Making Work Pay Tax Credit: What You Need to Know

Some key highlights of the tax credit that many workers will begin getting today.

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Starting in April, workers will be getting small additions to their paychecks, thanks to the stimulus package "Making Work Pay" tax credit. The fatter paychecks will continue through 2010--totalling up to $400 a year for working individuals, and $800 a year for married joint filers.

Here are a few things to know:

Look out if you have two jobs: If both of your employers pay you the full tax credit, you may owe money when tax season rolls around next year. To avoid the situation, make sure your employer is witholding the proper amount. (In fact, the IRS says there's a good chance you're not withholding enough if you have multiple jobs; a working spouse; income that isn't subject to withholding, such as capital gains or rental income; or you owe other taxes like self-employment tax.)

Rich folks won't get much: The tax credit is smaller for those earning $75,000 and above (or $150,000 as a married couple filing jointly) and its zero for those earning more than $95,000 (or $190,000 for couples filing jointly).

This isn't for retirees: If you received social security payments or pension benefits, then you'll get a $250 payment this spring, not the yearlong tax credit.


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