Making work pay credit

[Jack from Ohio]

Client has a W2 with wages and withholding in boxes 1-6. Also box 12 with code J has substantial income as well. We only calculated box 1 as earned income for calculating Making Work Pay Credit. Client received $183 per Sched M. They have pension income (not government) and Social Security. They also receive $250 Economic recovery payment.

IRS increased the Making Work Pay Credit to the full amount of $550 with no explanation.

Does non-taxable Third Party Sick Pay count as earned income for calculating the Making Work Pay Credit? All I can find shows the calculation from Line 7 on the 1040. Any ideas?

[mcb39]

The IRS is looking at and recalculating a lot of these (much to their credit). Mine was one. My husband's business loss off set my gain resulting in a negative. I couldn't, and still can't find a way to calculate these separately on the Sch M; however, they sent me more money just with a letter saying that they had made an adjustment. You are right, they do not explain how they arrive at the new number; but I guess in your case, the

third party sick pay was included in the calculations. Maybe they feel that if he hadn't been "sick", he would have been working.