Tax credits are the IRS’ way of saying ‘Thanks’!
Even if you’re behind on filing past tax returns, it’s important to take your time and file each one accurately. Sure, in some cases you won’t be able to claim your refund after a certain period of time has passed but you can always reduce your tax liability. That’s what tax credits are for.
For the 2009 and 2010 tax years, there was a tax credit known as the Making Work Pay Credit. Did you know that you can still claim this credit on your tax returns for those years? Let’s find out if you qualify.
What is the Making Work Pay Tax Credit?
You might remember President Obama focusing in on the Making Work Pay Tax Credit as a key policy of his 2009 stimulus package. It was meant to initiate more household spending among families in the U.S. Well, it stuck…for a couple years at least. The credit was authorized in the American Recovery and Reinvestment Act of 2009. Many taxpayers saw a reflection of this credit as an increase in their paychecks throughout the year.
Can I claim it on my late 2009 and 2010 tax returns?
If you have yet to file your 2009 or 2010 taxes and you earned wages or self-employment income in 2009 and/or 2010, you most likely qualify for the Making Work Pay Tax Credit. Of course, it’s never that simple when the IRS is involved. There are some factors that make you ineligible to claim the credit.
- if you are a non-resident alien
- if you are a taxpayer without a valid SSN
- if you are being claimed by a dependent on someone else’s tax return
- if you are a taxpayer with a modified AGI of $95,000 or more
- if you are filing a joint return with a modified AGI of $190,000 or more
- if you are filing a joint return and neither spouse has a valid SSN
How will the credit affect me?
A tax credit will directly reduce your tax liability (or increase your refund amount) dollar for dollar. This is sometimes confused with a tax deduction which will lower your taxable income. Unfortunately, you can no longer claim a 2009 or 2010 tax refund thanks to the IRS’ 3-year statute of limitations. However, if you owe tax for those years and are eligible for this tax credit, you can say hello to $800 off your tax bill if you’re married filing a joint return or $400 otherwise.
If you are a qualifying taxpayer but meet one of the following restrictions, then the amount of the credit that you can claim may be reduced.
- You are filing a joint tax return with a modified AGI between $150,000 and $190,000.
- You are not filing a joint return with a modified AGI between $75,000 and $95,000.
- You receive an economic recovery payment.
- You claimed the government retiree credit.
Can I claim the credit on my future tax returns?
No, unfortunately, it no longer applies. The credit expired on December 31, 2010. You can only claim it for the 2009 and 2010 tax years.
Need help seeing what other credits you can claim? Give our tax team a call. There are always new tax credits available and they can help you determine which ones you qualify for!