Making Work Pay and Government Retiree Credits
The American Recovery and Reinvestment Act of 2009 (ARRA) was passed to help the US economy, with almost $800 billion in stimulus money, to recover from the recent financial crisis. Three provisions affect the average taxpayer in 2009; the Making Work Pay Credit (MWPC), the Economic Recovery Payment (ERP), and the Government Retiree Credit (GRC).
Making Work Pay Credit (MWPC) is a refundable credit available in 2009 and 2010 worth 6.2% of earned income up to $400 ($800, MFJ). You are not eligible for this tax credit if you do not have a valid for work social security number, are a dependent or non-resident alien. When filing MFJ, only the taxpayer needs a valid social security number. Most taxpayers will have already received this “tax benefit” through the mid-year reduction in tax withholdings.
Economic Recovery Payment (ERP) is a one-time payment of $250 paid to retirees and those disabled who receive SSI, RRB (Railroad Retirement Benefits) Tier 1, and VA (Veterans Administration) pension or disability benefits. These latter individuals who received distributions in November or December 2008, or January 2009 will have already received ERP.
Government Retiree Credit (GRC) is a refundable credit of $250 ($500 if MFJ and both spouses are eligible) available in 2009 for retired government workers who do not receive social security benefits. A tax return must be filed to receive this payment; it reduces the MWPC.