Tax Credit and Stimulus Payments for Boomers and Retirees in 2009
Yes, the 2009 Stimulus Bill contains a little something for boomers and retirees: The retiree tax credit and the Making Work Pay credit. The former credit will depend on your Social Security status. The latter credit will depend on your income.
Retiree Tax Credit
This is a “refundable” tax credit which means that even if you owe no income taxes, the IRS will be sending you the money.
This credit is also available to disabled individuals receiving certain Social Security benefits as well as those receiving Supplemental Security Income, Railroad Retirement benefits, and veterans’ benefits.
Retirees from federal government jobs who do not receive Social Security are also entitled to this credit but they will have to wait until they file their 2009 tax return.
The “Making Work Pay” Credit
If you are working (even while receiving Social Security retirement benefits), you may also be entitled to the benefit of the “Making Work Pay” credit of $400 per individual and $800 per married couple. This credit will be provided in the form of reduced income tax withholding from your pay checks.
This 2009 stimulus tax credit will be calculated at a rate of 6.2% of earned income. It will phase out for taxpayers with adjusted gross incomes over $75,000 ($150,000 for married couples filing jointly.) Therefore, if you are on Social Security but earn at least $6,450 in 2009 and 2010 (and are not phased out), you will receive the full $400 credit for each year.
You cannot claim both stimulus tax credits. This means that the amount that you receive as a “Making Work Pay” credit will be deducted from your $250 retiree credit. Because of the uncertainty about how the retiree credit will be administered, some of this accounting may not get sorted out until you file your 2009 tax return.
When Will the Credits be Paid?
The timing for sending the tax credit payments to retirees has not yet been determined. However, the stimulus bill provides that they must begin within 120 days after the bill is signed into law. If this requirement is followed, the checks should start going out in late June. The retiree tax credit checks will be sent automatically to those who are eligible. You don’t have to ask.
The new tax withholding tables for the Making Work Pay credit were released this week. The lower withholding should be in effect no later than April 1. If you don’t want your withholding to be reduced by the Making Work Pay credit, you will need to submit a revised form W-4 to your employer.
If you are self-employed and believe you will be entitled to the Making Work Pay credit, you can reduce your quarterly estimated tax payments. Just be sure about your calculations and estimates so that you are not hit with an underpayment penalty next year.
I hope you can benefit from at least one of these credits. Unfortunately, I cannot.
Image Credit: Darren Hester
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When can we hope to get the promised 250. check?
Why give the military retiree $500 stimulus if you are going to take it away at the end of the year when we pay our taxes? Now we are in more debt that we starter out.
My wife and I are both retired. Should we have received a stimulus check for our 2009 taxes? Also, I am retired from the Army I read there was a $500.00 stimulus refund. Am I eligible for that credit?