M is for Making Work Pay Credit.
Doh! This is kind of a trick post.
There is no Making Work Pay Credit for 2011. That also means no Schedule M.
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act which was signed into law on December 17, 2010, did not renew the Making Work Pay Credit. That means that there is no Making Work Pay Credit available for 2011 or 2012. 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), and returns filed in 2012, there is no Making Work Pay Credit.
There is a “replacement” tax break making the rounds for 2012: the Payroll Tax Holiday. It was slated to expire at the end of February but got a last minute reprieve and is extended through the end of the year. The Payroll Tax Holiday was also in place for 2011.
Under the Payroll Tax Holiday, 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. Additionally, the cap for Social Security taxes stay in place (there is no such cap for the Medicare tax).
Unlike the Making Work Pay Credit, which required taxpayers to file a Schedule M, there isn’t anything you have to do to qualify for the Payroll Tax Holiday. If you’re a employee and you receive a form W-2, you’ve already received the benefit of the credit. There are no additional schedules or forms to complete.
If you’re self-employed, you have to do a little bit of work. Since the break also applies to the self-employed, your SE (self-employed) tax is reduced by the same 2%, as calculated on your tax return for 2011. Since SE is calculated on your form 1040, you will need to figure the reduction yourself.
Sufficiently confused? Blame Congress. They’re the folks that vote in a new credit or two every couple of years – and take existing credits away. It’s inefficient, costly and causes taxpayers (and tax pros) no end of trouble. But apparently, it wins votes. *sigh*
You can amend your 2008 tax rretun, or claim it on your 2009 tax rretun, just know that you will not receive the refund for the home buyers until processing is fully completed, processing of home buyer credit is taking up to 18 weeks. IRS will send you your 2009 refund timely. And when you do file for the first time home buyers credit make sure you include all the information needed and sign where it is required, If any information is missing and IRS must request additional info or signature, the process stops and then starts all over once your information is received. Adding another 6-8 weeks to the additional 16-18.Good luck!