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Making Work Pay credit to end

By Kay Bell · Bankrate.com
Tuesday, December 7, 2010
Posted: 1 pm ET

It looks like the outcome we expected all along will happen. The president announced a deal has been reached by bipartisan negotiators to extend the expiring Bush tax cuts for two more years.

There will be much debate over the fiscal and political wisdom of the extension. But when push comes to shove on Capitol Hill (And given the emotion that the tax cuts inspire, I'm hoping that just happens metaphorically!), the tax deal will be approved.

The continuation of our current low income tax rates and several popular tax breaks will all naturally be getting most of the attention.

What caught my eye, though, was something that's being eliminated: the Making Work Pay tax credit.

Good riddance!

It's not that I'm against the tax credit's results. Eligible workers got in 2009, and again this tax year, a credit of up to $400 ($800 for married joint filers).

What I don't like about the credit is its implementation.

It's designed to help relieve some of the 6.2 percent payroll tax that comes out of workers' paychecks to pay for Social Security. The IRS adjusted payroll withholding tables to account for the credit.

But then things got complicated.

To actually claim the credit, taxpayers have to fill out a new form, Schedule M, when they file their annual tax returns. That was very confusing, since they already had seen the credit's effects via reduced payroll taxes.

So lots of folks ignored Schedule M. Or they filled it out wrong.

The bottom line was that the Making Work Pay credit's good intentions and tax savings were undercut by the confusing administration of the tax break.

I'm sure we'll see the same this coming 2011 filing season. I'm hoping, though, that the hassles will be a little less, since we dealt with it this year.

But if the tax cuts compromise does become law, then there's no more messing with Schedule M, at least for two years. And that's very good tax news.

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3 Comments
Michael
December 07, 2010 at 9:22 pm

President Bush signed a first round of tax cuts into law in 2001. During his administration three million jobs (net) were created over its eight years, a fraction of the 23 million jobs created under President Bill Clinton’s administration. The Republicans [and T-BAGGERS] would have us believe that those making over $250,000 are the ones creating the jobs. If this is true, why did the rich create 20 million less jobs than the previous 8 years, while reaping the benefits of the tax breaks?