You probably haven’t been able to pick up a newspaper or magazine in the past year, or so much as flick past a news program on television or radio, without reading or hearing the word “stimulus.” What you may not have heard about is a stimulus-provided tax credit that you may qualify for.Deal of the Day: Credit Karma Tax offers 100% free Federal and State tax filing with a Maximum Refund Guarantee and Audit Defense. Never pay a penny to file your income taxes. Read the Full Review Here
That credit is the Making Work Pay Credit, and claiming it means being familiar with Schedule M. Schedule M is a simple, one-page form appended to your Form 1040 (i.e., your tax return). To fill it out, all you will need is your name, social security number, and some basic information about your income.
Some of you may already be experiencing a reduced withholding because of this credit. In other words, your employer is accounting for your expected credit, taking fewer tax dollars out, and sending you home with a larger paycheck. Even if you’re already receiving the credit via a reduced withholding, you must still fill out the Schedule M in order to claim the Making Work Pay Credit.
To fill out your Schedule M, you will need to know:
- The amount you made in wages this year
- Members of the military will need to know any non-taxable combat pay not included in their wages
- The amount on line 38 of your Form 1040 or line 22 of your Form 1040A
- The amount of economic recovery payments you or your spouse received during the year, if any
- Any pension or annuity paid for service as a government employee, excluding any included on your W-2
With those numbers handy, all you need do is consult the Schedule M. Schedule M will direct you where to enter relevant totals, and explain a few basic operations you’ll perform on those numbers.
Your situation may change if you fall into one of the following categories:
- If you have a net loss from a business
- You received a taxable scholarship or fellowship not included on your W-2
- Your wages include pay for work completed while an inmate at a penal institution
- You received a pension or annuity from a non-qualified deferred compensation plan or a nongovernmental section 527 plan
- You are filing Form 2555 or Form 2555-EZ
If you’re filling out a Form 2555 or 2555-EZ, Schedule M will instruct you on which amounts to take from these forms (lines 45 and 50 from Form 2555 and line 18 from Form 2555-EZ) and where to record them in the Schedule M.
Schedule M will also tell you where to record net losses from business, which you’ll find on one of several schedules, depending on what sort of business generated the income. It will also instruct you on how to record scholarship or fellowship dollars that went unreported on your W-2, and any wages earned while an inmate at a penal institution.
With all that information in place, the Schedule M instructions will run you through which numbers to add to which, and how to carry the data onto the Schedule M proper.
For most filers, the Schedule M should be an easy process. If you use an automated, computer-based tax service, chances are it will ask a few questions to see if you qualify, and then fill out the schedule from your personal data. If you use an in-person tax pro, make sure to ask if you qualify. Should you need help filing your taxes this year, you may want to consider both Turbo Tax and H&R Block. Their free online tax software can make your tax nightmares disappear.
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