Are you unemployed or struggling with personal finances?  There is a new informational section on the government website, IRS.gov, that has information and web links to tax-related resources, tax assistance information, and suggestions that could help you through these difficult financial times. The Tax Center to Assist Unemployed Taxpayers has been created to offer advice, free publications, links to sources for tax planning, tax settlement plans, offers in compromise, etc. as well as other relevant topics for which you need planning information. There are also links to videos, health insurance information, and other IRS publications covering topics like bankruptcy, cancellation of debt income, and bartering income. Get information directly from the “horse’s mouth” rather than your well-intentioned neighbor or friend.

Making Work Pay Credit (MWPC) as noted in a previous blog post is a refundable credit available in 2009 and 2010 worth 6.2% of earned income up to $400 ($800, MFJ) for taxpayers with a valid for work social security number. You cannot be a dependent of another taxpayer or identified as a non-resident alien. If you receive earned income as an employee you more than likely began receiving this credit beginning in April, 2009 as a reduction in the amount of federal income tax withheld from your paycheck; though not large, an amount was proportionally reduced so that your net pay was greater than what it had been at the beginning of the calendar year. If you completed the IRS Form W-4 in 2009 using single withholding status, the total tax withholding for 2009 would have been reduced by $400 (those using a married withholding status, $600).

Form 1040, Schedule M, Making Work Pay and Government Retiree Credits, is a new form in 2009 that must be filed by eligible individuals claiming MWPC on Forms 1040 or 1040A. IRS Form 1040EZ filers enter MWPC directly on the 1040EZ form; they do not file the additional Schedule M. The MWPC is not considered taxable income by the Federal government. Similarly, it is not used in the determination of eligibility for federal program benefits or assistance.

The American Recovery and Reinvestment Act of 2009 (ARRA) was passed to help the US economy, with almost $800 billion in stimulus money, to recover from the recent financial crisis. Three provisions affect the average taxpayer in 2009; the Making Work Pay Credit (MWPC), the Economic Recovery Payment (ERP), and the Government Retiree Credit (GRC).

In brief:
Making Work Pay Credit (MWPC) is a refundable credit available in 2009 and 2010 worth 6.2% of earned income up to $400 ($800, MFJ). You are not eligible for this tax credit if you do not have a valid for work social security number, are a dependent or non-resident alien. When filing MFJ, only the taxpayer needs a valid social security number. Most taxpayers will have already received this “tax benefit” through the mid-year reduction in tax withholdings.

Economic Recovery Payment (ERP) is a one-time payment of $250 paid to retirees and those disabled who receive SSI, RRB (Railroad Retirement Benefits) Tier 1, and VA (Veterans Administration) pension or disability benefits. These latter individuals who received distributions in November or December 2008, or January 2009 will have already received ERP.

Government Retiree Credit (GRC) is a refundable credit of $250 ($500 if MFJ and both spouses are eligible) available in 2009 for retired government workers who do not receive social security benefits. A tax return must be filed to receive this payment; it reduces the MWPC.