I thought that I had mastered the numerous tax schedules but then Schedule M showed up.
If I am not mistaken, a single guy can deduct up to 400 Dollars on Schedule M and on 1040 line 63.
If my self-employment tax and other tax, let's say my total tax would be USD 1000 that would deduct my taxes to 600 Dollars? Can this be true?
The Making Work Pay (MWP) credit is equal to 6.2% of wages and/or your net profit from self-employment up to a maximum of $400 ($800 on a joint return) unless your income is too high. The $400 must be offset by any economic recovery payment received. The MWP credit is also a refundable credit. I.e., the government will send you the money even if you don't have a tax liability. That's why the credit is listed under the Payments section of the tax form.
As has been noted, this is the Making Work Pay Credit, which is treated as a payment. What wasn't mentioned is that it's temporary, applying only to 2009 and 2010. It was part of the 2009 stimulus legislation.
Phil Marti VITA/TCE Volunteer
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