Many New Tax Savings for 2009 Returns: Ask your tax pro about the Making Work Pay tax credit

As you indies probably know, I do not encourage self-employeds to prepare their own tax returns. And I don’t explain tax forms on my blog. However, I don’t want you to miss out on this goodly amount of money so I’m breaking my own rule and am giving you a little tax preparation alert.

Among the many new tax advantages that have been served up for 2009 is one called the Making Work Pay Tax Credit. Many of you have been asking about it and its form Schedule M of Form 1040.

The most important question from you: Does it apply to self-employeds as well as employees? The answer is yes.

The credit is available to any person who has made any income while working, whether as an indie or an employee, or both. You may not be eligible, however, if your income is too high.

The Making Work Pay Tax Credit is a refundable tax credit. That means it is a dollar for dollar deduction against any tax liability you have. And if you owe no tax then the credit becomes your refund.

If you are single, the credit is $400.

If you are married filing jointly the total credit for you and your spouse is $800.

Singles will not get the credit if adjusted gross income is $95,000 or more.

Married people filing jointly will not be eligible for the credit if adjusted gross income is $190,000 or more.

What’s adjusted gross income? it is line 37 of your 2009 Form 1040 page 1 and is a combination of income and subtractions called adjustments. It is the sum of all your income, such as: wages; net self-employed income; interest; dividends; perhaps some of your social security; alimony received; stock gains; pension; and more. From that total you subtract adjustments, such as: health insurance premiums for indies; ½ SE tax for indies; moving expenses; certain expenses for artists; and the list goes on.

Eligibility depends on other particulars as well. Be sure to look into it to see if you qualify for the credit.

And, here again my encouragement, or warning: There are many new credits and deductions available for middle- and lower-income taxpayers, whether freelancer or employee. Good tax pros keep up with these changes. There’s a good chance you will save money by taking advantage of a tax pro’s knowledge. Have an indie-savvy tax pro prepare your return.

Special thanks to June Walker, Tax & Financial Advisor to the Self-Employed since 1979. Read her blog here.