I’ve been getting a lot of emails about what people are calling a 2009 stimulus check, passed by Congress and signed by President Obama last month. People are confused, wondering what the stimulus check is, if it’s a tax credit, who is eligible, etc. It’s a little confusing but I think I can put it all to rest.
Make Work Pay Tax Credit
The Make Work Pay Tax Credit was a law included in the new stimulus package called the American Recovery & Reinvestment Plan  and called for a refundable tax credit to workers in 2009 and 2010.
- Workers get a tax credit of 6.2% of their earned income, up to $400 for individuals and $800 for couples.
- Nonresident aliens and individuals claimed as dependents are not eligible.
- The credit phases out at 2% of income over $150,000 for couples and $75,000 for single filers, with the credit completely eliminated for couples earning more than $190,000 and singles earning more than $95,000.
- The credit is reduced by any other payments associated with the stimulus package, such as the Social Security benefit of $250.
The credit will come by way of a reduction of paycheck withholdings, meaning your paycheck will be slightly larger than before. It won’t seem like a lot but it’ll be $400 or $800 (or less, based on your income) you didn’t have before! The Tax Policy Center  has a little writeup about it, giving it a B+.
One thing to watch out for is how employers implement this. For single filers, you don’t have to worry because your employer knows your complete tax picture. For couples, you may want to work with your HR to determine the proper amounts. If you believe your combined income is in the phaseout region, or above it, be sure to tell your HR representative. If they give you the credit and you aren’t supposed to get it, you will owe taxes, and perhaps penalties, next year, warns MarketWatch .
That’s it! That’s the Make Work Pay Credit and what some people call the new stimulus check!
(Photo: oyf )