The Making Work Pay tax credit was a credit that was available for the lower income earners. It was set to provide some form of relief to qualifying taxpayers given the toughening economic times. For the tax year 2010, the taxpayers that qualified for the relief made the claim in their returns made in 2011. As people prepare to make returns for the tax year 2011, many taxpayers are still confused about whether the credit is still available and how to make a claim for the relief. Below is information that will help you resolve any confusions with this credit:
- Credit Not Extended for 2011 – The Making Work Pay Credit was lapsed in 2010 and is no longer available for claiming by taxpayers. This means that taxpayers cannot make a claim for the credit for their 2011 taxes to be reported in 2012.
- Payroll Tax Holiday Replaced Work Pay Credit - A Payroll Tax Holiday was introduced in 2011 as a replacement for the Making Work Pay Credit. However, unlike the former credit, the payroll tax holiday reduces the taxes that one pays on his or her payroll. This means that the amount of income that one makes every payroll went up in 2011 to reflect this holiday. There is therefore no credit or relief to be claimed during tax time in relation to this relief.
- Claiming Payroll Tax Holiday for Self Employed – If you are self employed, you can claim the Payroll Tax Holiday when filing returns. You will make an adjustment to your self employment tax rate by 2% from 12.4% to 10.4% and claim the difference.
- Tax Holiday Set to Lapse in February 2012 – The Payroll Tax Holiday will only apply for 2011 and has only been extended until February 2012. This means that unless Congress makes a further extension, the payroll relief will be lapsed come March 2012 and you may notice a corresponding slight decrease in your net earnings from this month onwards.
- Option to Amend 2010 Returns – If you did not claim the tax credit in 2011 for the 2010 tax year, you still have an opportunity to claim the credit. To do this, you will need to file an amendment to your 2010 tax returns. However, before you file an amendment, you should first confirm that you did not receive the credit. The IRS did include the credit for many taxpayers who had not made a claim for the tax relief and you may have been provided with the credit even if you did not claim the credit. If you ascertain that you were indeed not given the credit, you then need to check whether you indeed, qualified for the credit and how much of the credit you can claim. You can then file an amendment indicating the correct credit that was due to you. You have 3 years from the date of filing the original tax return form to make an amendment after which, the amendment may not be done.