As the deadline approaches for filing tax returns, the process of claiming a tax break created by the stimulus package has proved to be more work than millions of people had bargained for.
The new tax credit, championed by President Obama as a follow-through on his campaign promise to provide broad-based tax relief, affects 95 percent of all Americans by cutting $400 from the total tax bill for individual filers and $800 for married couples.
In an effort to jump-start the sputtering economy by putting the money into people’s pockets as quickly as possible, the government also decided to pay the credit upfront and instructed employers to reduce the amount of federal withholding deducted from workers’ paychecks over the last year.
But what millions of taxpayers did not realize was that to have the credit deducted from the total amount of taxes owed, they are required to complete a new form, Schedule M. For millions of retirees, the procedure also requires an additional step because they have to deduct the tax break, known as the “Making Work Pay” credit, from other tax credits they may have received.
While either of those procedures takes only a few minutes, I.R.S. officials said that the unfamiliarity with the process of claiming the credit had led to errors in more than four million of the 82 million returns processed as of this week. The government expects to receive 60 million more returns by the filing deadline on Thursday, so it is possible that millions of additional returns will also contain similar errors.
– “Many Filers Confused by Stimulus Tax Credit”, The New York Times, April 10, B1
If you had wages in 2009, you are entitled to a Making Work Pay tax credit of up to $400 for individuals and $800 for married couples. (If your Adjusted Gross Income was greater than $75,000 but less than $95,000, the credit is graduated down. Above $95,000 and you can’t claim a credit). Make sure to file Schedule M and claim the credit on line 63 of Form 1040.