Tax form question

[BaileyCatts]

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

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. 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.

[milanessa]

This should tell you what you need to know:

http://www.irs.gov/newsroom/article/...204468,00.html

[Karina1974]

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.

[PDilemma]

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.

[vesperholly]

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!

[PDilemma]

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!

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.

[Karina1974]

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!

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.

[vesperholly]

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.

What! 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.

[Karina1974]

What! I've never owed federal tax ... always get a refund of $400-800 (low in recent years).

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...

[BaileyCatts]

^^ uhm ... what u mean Karina? 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?

[Coco]

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.

[Karina1974]

^^ uhm ... what u mean Karina? 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?

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.

[manhn]

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.

[vesperholly]

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...

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

[danceronice]

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...

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.

[sk8er1964]

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.

[Aceon6]

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.

[genevieve]

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 This is one of the most disciplined person I know, who would never spend money she had designated as off limits.

[Debbie S]

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.

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).

[PDilemma]

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.