The Obama $400 tax cut
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There's been a modicum of inference on the street that Obama has granted a $400 per person "tax cut" via the income tax system.
Since this is filing season, does anyone know how this rebate is implemented and/or obtained? Is it via the tax return?
TurboTax filled out schedule M and inserted a tax payment on line 63 of my 1040. It's money I didn't really pay, so I guess it's the same as a credit. I wonder why the word games.
Mel, I'm going to receive a letter soon from the IRS explaining this $400 windfall. I will post up here when I receive what it is all about. It was news to me.
I used an online tax return service this year (TaxAct) and saw that it included the $400 credit automatically. Didn't know a thing about it before that, but then checked last year's return, too, and saw it was included in 2008 as well.
If you recall, back last Feb/March the tax withholdings for most people paychecks were altered to give you more take home pay, to stimulate the economy. This credit simply reduces the tax owed as you had less withheld to cover whats due. Withhold less, then owe less (net) and you're back to zero. The good news is this credit only applies to people who work.
Here's the IRS information page on the "Making Work Pay" tax credit:
http://www.irs.gov/newsroom/article/0,,id=204447,00.html
...General Information
In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
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I'd not heard of it, but our tax sotftware caught it. It's called the Making Work Pay tax credit. Read the rules in the 1040 instructions.