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Making Your Money Last

Recovery Check for Seniors is on the Way

You've had questions on the recovery check for seniors, and we've got the answers.

The Obama administration's plan to stimulate the economy is on track to hand over more money to taxpayers. Workers are getting their Making Work Pay tax credit, and many seniors will soon receive their one-time recovery checks. Read the following for the details.

What must I do to get my check? Nothing. Uncle Sam will automatically send the $250 one-time payment to people who receive Social Security, Supplemental Security Income, veterans' benefits or Railroad Retirement benefits. If you receive benefits from more than one program, you'll get one $250 check. If both spouses qualify, couples will receive $500.

To qualify, you must have received benefits from one of these programs in November 2008, December 2008 or January 2009. "If you're old enough for Social Security but you weren't taking the benefit in one of those three months, you won't get a $250 payment," says Mark Hinkle, a Social Security Administration spokesman. If you live overseas, you're not eligible for a recovery check.

Government retirees won't get a check but instead will receive a $250 tax credit when they file their taxes next year. The credit is available to individuals who receive a federal or state government pension or an annuity from work not covered by Social Security, says Bob Scharin, senior tax analyst for Thomson Reuters.

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When will my check arrive? By law, the checks are to show up no later than June 17. But the Social Security Administration expects that its beneficiaries will get their checks by June 4. You will receive the check the same way you get your Social Security benefits. The Treasury Department says that those using direct deposit will receive payments sooner than those who use mail. If you haven't received a check by early June, contact the agency from which you receive benefits.

I retired in 2008. Do I get the tax credit? You're eligible for the Making Work Pay tax credit only if you earn income from a job in 2009. (The credit is also good in 2010 for those with earned income in 2010.) The Making Work Pay credit, which will show up on 2009 and 2010 returns, is worth 6.2% of earned income each year up to $400 for individuals and $800 for married couples who file jointly.

The credit is already putting more money in workers' paychecks because new withholding tables adjusted the payroll tax for 2009. The extra amount averages $45 for single filers and $65 for married filers per month for the rest of '09. The tax credit begins to phase out for individual filers with adjusted gross incomes of more than $75,000, or $150,000 for married couples filing jointly. Self-employed workers can adjust estimated tax payments to benefit from the credit.

Will I get anything if I'm retired at age 58? Those who no longer work but are too young to qualify for federal retirement benefits will not receive either the check or the credit. "Those people are not eligible for the Making Work Pay credit because they don't have earned income. They're not collecting Social Security benefits, so the $250 will not be sent," says Scharin.

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The withholding on my monthly pension has dropped. Is that because of the tax credit? The new withholding tables affect all taxpayers, even those who have no earned income and are not eligible for the credit. This could mean that your pension withholding may no longer be high enough to cover your tax liability. You can make an estimated tax payment, or adjust the withholding on your pension by filing a revised Form W-4P, "Withholding Certificate for Pension or Annuity Payments," says Mark Luscombe, principal federal tax analyst for CCH, a tax-information publisher.

Can I receive both the check and the tax credit? A single filer who receives federal retirement benefits and has earned income will get both the $250 check and a tax credit of up to $400 -- but only temporarily. Come tax-time in 2010, the $250 check will reduce your tax credit on your 2009 return because you're not allowed to take both, says Scharin. The lower credit might leave you with a higher tax bill than you expected as a result of having less money withheld in '09. To avoid that, file a revised Form W-4 to increase your withholding.

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