If you were employed in 2009 — either working for someone else or for yourself — don't forget to claim the new Making Work Pay refundable credit.
There has been much confusion with the credit so far this tax filing season, both on the part of taxpayers and the IRS. Not claiming the credit to which you are entitled, or claiming it improperly, can cause your refund to be delayed.
The credit is 6.2% of your earned income up to a maximum of $400 for a single worker or $800 for those filing a joint return. Earned income includes W-2 wages, self-employment income and nontaxable combat pay.
Actually, if you were an employee you already received this credit in your weekly paycheck during the year — as the withholding tables were adjusted to reflect the $400 or $800 (which caused many unintended problems for those with more than one job and retirees). It was similar to the previous administration's rebate checks, but much easier and less expensive to administer.
The credit phases out for single, head of household and separate filers for AGI between $75,000 and $85,000, and for joint filers from $150,000 to $190,000.The credit is not available to workers who can be claimed as a dependent on someone else's return and nonresident aliens.
To claim this refundable credit you must file new IRS Schedule M. The credit is reduced by the $250 Economic Recovery Payments received from Social Security or Railroad Retirement.
New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.