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Good news: I didn't know about the "making work pay" credit and my refund is $800 more than I had anticipated.

And that anticipation was based on? A psychic's prediction? Perhaps a return prepared without Schedule M because you didn't know you needed it? An answer to my seemingly SA question might help us tell you where your logic went awry.

Bad news: I don't understand it.

Congress reduced your taxes by $800 but didn't go to the bother of changing the tax rates. Instead they instituted the credit. Without Schedule M and the MWP credit your return would show $800 too much in tax.

Meanwhile, back at the ranch, Congress also told the IRS to revise the withholding tables so that roughly $800 less would be withheld during the year. That's why your withholding went down in May or June and also why it went up in January 2010. (The credit is also effective for 2010, but the withholding tables reflect the effect spread over the entire year.)

As always, a refund or balance due is simply a math reconcilication of how much you prepaid vs how much your total tax is.

Rule Your Retirement Home Fool
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