January 31, 2010

Making Work Pay Tax Credit

Many working taxpayers are eligible for the Making Work Pay Tax Credit, a provision created by the American Recovery and Reinvestment Act in early 2009.

Here are 10 things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

  1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
  2. For taxpayers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.
  3. Taxpayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.
  4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.
  5. Taxpayers who file Form 1040 or 1040A will use Schedule M, Making Work Pay and Government Retiree Credits to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
  6. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit.
  7. In 2010, you may notice that your paychecks are slightly lower than in 2009. The slight decrease may be because of the Making Work Pay Credit. Most of the credit for wage earners is distributed through reduced withholding. The credit – which was spread out over nine months last year – is being spread over 12 months this year. A little less credit in each paycheck means slightly higher withholding. But don’t worry, in the end it all adds up.
  8. Certain taxpayers should review their tax withholding to ensure enough tax is being withheld in 2010. Those who should pay particular attention to their withholding include: married couples with two incomes, individuals with multiple jobs, dependents, pensioners, Social Security recipients who also work, and workers without valid Social Security numbers.
  9. Having too little tax withheld could result in potentially smaller refunds or – in limited instances – small balance due rather than an expected refund.
  10. To ensure your current withholding is appropriate for your individual situation, you can review Publication 919, How Do I Adjust My Tax Withholding? You can also perform a quick check of your withholding using the interactive IRS Withholding Calculator on IRS.gov.
  11. If you find you need to adjust your withholding, submit a revised Form W-4, Employee's Withholding Allowance Certificate to your employer. 

Visit IRS.gov for more information about the making Work Pay Tax Credit, Schedule M, Form W-4 or Publication 919. You can also call 800-TAX-FORM (800-829-3676) to order forms and publications.

Credit Card Survey

Learn more about your credit card! The 2009 Credit Card Survey was conducted between March 4 and May 20, 2009 by Sheree Jones and Kristen Ashby, students at the Virginia Tech, and Ruth Susswein of Consumer Action. The survey contains basic information about different credit cards offered by 22 of the most popular credit card companies in the United States. The survey includes details on: APR, fixed and variable rates, minimum and maximum fees, and grace period.

For more details, check out Consumer Action News.

January 27, 2010

Estate planning made easy

Nolo Press estate planning products are on sale now. Get 40% off Quicken WillMaker Plus 2010 and Plan Your Estate. Sale ends Feb. 4. I use their estate planning books and software. Check out their website to learn more about wills, trusts, and estate planning and other aspects of personal finance: www.nolo.com

January 20, 2010

Save During Tax Time

Now, taxpayers have an easy way to keep some of the pie for themselves: Finally, savings made simple! Using Form 8888, taxpayers can direct-deposit tax refunds into up to three accounts, making it easy to save a portion of their refunds. They can spend some on expenses, invest some in a long-term goal and save some for emergency funds.

Sponsored by the America Saves, Consumer Federation of America, and H&R Block.

Book of the Month

The New Frugality by Chris Farrell.

As the recession continues, with a downturn in spending, rise in defaulting mortgages and throttling of credit, a Go-Go economy has transitioned to an Uh-Oh economy. How did we get here, and what does it mean for individuals and families? The New Frugality lays out how Americans have overspent, and offers a way out through consuming less and saving more — showing that living simply is not just living cheaply.

New Credit Card Rules

The Federal Reserve Board has announced new rules to protect consumers who use credit cards from a number of costly practices. Credit card issuers must comply with most aspects of the rules beginning on February 22, 2010. Among other things, the rule will:
  • Protect consumers from unexpected increases in credit card interest rates
  • Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 without consent or the ability to make the required payments
  • Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.
  • Limit the high fees associated with subprime credit cards.
  • Ban creditors from using the "two-cycle" billing method to impose interest charges.
  • Prohibit creditors from allocating payments in ways that maximize interest charges
Consumers can learn more about changes to their credit card accounts by accessing a new online publication: "What You Need to Know: New Credit Card Rules." It explains key changes consumers can expect from their credit card companies as a result of the new rules.

For more information about the new rules, including the official press release, visit Federal Reserve.
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