Taxpayer asks:
I read that the Making Work Pay Credit was back for 2011 (I saw this post) but I can’t find anything about it even on the IRS web site. Can you help?
taxgirl says:
Easy answer first: the Making Work Pay Credit was not extended into 2011. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act which was signed into law on December 17, 2010, did not renew the credit.
The reason that posts on the web (including on my site) from early in the year reference 2011 is that the credit was still applicable for the 2010 calendar and tax year for tax returns filed in 2011. However, for the current calendar and tax year (2011), there is no Making Work Pay Credit. You will not report the credit in 2012 when you file your 2011 federal income tax return.
There is a “replacement” tax break making the rounds for 2011, the Payroll Tax Holiday, meant to make up for the loss of the Making Work Pay Credit. If you’re an employee, you should have noticed a few extra dollars in your paycheck each pay period this year. That’s because, on the employee side, payroll tax contributions for federal purposes have been reduced by 2%: instead of paying in at 6.2% for Social Security taxes, contributions are 4.2% for Social Security taxes. Contributions for Medicare remained the same.
The break also applies to the self-employed. The SE tax (more or less, the self-employed equivalent of FICA taxes) will be reduced by the same 2%, as calculated on your tax return for 2011.
And the rumor that there would be a federal stimulus check for 2011 to replace the Making Work Pay Credit? Just a rumor. No check.
So, there you go. No federal stimulus check for 2011. No Making Work Pay Credit for 2011. Rather, just the payroll tax holiday for employees which, for now, is in effect for one year and one year only.
The result was supposed to boost the economy. Did you feel it? And if you did, what did you do with the money?
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
I would have preferred to have the $400 relief that the Work for Pay Credit brought into my household…not just saved $40.00 for less payout for ss tax.
So, I have so many exemptions that I essentially have $0 taken out in federal tax. Would this mean that for me to see this as a bonus I need to reduce my exemptions so I get taxes taken out and can get a reduction on them? Why does it look like the government is trying to punish people with kids?