What is the “Making Work Pay” tax credit?

In February 2009, the IRS revised its withholding tables to incorporate the Making Work Pay tax credit contained in the American Recovery and Reinvestment Act of 2009 (ARRA). Available for tax years 2009 and 2010, the tax credit is 6.2 percent of a taxpayer's earned income with a maximum credit of $800 for a married couple filing jointly and $400 for other taxpayers. It is phased out for married couples filing jointly with modified adjusted group incomes of between $150,000 and $190,000, and other taxpayers with modified AGI of between $75,000 and $95,000.

Instead of issuing separate stimulus checks, the IRS updated its withholding tables so that the benefit is spread out over an employee's paychecks. The revised tables can be found in IRS Publication 15-T (http://www.irs.gov/pub/irs-pdf/p15t.pdf ). Employers should begin using the revised tables as soon as possible, but no later than April 1, 2009.