The Expiration of The Making Work Pay Credit

If you read my post last week, you noticed I mentioned the 2% social security tax reduction for tax year 2011.  While this is certainly a nice pay raise, we need to make certain we don’t forget about the expiration of the Making Work Pay Credit. The Making Work Pay Credit benefited most earners with a $400 credit ($800 for a couple). The credit was not renewed for tax year 2011, so; therefore, we can’t forget to include its expiration in our 2011 tax planning.

Plan Wisely

While it’s certainly confusing and difficult to keep up with the stimulus de jour, it’s imperative to plan accordingly.  For many couples, the expiration of the Making Work Pay Credit will impact the taxable bottom line for 2011 by $800. This should be addressed through tax planning and adjustments should be made to cover the shortfall….if necessary.

The 2011 social security tax reduction (your two percent raise) is nice, but we must remember the reduction shouldn’t impact your federal withholding rate (at least not much). If you are thinking of ways to spend your two percent raise (especially if they weren’t on my approved list last week), I would suggest to plan accordingly.

If anything, all this confusion illustrates the importance of tax planning.  On one hand, it seems simple…..a 2% pay raise. On the other hand, it’s doesn’t…..a loss of an $800 tax credit for many filers. So, what should you do? The answer is simple: plan!

About the author

Troy Von Haefen, CFP®
Troy Von Haefen, CFP®

6 Comments

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  • I still do not understand the Making Work Pay Credit. We had to pay it back this year ($800 for married couple)on our 2011 taxes. It appears by the 2011 Federal tax table that my employer was taking out the correct amount of taxes so my question is, why did we own this $800? And, what happens next year, the 2012 tax schedule is not that much different from 2011?

  • I did my taxes and the tax preparer said that everyone owes $400 ($800 mfj) and its because of the make work pay. I thought that was a tax credit, why is it being deducted? And I don’t see anything on my 1040 saying its being deducted, is this tax preparer skimming money or is anyone else having this problem?

  • Thank you for posting information about the making work for credit expiration for 2011. I went to the local irs office and asked for schedule M for my 2011 tax retun and was told they didn’t have it. Then I called the IRS by Phone and after 15 minutes listening to music I googled and found your site which answered the question clearly. The $800 was a help for those of us who qualified and would like to know when the vote was taken in Congress and who voted for the credit expiration? There are better ways to balance the budget, like giving incentives to CEO’s to bring back manufacturing and other jobs to American workers and those of us that want to work.

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