Did you make less than $95,000 last year? If so, you’re probably eligible for a $400 tax credit, thanks to the government’s Making Work Pay program.
Here’s the catch. You must fill out a tax form called the Schedule M to get your credit. No tax form, no credit. That’s true for self-employed workers, too.
Here’s where things get confusing. There is no rebate check for Making Work Pay. Instead, the government actually reduced your payroll taxes last year. That way, you could get a few more bucks each paycheck, and get use of the credit sooner. It was incremental, and you probably didn’t notice it.
Oddly, the IRS doesn’t actually apply that credit until you file a Schedule M. Bankrate’s Kay Bell explains how it works:
Essentially what the IRS wants via this new form is to double-check that people get the correct credit amount due them. The problem is that in some cases, people got more credit than they should have. This could be the case for someone who held multiple jobs or who could be claimed as a dependent on someone else’s tax return. In such instances, the Schedule M will account for the over payments.
And for folks who are eligible for the full amount, Schedule M will help them determine whether they received the maximum possible credit in their paycheck or are due more money when they file their returns.
For most folks who made under the thresholds and had their withholding reduced last year, there’s no problem. The credit amount plus your reduced withholding amount on your W-2 will be added together (along with any other credits for you might be eligible) in the “payments” section of your 1040 or 1040A to cover your tax bill.
If all of these amounts are more than your tax bill, you’ll get a refund. But if you didn’t claim the credit, that money won’t be counted, so you’re shorting yourself.
Note to government: Rebate checks would have been a better idea. Read more of Kay’s article here for further clarification on the Schedule M.