File M for money: Don’t forget that $400 tax credit

Published 11:05 pm Saturday, March 27, 2010

There are lots of reasons you may not remember a certain $400.

It hasn’t been in the news for more than a year. It was part of the $787 billion economic stimulus package that Congress passed and critics hated. When it showed up in your wages — as it likely did in small amounts, payday after payday — you scarcely noticed.

Now, there are very good reasons for remembering that $400. The $400 “Making Work Pay” tax credit for most Americans (married couples got $800) was included in the 1,000-plus page economic recovery plan, signed into law the day after Presidents Day in 2009.

With this year’s federal income tax deadline coming April 15, you need to include an extra page, Schedule M of Form 1040, in order to claim the Making Work Pay credit — and, if more taxes aren’t owed, hang on to that $400.

For me, it’s tricky enough remembering what happened a year ago without throwing in a lot of numbers. I’m telling you, though, this form is important.

While I waited to ask about it Friday at the Internal Revenue Service Office in Everett, I overhead an IRS worker ask a man there for assistance, “Did you receive an economic recovery payment?” The woman at the counter told me that if you use the simpler 1040EZ form, Schedule M is included on the back.

“We’re certainly trying to make people aware of it. It’s a credit that impacts nearly every working taxpayer,” said David Tucker, an IRS spokesman in Seattle.

Tucker said that the intent was to get more money into taxpayers’ pockets quickly, to get us spending and boost the economy. Employers were given a formula to reduce the amount of taxes withheld from paychecks, which gave us the credit in advance.

“Let’s say you owe $1,000 in taxes, and that normally withholding equals that amount. This year you had $600 taken out,” Tucker said. Not having the additional $400 withheld, you’re still responsible for it — unless you fill out Schedule M. “If you claim that credit, then your tax liability would be zero,” Tucker said. “If you have other credits and exemptions and a $1,000 tax responsibility, with other deductions you might receive that $400 as a refund,” he added.

Pretty important, even if it’s mind-boggling.

Tucker said that if you file electronically, a step in the process should prompt you to include the credit if you’re eligible.

Conrad deAenlle is a California-based journalist who writes a blog called “Against the Grain” on www.MoneyWatch.com, part of CBS Interactive. An understandable explanation of the Making Work Pay credit was included in his blog posted Friday.

“The credit provides $400 to anyone whose adjusted gross income was between $6,451 and $75,000 last year,” he wrote. Smaller amounts were granted to those earning up to $95,000, and retirees were generally eligible for $250, he wrote.

DeAenlle said last week that the credit is money “almost everyone is entitled to, but almost no one knows about.”

No wonder we don’t know about it. We barely saw it.

I recall many months ago getting an e-mail from The Herald’s payroll department saying that our checks would be slightly larger because of the stimulus package. How much larger?

Herald payroll administrator Linda Peterson said Friday that in our company the increases were between $2 and $14 per pay period. I get a check every other week. Peterson and I had a laugh trying to figure out where we spent it. I’m guessing mine paid for vending machine coffee.

Professional tax preparers should know about the $400 credit, deAenlle said Friday, but folks who do their own returns may not.

“I just have a feeling a lot of people don’t know about it,” he said.

Julie Muhlstein: 425-339-3460, muhlstein@heraldnet.com.

Help with taxes

The Internal Revenue Service Taxpayer Assistance Center in Everett is open 8:30 a.m. to 4:30 p.m. Mondays through Fridays at 3020 Rucker Ave., third floor. It will also be open 9 a.m. to 2 p.m. April 10 and 8:30 a.m. to 5:30 p.m. April 13, 14 and 15.

For information about the “Making Work Pay” tax credit, go to www.irs.gov. You’ll find “Instructions for Schedule M” and the Schedule M form.