withholding changes should read this article:

    http://www.ehow.com/how_4863981_making-work-pay-tax-credit.html

  24. They’ve (government) have made a mess of this! It’s horrible. Here’s how it will go. If you work and are single you’ll have $400 less withheld from your federal taxes (get it in hand) and then on your 2009 tax return you’ll get a $400 credit to offset the reduction in your withholding. No problem there. BUT if you’re married and you both work you will have $600 less withheld AND your spouse will have $600 less withheld; you will have a $800 credit on your return so you will owe Uncle Sam $400! IRS even acknowledges this and states ‘well, you can adjust your W-4 to accomodate for that’. HOw many of you out there are going to know how to do that??? This will cause many who come close to breaking even owe next year. Jean H. Enrolled Agent with IRS

    • Cathy Manning says:

      Hello Ms. Hartley, I was reading this forum and thought you could perhaps answer a question Im wondering. I am single and already had the $400 less withheld from my federal taxes for my paychecks in 2009. I just filed my 2009 tax return online and was also given the $400 credit. From your comment on 1 April 09 it looks as if I did this correctly, but wanted to make sure I was supposed to claim this credit on my return. Can you please help me? Thank you.

  25. How can some of you be so stupid! Yeah, you think this little $13.00 is the greastest thing since sliced bread, you want to go out and buy pizzas or “think” it’s free money, ha, what a joke. Why in the world would you want to see a little extra money now and then have to pay it all back in one lump sum at the end of the year…?????

  26. Hey Jim -
    Why do you think the government is obligated to pay for your kid’s college? Maybe you should have sent him to a college you could actually afford! I’m tired of everyone sending their kids to the most expensive school they can find and then whining about how much it costs!

  27. Yeah Eddie, way to stick it to them by NOT spending any money. We wouldn’t want to help stimulate the economy or anything. By the way, why is it THEIR economy, and not OUR economy?

  28. Most of you on here complaining are idoits. You all are probably the same people who voted for the $@!hole who put the country in this situation. I guess your suggestions would be to continue down the same path. How about this; shut-up and spend the money!

  29. I wish I would have known or been aware of this last year. We discovered that my husband’s employer payroll dept. screwed this up royally and took out WAY too little in fed taxes. we now OWE nearly $2000 in taxes!

    This is not a break at all and a real hardship on us and there is nothing we can do about it.

  30. …and also, his employer did not make us aware of this difference and so we weren’t even paying attention to the amount of withholding. this will never happen again, I can assure you, but if there are no changes from one year to the next, why would we be alerted to check on this?

  31. Well, I just did my taxes, it showed that i could see up to $400 on my return for this. Then when all was said and done, I see nothing. but after reading this page, i see it as being only able to see a discount throughout the year for 2010 of up to $400. Because I sure didn’t see it this year at all.

  32. I as well filed mt taxes and this was brought to my attention on the form that I did qualify for $400 stimulus yet when all was said in done did not see it reflected in my refund. Not to mention I saw no difference in my pay all year so what’s the deal with that?????

    • So did you get your refund alredy and the extra $400 was not in there….or when you filled out your return paperwork, and plugged in the $400, it did not adjust your refund amount? Just wondering how the heck they can come up with a form you fill out saying you get this $$$….then not get it if in fact you already recieved your refund.

  33. How do I know if I received it? I keep getting my taxes rejected for aschedule m!!! HELP!!!
    married , filing jointly and both empolyed

  34. You received it in your paycheck…. you need to check your federal withholding and if there is a lower amount than the 6.2% then you received the credit. its only going to be 800/ 39 weeks which is about 20-21 dollars increase in your paycheck… If both you and your husband received it in your paycheck and was more than 800, then your going to owe the IRS the difference.

  35. For example, Say you made 15,000 in the year… if you did not receive the making work pay credit, then your federal income tax withheld is 15,000*6.2% = 930.00
    Now lets say you did receive the making work credit, then your federal income tax withheld is 15,000*6.2% = 930.00 – 800 = 130.00
    You need to check in your federal withholding in your W2….
    even If you received it you still need to file a schedule M, in your 1040 it will show a credit for the 800 …. it will act as payment to offset the taxes withheld..
    Working couples need to be careful because if both of you received the credit then you received too much money and will owe the IRS.
    For example both of you receive the credit througout the year…. 800 * 2= 1600 … The IRS paid you 800 too much… There gonna want their money back… so you will owe 800 on your federal return… In this case you will need to file a W4 through your employer

  36. And for all those who are bashing what 13-20 dollar increase in a paycheck will do?
    This is Part of the STIMULUS package, key word stimulus…. it is intended for you to spend weekly…. You are more likely to spend 20 than save it… for example you will buy 20 more of groceries or at a restaurant, this will help small businesses as well…. Thus stimulating the economy… Now If the government gives you the entire 800 in one payment…. then most likely you will use it to pay off debt or save it…. THIS does not stimulate the economy… This is a 2 year credit which will no longer take effect in 2011

  37. I’m sorry but receiving 13-20 dollars – it will not move me to spend more at the store or anything to that notion, all it does is says to me i can add 20 more bucks a week to my credit cards i have to pay off. This adding it to your check doesn’t stimulate the economy – no matter what most people are using their money to get themselves out of debt. The lump some helped people more and allowed them to try to get their heads above water so that they could then stimulate this economy.

  38. My first Chinese credit card! :D

  39. The world’s economy almost collapsed. We are lucky we can get a tax break.

  40. The good news at least is that this credit has been extended in 2010. It is a small amount, but every little bit helps.

  41. Fools – it’s all fake money anyway – borrowed from the Chinese. Your gov’t is desperately trying to get you to go back to the good old days of spend, spend, spend by giving you back some of your hard-earned money. How long do you think this type of economy can continue? It’s all fake and will eventually collapse and when it does, your generous politicians will be taken care of while you will be left to scratch for a meal.

  42. I’m not seeing anything on my paychecks. I got nothing extra in my return. This is bogus.

  43. Perspective From Texas says:

    It’s pretty simple. Whether your employer adjusted your tax witholdings each week or not, you still need to file a Schedule M with your tax return. My parents are retired and work part-time. They each recieved the $600 reduction in witholdings TWICE!!! Compound this adjustment to witholdings with the usual inconsistancies between two sources of income, and they owe a very large sum to Uncle Sam. However, I as an idividual with no dependants and only one source of income am getting a credit. Who’s happiest? They are! They got to hold onto their money and put it to use for themselves as it was earned and ONLY pay Uncle Sam what he’s owed. I, on the other hand, loaned our government a sizable sum intrest free over the past year.

  44. I sense that most of the people posting here are severely undereducated. With the Reinvestment and Recovery Act of 2009, the Obama Administration averted another Great Depression. Moreover, there has been no significant change in our Federal Income Tax. You are angry at the wrong targets.

  45. Big Bootay says:

    To implement Make it Work, IRS notified employers in Feb 2009 of reduced tax witholding amounts. Some employers changed their payroll systems to reduce the withholding, thereby increasing the amount of each employee’s paycheck. Some employers failed to do this. Employees of those companies did not receive bigger paychecks. The program was poorly advertised. Do you remember the amount of publicity behind the 2008 rebate program? IRS and .gov failed to generate the same type of publicity for the Make It Work program.

    Therefore nobody knew about it.

    IRS created Schedule M for filing and claiming the Make it Work tax credit.

    Nobody knew about that either.

    I didn’t. I’m married filing joint, wife does not work.

    My employer lowered my withholding amount, thereby increasing each bimonthly paycheck I received in 2009 (Feb thru Dec) by ~$30. Yes, we noticed it.

    I filed my 2009 return in Feb. I had never head of Schedule M (1040 Line 63), so I ignored it.

    I just received my tax refund, direct deposited to my bank acount. It was for exactly $800 more than we expected.

    I have since read that because of the confusion in publicizing and implementing the program, IRS is now providintg the $400 or $800 credit to everyone, regardless of whether Schedule M was filed or whether the employee received the 2009 withholding reduction.

    This means my total benefit was $1658. My 2009 paychecks were each $39 higher for 11 months, or 22 paychecks. That’s $858. Then, they lumped on the other $800.

    If my present understanding is correct, my benefit will be about double what my neighbor gets because his employer failed to make the withholding change back in Feb.

    I anticipate that the IRS may discover this silliness at some point in the future and ask for the $800 back. I’ll probably tell them to pound sand.

    My advice – don’t file Schedule M.

  46. Big Bootay says:

    Wait a minute!!

    I was wrong!!

    Here is a quote from Instructions to Schedule M.

    “You may be able to take a credit of up to $400 ($800 if married filing jointly) if you have earned income
    from work. Even if your federal income tax withholding was reduced during 2009 because of the credit, you must complete Schedule M and claim the credit on your return to benefit from it. You cannot
    take the credit if the amount you enter on line 5 is $95,000 ($190,000 if married filing jointly) or more, you are a nonresident alien, or you can be claimed as a dependent on someone else’s return.

    The credit is reduced if either of the following statements is true: .

    You (or your spouse, if filing jointly) received a $250 economic recovery payment during 2009. You may have received an economic recovery payment if you received social security benefits, supplemental security income (SSI) benefits, railroad retirement benefits, or veterans disability compensation or pension benefits.

    You take the government retiree credit discussed next.”

    So – what happened to me was normal. I received lower withholding in 2009, and I received an $800 credit to my return.

    The only unusual aspect is that IRS gave me the $800 credit even though I failed to file Schedule M.

    Nice!

    Sorry for the earlier post. I didn’t mean to confuse.

  47. I’ve can’t believe how many of you complain about keeping an extra $400 of your own wages in your own pocket. Of course the gov’t has alterior movitives, they want you to spend it and help spur the economy. Yes this reduces federal revenues in the short-term, which will lead to a higher deficit, but you get to decide how spend (or save) it. This is not welfare, nor does it go to the wealthy. How can anyone argue against hard-working, low-to-middle class Americans paying less in income taxes! If you decide to spend it, buy something made in the USA, we’ll all benefit.

  48. I’m using turbo tax and the $800 credit was added to my taxes due???? Some credit

  49. Ok, so I know I’m late in doing my taxes, but they still need to be done. I held 2 part-time jobs last year, and I have no idea if my withholding was adjusted or not. Is there any way to check for this before I file? If I don’t file Schedule M, Will I still get the credit?

    • Try Turbo Tax for free and it has a link to the IRS web site that checks to see if you received the credit from your employer…or google that link.

  50. Good grief. If taxes had been raised $13 a month, people would be pissed. But taxes were lowered $13 a month. And, guess what? People are pissed.
    Seems like the government can’t win for losing.

  51. I noticed the difference especially when my work heath insurance took an extra $70 out of my paycheck but as far as the $13 a paycheck couldn’t notice that tiny amount,I was too mad about the heath insurance I have to work 2 hrs over time every day and sometimes when my work place allows on my days off just to pay my bills

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