I conduct scientific research at an institution and am paid with a research fellowship that has taxes withheld (1099-MISC). I should be eligible for the Making work pay credit, but I was not paid with a W2. On the schedule M, should I just answer yes to the question "Do you have 2010 wages of more than $6451?" Schedule M states that if you receive a taxable fellowship, you should answer No and fill out a worksheet to determine your earned income. If I do it this way, my earned income ends up being 0.

Then you are NOT eligible for the Making Work Pay Credit.