Did you receive an Economic Recovery Payment?

Don't forget the $250 when you prepare your income taxes or the IRS will reject your return.

As part of the 2009 American Recovery and Reinvestment Act (ARRA), taxpayers who receive social security benefits, SSI benefits, railroad retirement benefits, veterans' disability, or pension benefits received a $250 economic recovery payment sometime in late spring/early summer.

In addition, taxpayers who did not work in 2009 but received a pension or annuity in 2009 for services performed as a government employee were eligible for the new $250 Government retiree credit. The credit cannot be taken if the taxpayer received a $250 economic recovery payment.

For working taxpayers, the Making Work Pay Credit has been added to the tax code under ARRA. It's a refundable credit of 6.2 percent of earned income with a maximum of $400 per individual and up to $800 for married filing joint tax returns.

To take advantage of the Making Work Pay credit, complete Schedule M and report the total on Form 1040, line 63.

Caution:
When completing the Schedule M, you need to indicate the amount received under the economic recovery payment on line 10 or the Government retiree credit line 11. Failure to report the correct amount will result in your tax return getting rejected by the IRS.

You may not have realized you received the $250. If you typically received your monthly Social Security via direct deposit, the Economic Recovery Payment would have been deposited into the same bank account. The payment itself isn't taxable income and is not listed on Form SSA-1099 the annual benefits statement Social Security recipients are sent for tax purposes.

For additional information, review Schedule M instructions.