Making Work Pay Tax Credit

Once again, a special tax credit offers taxpayers an opportunity to lower their tax bill or increase their refunds on their 2010 federal tax returns. Available to both Form 1040 and Form 1040A filers, this credit is claimed on Schedule M, Making Work Pay Credit. The Making Work Pay Credit helps millions of workers and self-employed individuals. Although income limits apply to this credit, it is refundable –– meaning that those eligible can get it even if they owe no tax. Though all eligible taxpayers must file Schedule M to claim the Making Work Pay Credit, most workers got the benefit of this credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.

NOTE: 2010 is the last tax year in which workers may claim the Making Work Pay Tax Credit. The Tax Relief Act of 2010 terminates the Making Work Pay tax credit and replaces it with a 1-year payroll tax reduction that will reduce the employee share of the FICA payroll tax by almost one-third, by 2 percentage points – down to 4.2 percent.