The tax alphabet is sure filling up. Earlier this month, I blogged about the new Schedule L that some taxpayers will have to file with their 2009 returns next year.
Let me now introduce you to Schedule M.
As the Schedule M snippet above indicates, it's related to the Making Work Pay credit that was part of the American Recovery and Reinvestment Act. Under that bill, popularly known as the February 2009 stimulus package, working taxpayers could get up to a $400 benefit. In addition, the stimulus package provided a special $250 payout to many retirees.
Now comes the fun part. When filing season rolls around next year, all of us who got some added cash from the credit get to account for our minimal windfall on this new form.
That's right. Every time there's a tax break, there's usually more tax paperwork.
Not as easy as advertised: When the Marking Work Pay credit was announced earlier this year, it sounded easy enough. The credit amount would be distributed automatically to workers via a change in payroll withholding tables.
All you had to do was earn your pay and voila, your withholding would be adjusted to make sure a smaller portion of your pay went toward your federal taxes. You'd see the credit benefit as a slightly larger amount of take-home pay in each paycheck.
That did happen for most folks. But not all.
Self-employed folks have no payroll withholding taken out of their earnings. So if these folks didn't adjust their quarterly estimated tax payments to reflect the credit, they didn't get an extra dime this year. They'll need the Schedule M to compute the credit amount they can claim.
And even more problematic, folks like those I discussed in Making Work Pay payroll considerations will get too much of a credit this year. Schedule M will sort out that overpayment.
But it won't be easy, espeically if you do the work by hand instread of using tax software. The Schedule M worksheet that's included in the form's instructions looks to be even more intimidating that the Schedule M itself.
And even folks who file the easiest return, the 1040EZ, won't be off the hook. While those folks won't have to file a separate form, they will have to complete a worksheet on the back of the simplest of 1040s.
Make sure you report it: Think you can ignore this form because you already collected your Making Work Pay $400 credit though payroll withholding and made less than the phaseout amount ($75,000 in adjusted gross income for single taxpayers, $150,000 for couples filing jointly)?
You'll need to file Schedule M (or complete the 1040EZ worksheet) or your appropriate Making Work Pay credit amount won't be reflected on your filing.
The correct credit amount, arrived at via the worksheets and/or Schedule M, is reported in the "payments" section of your return, along with, among other things, the amount of income taxes you had withheld or paid via estimated filings.
If you don't include the Making Work Pay credit amount, you essentially give back the eligible credit money that you received in 2009.
And if you got more than you should have, the smaller amount you can claim on your 2009 return will be reflected there.
As the instructions for this new schedule (and other tax forms) are finalized and the filing season gets closer, I'll revisit this and other new 2009 tax forms. I know all y'all are as excited about that prospect as I am!
Yep, the 2010 tax filing season is going to be another wild one for tax preparers, tax software companies, the IRS and, most importantly, we taxpayers.