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The American Recovery and Reinvestment Act of 2009 (commonly referred to as the Recovery Act), which was signed into law on Feb. 17, 2009, makes a number of beneficial tax changes for individuals. However, most of them are temporary in nature, that is, unless extended by future legislation, they apply for 2009 only or in some cases for 2009 and 2010.
Today, and over the next week, I’ll be positing about the more widely applicable provisions that could have an impact on you and your family.
Making Work Pay Credit
Individuals who work generally get a credit of up to $400 ($800 for joint filers). The credit is refundable, meaning you get it even if you owe no income tax. This change applies for 2009 and 2010. The credit is the lesser of 6.2% of your earned income or $400 ($800 on a joint return). The credit is phased out for joint filers with modified adjusted gross income between $150,000 and $190,000 and other taxpayers with modified AGI between $75,000 and $95,000.
You won't be getting a separate check from the IRS, as you did with last year's Stimulus payment. Rather, your employer will automatically adjust your withholding so that you will get a little more money in each paycheck. If you have multiple jobs, you may have to adjust your withholding so that too much is not taken out. If you are self-employed, you can effectively receive the credit in advance by reducing your estimated tax payments.
One-time $250 payment or credit for others. The Recovery Act provides a one-time payment of $250 in 2009 to retirees, disabled individuals and SSI recipients receiving benefits from the Social Security Administration, Railroad Retirement beneficiaries, and disabled veterans receiving benefits from the U.S. Department of Veterans Affairs. It also provides a one-time refundable tax credit of $250 in 2009 to certain government retirees who are not eligible for Social Security benefits. The Making Work Payment credit is reduced by any $250 payment or credit received.
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