If you are fortunate enough to receive a steady income paycheck to paycheck, you may notice that your take-home pay in 2010 is less than in 2009. While there may be other factors in your case, the reason why your paycheck shrunk is probably the Making Work Pay credit.

Remember back in March or April of last year when you saw a slight increase in your paycheck?  The reason for the increase of take-home pay then was that federal tax withholding was decreased in order to allow you to have your Making Work Pay Tax Credit during the year, not when you file.  This amounted to $400 for singles and $800 for married couples, and was taken out of your withholding throughout the last 8 months of the year last year.

The Making Work Pay Tax Credit is back in 2010, but it’s benefit is spread out over 12 months, instead of 8.  You’ll still see the full amount in your pay check, but it will coming in smaller pieces with each paycheck.  So if nothing’s changed between this year and last, your take home pay would have shrunk slightly, though it still won’t go back to your pre-April 2009 level just yet (if the credit is not extended for 2011, then your take-home pay will go back down to “normal”).

Remember people with multiple jobs or spouse who both work might have been burned in 2009 by having less withheld than they should.  If this is you, you may consider adjusting your W-4 so that more is withheld in 2010.