J. William Seabrooke CPA P.C.

This post is providing factual information from the Internal Revenue Service regarding the tax benefits for individuals and businesses through the provisions of “The American Recovery and Reinvestment Act (ARRA) of 2009”.  Although the law was signed by President Obama on February 17, 2009 there are still tax benefits available for tax year 2010.  There are two major sections for this post: 1) the “Making Work Pay Credit”, and 2) the other seventeen major tax benefit areas. 

“The bill is intended to provide a stimulus to the U.S. economy in the wake of the economic downturn. The bill includes federal tax cuts, expansion of unemployment benefits and other social provisions, including domestic spending in education, health care, and infrastructure, including the energy sector.” (IRS website)

• The “Making Work Pay Credit” (please note that this is a “refundable” tax credit) 

Many working taxpayers are eligible for the Making Work Pay Tax Credit in 2010. The credit is based on earned income and is claimed on your 2010 tax return when you file your taxes in 2011.

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

1. The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
2. Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.
3. Taxpayers who file Form 1040 or 1040A will use Schedule M 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.
4. Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.
5. You cannot take the credit if your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return, you do not have a valid social security number or you are a nonresident alien.

Visit http://www.irs.gov/recovery for more information about the Making Work Pay Credit. 
  
 Links:

• The American Recovery and Reinvestment Act of 2009: Information Center
• Publication 919, How Do I Adjust My Withholding?

• Other Provisions of the Tax Law

Information for Individuals

Can you benefit from Recovery Act tax credits? Try the White House Tax Savings Tool to find out.

 Many of the Recovery Act provisions are geared toward individuals:

• Homebuyer Credit. Homebuyers who purchase by April 30, 2010, and settle by Sept. 30, 2010, may be eligible for a credit of up to $8,000. Documentation requirements apply. See the first-time homebuyer page for more.
• COBRA. Workers who lose their jobs between Sept. 1, 2008, and May 31, 2010, may qualify for reduced COBRA health insurance premiums for up to 15 months.
• Education benefits. The American opportunity credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.
• Home energy efficiency and renewable energy incentives. See what you can do to reap tax rewards.
• Earned Income Tax Credit. The EITC is bigger in  2009 and 2010.
• Additional child tax credit. More families will qualify for the ACTC in 2009 and 2010.
• Making Work Pay Tax Credit. This credit means more take-home pay for many Americans in 2009 and 2010. Make sure enough tax is withheld from your pay with the help of the IRS withholding calculator. See Making Work Pay for more.
• $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment was paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board in 2009. To verify whether you received it, call 1-866-234-2942 and select Option 1 or visit Did I Receive a 2009 Economic Recovery Payment? on this website.
• Money Back for New Vehicles. Taxpayers who bought new cars and certain other new vehicles in 2009 can deduct the state and local sales taxes they paid as well as other taxes and fees they paid in states with no sales tax.
• Increased Transportation Subsidy. Employer-provided benefits for transit and parking rose in 2009.
• Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.
• Health Coverage Tax Credit. This credit increased from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Information for Businesses

The following Recovery Act provisions affect businesses:

• Making Work Pay Tax Credit. The 2010 withholding rates, contained in Notice 1036, reflect reduced withholding. An optional withholding procedure is available for pension plan administrators.
• Work Opportunity Tax Credit. This expanded credit adds returning veterans and “disconnected youth” to the list of new hires that businesses may claim.
• COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers, including an updated Form 941.
• Energy Efficiency and Renewable Energy Incentives. See what businesses can do to reap tax rewards.
• Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Find information on carrybacks, an expanded section 179 deduction and other business-related provisions. The Worker, Homeownership And Business Assistance Act Of 2009 (WHBAA) expanded the five-year NOL carryback to most businesses.
• Municipal Bond Programs. New ways to finance school construction, energy and other public projects . 

 Related Items:

• IRS news releases, multimedia and legal guidance
• Marketing products for partners
• Summary of the key provisions from the Senate Finance and House Ways and Means committees