The Making Work Pay Credit and the Government Retiree Credits are refundable tax credits provided by the American Recovery and Reinvestment Act of 2009. Here are some factors that determine eligibility:

• If you earned income as an employee or were self-employed, you're probably eligible for the Making Work Pay Credit. This refundable credit is worth up to $400 per person ($800 for a married couple filing jointly).
• If you did not have earned income from wages or self-employment, as with many who are retired or disabled, you may have received a U.S. Treasury economic stimulus payment of $250 in May or June of 2009.
• If neither of the above applies to you, and you are a government retiree, you may qualify for the Government Retiree credit, which provides $250 per elilgible person.

It is possible to receive both the Making Work Pay Credit and either the economic stimulus payment or the Government Retiree Credit, but the total amount cannot exceed $400 per person.

The credit equals 6.2% of your earned income, with a maximum of $400. Married couples filing jointly receive $800, even if only one spouse works. You're eligible for the credit if:

• You are not claimed as a dependent by another taxpayer.
• You are not a nonresident alien and have a valid Social Security Number.
• You received earned income. The maximum credit is reached at $6,451 in earned income ($12,903 for married filing joint). The credit is reduced when modified adjusted gross income reaches $75,000 for an individual taxpayer ($150,000 if married filing joint), and phases out completely at a MAGI of $95,000 ($190,000 if married filing joint).

The credit is for both 2009 and 2010. Wage earners began receiving the credit in March and April of 2009 through reduced withholdings on their paychecks. The self-employed could choose to receive the credit's funds early by reducing self-employment tax payments in 2009. To avoid underpayment penalty on estimated taxes, however, it may be safest to wait until you file your return to claim the credit.

Although you may have received the funds from the credit early, you still have to claim the credit on your 2009 return. Doing so ensures that the funds from the credit are counted as payment toward your 2009 tax liability. This lowers your tax due or increases your refund compared to what it would have been without the credit. If you don't claim the credit on your return, you'll have a higher tax liability, and would essentially be giving the credit back.

How you claim the credit depends on the return form you file:

• If you file Form 1040EZ, fill out the worksheet accompanying the form.
• If you file Form 1040 or 1040A, complete Schedule M, new for 2009.

For more information, see Instructions for Form 1040EZ or Instructions for Schedule M.

The economic stimulus payments were targeted at those who are ineligible for the Making Work Pay Credit because they have no earned income. In order to receive the $250 payment, you must have recieved Social Security, Supplemental Security Income (SSI), railroad retirement or veterans benefits in November or December, 2008 or January, 2009.

If you received a stimulus payment and the Making Work Pay Credit, the amount of Making Work Pay Credit that you're eligible for will be reduced by the $250 stimulus payment. The adjustment is figured on either the 1040EZ worksheet or Schedule M, depending on which return form you're using. 

For retirees who receive a government annuity or pension instead of Social Security, the Government Retiree Credit also provides a recovery payment of $250 per eligible taxpayer. You're eligible if you received a pension or annuity payment in 2009 for work for the U.S. government, or a U.S. state or local government, and the work was not covered by Social Security. The credit is not allowed if you received the economic stimulus payment, and will also reduce the amount of your eligible Making Work Pay Credit.

Certain situations reduce or eliminate your eligibility for the Making Work Pay Credit, even though you received the credit amount through reduced withholding. After completing the 1040EZ worksheet or Schedule M, if some or all of the credit is disallowed, your tax liability will be higher, meaning you'll owe more tax or receive a lower refund. Particularly affected are:

• Taxpayers with more than one job
• Married couples with two incomes
• Dependents with earned income
• Recipients of Social Security and similar benefits who also have earned income

Especially since the Making Work Pay Credit is also for 2010, you may want to avoid having too little withheld. The IRS Withholding Calculator can help you determine if your withholding levels are appropriate given your income, dependents and other tax information.