If you filed your own taxes this year, you may have overlooked a new credit on the 1040 form. This credit is called the Making Work Pay and Government Retiree Credit and is located on line 63. It requires that you attach schedule M.
“I overlooked it while in the process of preparing my own return,” says Don Grady, owner of People Centrics, a business consulting firm, and Executive Director for Academic Outreach at National-Louis University. Don is a former CPA who practiced for over 10 years. “The reason I overlooked it is that the title that’s associated with Line 63 refers to retirees, and I’m not retired. So I blew right by it. And I’m afraid that’s what others are going to do.”
The purpose of the credit is to reduce the amount of withholding during 2009. “That line is a credit,” says Grady. “ A credit reduces your tax to be paid dollar for dollar, so it’s much better than a deduction, which goes toward your adjusted gross income… When you get a credit, it’s going to reduce your tax liability dollar for dollar, so it’s really important.”
The percentage of the credit coincides with the social security tax percentage of 6.2%. The maximum amount of the credit is $400 ($800 married filing jointly) for those who made between $12,000 and $150,000 per year.
“This particular line combines two types of credits,” says Grady. “The first type is what they call a pay-for-work credit. Essentially, it’s another way for the government to provide stimulus funds to those that are working.”
Part two of the credit is for retirees from government-related agencies, whether state, local, or federal. “If you’re retiring from there, and you’re getting a pension, you’re eligible for getting a credit of $250 to $500,” says Grady. You may have received this credit as a reduced amount of withholding from your pensions. But if you want to get the benefit from it, you still need to claim it on your return.”
If you have already filed your taxes, you can re-file with an amended return, the 1040 X. Include schedule M with the amended return. If you are having trouble with the forms, consult the IRS website at irs.gov for instructions, or a tax advisor.
