Schedule M: Making Work Pay Credit (For Tax Year 2010; Not offered for 2011)
Getting money back from the government doesn't get any easier than this. The Making Work Pay Credit (MWPC) allows American workers to get a gift from the Fed at tax time. The requirements are simple, the credit is significant, and the paperwork is easy. Interested?
If you were employed in 2010 you probably earned more than $6,500. If you earned more than $6,500 then you're eligible to harvest a smooth $400 from the federal government. That's it. No really.
Like all these supplemental forms, you'll need to enter in your name and social security number at the very top. Don't do it and the IRS could refuse your form. Please don't let this be a $400 mistake.
For most people that check yes, enter you wages on Line 1a, and enter $400 ($800 if married filing jointly) on Line 4. You can now move on to Line 5. I told you this was easy.
But if someone else can claim you, you have to check no online 1a and are not eligible for this credit. If you received pay while in prison, if you have a net loss from a business, or if you received cash from a nonqualified pension or annuity, you won't be eligible for the making work pay credit.
If you received nontaxable combat pay you'll need to enter the amount on Line 1b. You can find this figure on your W-2, box 12, with a code of Q. Now multiply Line 1a by 6.2% and enter the total on Line 2. Then enter $400 ($800 if married) on Line 3. On Line 4 enter the smaller of Line 2 or 3 unless you checked yes on Line 1a.
Now enter your adjusted gross income from Line 38 of your 1040 (or Line 22 of your 1040A) on Line 5. On Line 6 enter $75,000 ($150,000 if filing jointly). If your AGI is below this threshold skip Line 8 and enter the amount from Line 4 on Line 9.
If it's more, you'll need to subtract your wages from Line 6 and enter the total on Line 7. You then have to multiply line 7 by 2% and enter the total on Line 8. Now you can subtract Line 8 from the work credit to see if you're if you've got any money coming to you. What this boils down to is for every $5,000 you make over the $75,000 threshold, your making work pay credit will be reduced by $100.
Line 10 is trying to establish whether you've received some form of economic recovery payment last year. If not, enter zero and move on to Line 11. If you did, enter the total (with a maximum $250, $500 if married filing jointly), on Line 10. If you did not receive a government retiree benefit, check no and move on to Line 11. If you did, enter $250 and check yes on Line 11.
Now subtract Line 10 from Line 9 and enter the total on Line 11. Line 11 yields your total Making Work Pay Credit which you should enter on your main tax return. That's Line 63 on your 1040 or Line 40 on a 1040A.
Cha-Ching
If you're married (and you both work), an $800 payment from the Making Work Pay Credit is a nice benefit most forget about. Heck, you could even think of it as extra pay from your employer. Do the math. On a 40 hour workweek this credit works out to be 40 cents per hour. So the next time you see him, thank Uncle Sam for the nice raise he just gave you.
