Tax form question

Discussion in 'Off The Beaten Track' started by BaileyCatts, Mar 26, 2011.

  1. BaileyCatts

    BaileyCatts Well-Known Member

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    AAAAAUUUUUURRRRRGGGGGHHHHHHH!!!! I HATE THESE STOOPID TAX FORMS!!!!! There, I feel better now. :lol:

    Last year, the IRS revised my 1040 by adding in the Making Work Pay Credit, because it was not claimed on my form, and they said I could claim that. Yea for me, got $400 extra bucks. They said in the letter if I wanted to claim that in future years, I had to fill out Schedule M. Got Schedule M and on line 10 it says "Did you receive an economic recovery payment in 2010?". Uhm, was the $400 they gave me an "economic recovery payment" that I got in my 2009 Tax Refund? I had no clue what this Making Work Pay Credit deal is all about, but if it gets me $400, I'll take it. :D But how do I answer Question 10 on Schedule M? I did not get any kind of payments other than my 2009 Tax Refund and that extra $400 last year.
     
  2. milanessa

    milanessa engaged to dupa

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  3. Karina1974

    Karina1974 Well-Known Member

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    Seems to me they are two different things. I know *I* didn't get an extra $250 last year, on top of the MWP $400.
     
  4. PDilemma

    PDilemma Well-Known Member

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    We had H&R Block do our taxes (due to complicated tuition credits, IRA disbursements for tuition, etc...) and it seemed pretty clear that the MWP credit is not an economic recovery payment.

    The bad news is that there will be no MWP credit next year.
     
  5. vesperholly

    vesperholly Well-Known Member

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    I don't understand that stupid Making Work Pay credit. I did not get an extra $400 in my tax return last year, and I most certainly didn't get it this year, because my refund was only $332! :p
     
  6. PDilemma

    PDilemma Well-Known Member

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    It is a credit-- a deduction from the total tax you pay. So it wouldn't necessarily add up to $400. Rather it takes $400 off of your total tax liability. Your refund would still depend, then, on what you owe versus what your employer(s) withheld during the year.
     
  7. Karina1974

    Karina1974 Well-Known Member

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    Which means that, if you didn't fill out and file Schedule M, then you wouldn't have gotten a refund at all. You would have owed $68.

    I owe $86.28 on my Federal (I don't have enough taken out of my PT 2nd job). If not for MWP, I would instead owe $486.28.
     
  8. vesperholly

    vesperholly Well-Known Member

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    What! :eek: I've never owed federal tax ... always get a refund of $400-800 (low in recent years). I owe state now, rather than a small refund, because I am a contract worker at a state university.
     
  9. Karina1974

    Karina1974 Well-Known Member

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    So you like giving the IRS an interest-free loan every year. You wouldn't catch me dead doing that. Not until I get to charge them interest...
     
  10. BaileyCatts

    BaileyCatts Well-Known Member

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    ^^ uhm ... what u mean Karina? :shuffle: I never owe federal either and always get a refund. What am I doing wrong? I am single filing status, no dependants. does that matter?
     
  11. Coco

    Coco Well-Known Member

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    She's saying that your REFUND is your money, that you let the Federal Gov't have, some of it for over a year, interest free.

    This is a frequent argument. But you should divide your refund by 12, assuming your income was stable through the year, and figure out what return you could have received for investing it 1/12th at a time. Most worthwhile investments require more capital than 1/12th of a refund.

    However, if your refund is larger than your credit card balances combined, and you were paying interest on them, then yeah, you shouldn't be happy about the refund. If you'd had that money all year long, you could have avoiding carrying a balance, or carried it for a shorter period of time.

    Personally, I LOVE refunds. :)
     
  12. Karina1974

    Karina1974 Well-Known Member

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    When you get a refund on your taxes, whether it's Federal or State, that's because you are paying too much in witholdings on your paycheck. So you get back that extra $$ every April (or whenever you file - I always wait until the week before to file). So, you are basically loaning the government $$ when you overpay - and IDK about you, but every single loan I've ever taken out, or when I've carried a credit card balance, there's been interest charged. But do you get extra back in that refund to cover interest?

    No... that's why it has never made sense to me when people chirp about oh, I get a refund every year! I'd rather that extra $$ stay in my pocket, perferably socked away in a savings account that I will not touch unless there's a dire emergency or an expense that I can't get away with not paying. That way, I know I will have the funds there and available when the time comes to file my taxes.

    They're going to get the same amount of $$ from me, regardless. The only thing I get to deduct is my student loan interest, so my taxes are simple enough that I do them myself. I just prefer that they get that $$ on my terms.
     
  13. manhn

    manhn Well-Known Member

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    I view the "stop giving your government an interest-free loan!" advice the same way as the "stop buying a latte everyday and you'll have all that money" advice. Stoopid--I like my lattes, I like my refunds. Maybe if one got thousands and thousands of dollars back, but $400-$800? Please, hardly enough to question the person's fiscal responsibility.
     
    jamesy and (deleted member) like this.
  14. vesperholly

    vesperholly Well-Known Member

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    :rolleyes: What a lovely judgement to make of my financial responsibility based on one tiny nugget of information.
     
  15. danceronice

    danceronice Corgi Wrangler

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    Yep. I never get refunds (especially not in the state.) I'm not giving them any free rides.

    And it's not like skipping a latte, where you either have the money or have hte latte. Either way, you're out your taxes. If you get a "refund" you just overpay earlier in the year so you have less then, and get some of it back later.
     
  16. purple skates

    purple skates Shadow dancing

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    After having to pay something like $2000 one year to the IRS, I'd rather err on the side of caution.

    To each his/her own, though.
     
  17. Aceon6

    Aceon6 Get off my lawn

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    I guess it depends. My husband is a Schedule C filer, so we always over pay on my W-4, just to be safe. No sense setting up red flags for quarterly estimated tax payments or for a possible audit.
     
  18. genevieve

    genevieve drinky typo pbp, closet hugger Staff Member

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    to each their own. I get making sure you're covered for uncertainties (such as in Aceon6's case), and I do understand the rush of getting money back each spring (the only time I've ever gotten a refund over $500, it was right after I ran up a huge vet bill and was grateful), but if you are consistently getting more than a couple hundred dollars back, you are in fact loaning the government your money all year long. Which is fine if that's how you want to do it, but I'm shocked at how many people think their refund is actually money the government is giving them. they don't understand that it's their money they're getting back.

    I had a friend who wanted to deduct an additional $100 per paycheck so she would get a bigger refund in the spring, even though she was already getting over a $1000 refund. I asked her why she couldn't just open a new savings account and have $100/paycheck deposited there (we can split our paycheck direct deposits) and she said having the government hold it for her made her feel safer :wall: This is one of the most disciplined person I know, who would never spend money she had designated as off limits.
     
  19. Debbie S

    Debbie S Well-Known Member

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    Sometimes, though, you don't have control over what you pay 'into the system'. Most of my refund comes from my deductions of mortgage interest and property taxes. I'd like to pay less of those each month, but I don't have a choice about it. ;) And I'm single, so I think my only options for withholding allowances are 0 and 1 (which I have).
     
  20. PDilemma

    PDilemma Well-Known Member

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    Sometimes, you get a refund because circumstances change. I used to typically get less than $100 back. This year, I left my full time job and went back to school in August. The drop in income and tuition deductions meant that we got a larger refund than normal. And that was with my current income sources not having any state or federal taxes withheld and our being required to pay taxes on money we withdrew from retirement to pay for school. Next year, we should be back in line according to the available tax tables for 2011.

    A lot of people don't want to or don't know how to figure out what they will owe and are simply at the mercy of how their employer deducts during the year, as well.
     
  21. Aceon6

    Aceon6 Get off my lawn

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    Actually, you can claim more if you're expected deductions justify it. Use the worksheet on the back of the W-4. Anyone in a state income tax state who owns a home should look into it.
     
  22. genevieve

    genevieve drinky typo pbp, closet hugger Staff Member

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    I'm single, own a home and I claim 2 deductions.

    No one is at the mercy of what the employer deducts. People can take the most passive route possible for determining their withholding, but the employer can't just decide what to deduct for them.
     
  23. PDilemma

    PDilemma Well-Known Member

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    If employees are passive about it --which is usually due to more to not understanding the process, the tax tables or that they can request higher deductions than willfully being passive--the employer will withhold as they see fit based on what deductions the employee indicates on paperwork. And that is what I meant.

    But this is, quite frankly, a pointless argument. Some of you are never going to comprehend that not everyone has the knowledge or skill set to understand tax policy and take control of their own finances in that area. It is foolish to think that in a culture where most people don't know how to balance a checking account or manage their credit, everyone is going to understand withholding and tax tables.
     
  24. genevieve

    genevieve drinky typo pbp, closet hugger Staff Member

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    But that's not as the employer sees fit - it's based on what the employee puts down. My point is that the employer cannot make any decision about what an employee deducts - it has to come from the employee. Now, the employee may not be making most advantageous deduction for themselves (through choice, ignorance or lack of comprehension), but the employer does not get to look at the W4 and say "this person doesn't know what they're talking about, I'm going to deduct a different amount instead".

    And how is perpetuating the notion that employees are at the mercy of their employers when it comes to tax deductions going to help?
     
  25. Hannahclear

    Hannahclear Well-Known Member

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    I was just talking about this with an accountant, when we filed this weekend. He said that most people don't understand that there is a *number*. It's the amount you make with your tax obligations removed. You can get that number spread out over 52 weeks, or you can get a chunk of it back in the spring. But it's still your number.

    And with interest rates being what they are these days, unless there is high-interest debt, I don't think it matters which you choose. It's personal preference. I prefer the money over the course of the year.
     
  26. Erin

    Erin Well-Known Member

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    :eek: I generally agree with the sentiment that the decision mainly comes down to personal preference, as long as people understand what they're doing, but this kind of thing is a little bit crazy.

    Yes, I agree. Although for some people who I know who are not very disciplined savers, I sometimes think it really is better to lend it interest-free to the government, just to keep them from spending it.

    I do agree in theory that it's generally better to get the money spread out, but in practice, I've ended up with a reasonably large refund more often than not, for a variety of reasons. Job changes, tuition credits, or a last minute deductible RRSP contribution are a few of them. Canadian payroll withholding rules seem to be a little stricter than US, as in some cases I'd need to get a letter from my tax services office to get the withholding reduced because my reason isn't on the form that you can provide my employer. And that is way too much work.