When Work Pays Twice – Schedule M and the Making Work Pay Credit

Let’s walk through some common questions we’re seeing and answers that will help you today. We’ll kick it off now.

Although you might not have noticed, your federal income tax withholdings from your paycheck were adjusted in your favor during 2009 and 2010.

You: Why?

The change was made automatically to account for the Making Work Pay Credit.

You: Didn’t work already pay?

For most people.

You: Then what’s this credit for?

An opportunity to receive even more money from the same amount of work.

You: I like the sound of that. But you said I have the money already, yes?

Yes.

You: So I don’t need to fill out any special forms then, right?

Wrong.

You: What? You just said I already have the money.

Although you effectively received the Making Work Pay credit money via your larger paychecks, you still need to file a Schedule M with your 2010 tax return.

You: And if I don’t?

You will not find out if you received full credit in your paycheck, are due more, or in some cases may not have had enough withheld. You may also have an error in your tax return and it will not match IRS records. Or you can put, you may be giving money back that is owed to you.

You: Why?

When you file Schedule M, you claim your credit. Also, the IRS has information regarding payments that may reduce your credit like the Economic Recovery Payment. You have to put Economic Recovery Payment information on schedule M.

You: Is all this, pardon the expression, work worth it? How much money are we talking about here?

Four hundred dollars for a single person. If you’re married, $800 total.

You: Woah – okay. I’m on that. Is everyone eligible?

Almost everybody.

You: Here it comes. Who doesn’t get the credit?

Ineligible taxpayers are people who:

• Didn’t work in 2010

• Are non-resident aliens

• Can be claimed as a dependent on another person’s return

• Made too much money

• Do not have a valid social security number

You: Made too much money in whose opinion?

Congress.

You: Seriously?

Seriously.

You: How much is too much?

More than $95,000 if you’re single; twice that—or more than $190,000—if you are married and filing jointly.

You: So if I don’t qualify for the credit?

You won’t get the money. But then again, you won’t have to file Schedule M.

You: A silver lining to be sure; but I’d rather fill out the form and get $400.

Good—odds are, you qualify. Go get your money. Where else are you going to make $400 by just filling out a form? And more good news, TurboTax automatically calculates Making Work Pay Credit for you. Just for kicks, here’s an overview of How to File Schedule M.

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN Money.com, latimes.com, The Wall Street Journal, SmartMoney.com, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

Comments (5) Leave your comment

  1. I just learned of this issue, and I qualified for Making Work Pay Credit in 2010, according to a mini IRS computer interview. Can I amend my filing for 2010 and still receive the $400? If so, where do I obtain the form; I cannot seem to locate it through a search. Thank you for your time!

  2. you are absolutely right B Coleman. The amount of tax sheltering for the rich compared to everyday people is staggering. I knew two ex-Wallstreet people that use to laugh about how they tucked away 1 million tax free because it was in a college savings account. Their kids went to state schools. At most they needed $100K for college.

  3. Those of us who are retired and not paying into ss get nothing and the ss increase is nothing compared to the increase in living cost. FOR ME AND MY WIFE NO SCHEDULE M MEANS $800 DOLLARS MORE IN TAXES WHILE ROMNEY PAYS ONLY 13.9%–WHAT A GREAT COUNTRY.

  4. I did not get schedule m generated with my 2011 turbotax. where do I find the check box for I did not receive a economic recovery payment?

    • Hi R Winterhalter,
      You did not receive schedule M generated with you 2011 TurboTax, because the Making Work Pay Credit expired December 31, 2010. Congress approved the payroll tax holiday for 2011, which reduced the amount of Social Security taxes taken out of your pay from 6.2% to 4.2%. The payroll tax holiday was set to expire 12/31/2011, however Congress just extended it until the end of February 2012 until a longer term solution is approved. You will no longer see the credit or schedule M on your tax return. You will just see bigger pay checks until the end of February(and hopefully longer)since the social security tax was reduced.
      Thank you,
      Lisa Greene-Lewis

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