December 28, 2011 07:42 PM UTC

Your Taxes Will Be $800 Higher for 2011

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• by: caroman

Did you know that your tax bill will be $800 higher in 2011, even if you made the exact same income?  That’s because the Making Work Pay credit didn’t exist in 2011.

Background: For 2009 and 2010, the Making Work Pay (MWP) credit was a $800 deduction from taxes for joint filers ($400 for singles) who made less than $190,000 ($95,000 for singles).  Congratulations to you if you even knew it existed because it only showed up as an obscure line item on your Form 1040.  So, for the past two years, most joint filers paid $800 less in federal income taxes without even knowing it.  

Well, that doesn’t exist in 2011 because the credit expired without a whimper.  Now, that hit to the middle/lower classes was tempered by the 2% payroll tax cut in 2011.  A family with $50,000 W-2 income saved $1,040 in taxes in $20/week increases in their paychecks.  

Here’s the kicker: Those families have already spent that tax break.  When they prepare their 2011 Form 1040 they’ll realize that maybe they should have saved $800 of that payroll tax break to pay for the elimination of the WPT credit.  Oops.

As obscure as this credit was, watch for this to become an issue in 2012 as more people learn the dirty truth about their 2011 taxes and scramble to pay the extra $800 for their 2011 federal income taxes.