Schedule M: How to Get Your Making Work Pay Credit

A step by step guide on how to fill in Schedule M, the Making Work Pay Credit (MWPC) form.

Christmas is coming early this year. The government has prepared a gift for you, but you have to claim it. It is called the Making Work Pay Credit and you have to file Schedule M in order to get some money back at tax time. Getting money from Uncle Sam has never been easier. It’s not at all difficult to qualify and Schedule M is one of the easiest to fill in. So what are you waiting for?

This credit is available for you if you worked during 2009 and earned at least $6,451 ($12,903 if you’re married and file jointly). Oh, we almost forgot to tell you how big the credit is. Well, you’re just few steps away from cashing in on $400 (or $800 if you file jointly with your spouse).

Let’s begin. First, you enter your name and social security number. Do it correctly, or else the IRS could drop your request and you don’t want to make a $400 mistake.

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If you check “yes” on Line 1a (most people do) and then jump to Line 4 and enter $400 (or $800 if you’re married and file jointly).

There are some cases in which you are not eligible for this credit, though. If you are claimed as a dependent on someone else’s return, you are a nonresident alien, you were paid for work done while in prison, you had a net loss from your business, or if you received a pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan, then you must check “no” on Line 1a and are not qualified for the Making Work Pay Credit (see the 2009 Instructions for Schedule M (Form 1040A or 1040) for details).

If you got any non-taxable combat pay, you have to write the amount on Line 1b. This amount can be found in box 12 of Form W-2 with code Q.

Now, multiply the amount on Line 1a by .062 (6.2%) and enter the result on Line 2. Enter $400 (or $800 if married and filing jointly) on Line 3. If you checked “no” on Line 1a, write the amount from either Line 2 and Line 3 (whichever is smaller) on Line 4.

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Now take your adjusted gross income from your 1040 form (on Line 38), or your 1040A (on Line 22) and write it down on Line 5. Go on to Line 6 and enter $75,000 (or $150,000 if married and filing jointly). If the amount of your AGI (the value you just wrote on Line 5) is higher than this threshold, subtract Line 6 from Line 5 and write the result on Line 7. Then, multiply the amount on Line 7 by .02 (2%) and write the result on Line 8. Then, subtract the amount on Line 8 from the amount on Line 4 and see if you have any Making Work Pay Credit money coming your way.

Too many numbers for your taste? The bottom line is that for every $5,000 you make over the $75,000 limit, your Making Work Pay Credit gets decreased by $100.

If, however, the amount on Line 5 is smaller than the one on Line 6, skip Line 8 and enter the amount from Line 4 on Line 9.

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On Line 10 you have to say whether you have received any form of economic recovery payment during 2009. If you didn’t, just enter zero and go to Line 11. If you did, write down the total, but not more than $250 (or $500 if married filing jointly).

It’s time to see the amount of your Making Work Pay Credit. Subtract the amount on Line 10 from the one on Line 9 and write the result on Line 11. If the result is zero or less, you have to enter zero (this means you won’t get any credit). Don’t forget to take the amount on Line 11 and write it on Form 1040, Line 63, or Form 1040A, Line 40.

To Sum Up

The Making Work Pay Credit is a nice benefit that many people simply forget to claim. You can even see it as an additional pay from your employer. It’s enough to have a job, and Uncle Sam contributes $400 to your paycheck. Being married proves beneficial, at least on this one, as your extra pay can go up to $800.