Why arent I getting back $4000+

[jkscott]

Im so frusterated.

I was really looking forward to tax time this year because my wife and I had a child. I heard from a coworker who makes less than me that due to her son, she gets back thousands of dollars every year. I just prepared my taxes (quickly) to estimate my refund and im getting a laughable $500 back.

Whats the deal with that?

[MN-Investor]

It's obvious. You needed to have octoplets.

[Deleted]

Jan 16, 2011 21:54:27 GMT -5 jkscott said:

Im so frusterated.

I was really looking forward to tax time this year because my wife and I had a child. I heard from a coworker who makes less than me that due to her son, she gets back thousands of dollars every year. I just prepared my taxes (quickly) to estimate my refund and im getting a laughable $500 back.

Whats the deal with that?

I'd like to know this persons so called accountant. What did this person suposdley declair! Granted last year there were lots of "tax" credits, but this year.. I'm not so sure!

[sue]

"I heard from a coworker who makes less than me that due to her son, she gets back thousands of dollars every year. I just prepared my taxes (quickly) to estimate my refund and im getting a laughable $500 back."
Since she makes less, she may qualify for the Earned Income Credit and you don't?

[mwcpa]

JK....

a large tax refund (actually an interest free loan to the government) is not necessarily a good thing....

One's total "tax" is the issue, not the size of a refund, a refund is a function of the actual tax calculated, the tax one paid in during the year and credits one may be entitled to as a result of their situation.

Example...

You and your friend make the exact same salary, live in a home that costs exactly the same, etc., etc... everytting is exactly the same except you planned and your friend did not...

Your friend's tax is 3,000 and their refund is 4,000, because they had 7,000 withheld from their job.
Your tax is 3,000 and your refund is 500 because you had 3,500 withheld from your job.

Who is better off? net, net they are the same... but you, in my example, had more money in your pocket each week... your friend is using their refund to pay down their 20% interest rate credit cards.... again, who is better off?

Unlike what some chain tax prep stores and many uninformed pundits say a large tax refund is, in many cases, the result of poor financial planning or the result of an unusual set of facts and circumstances....

Personally, I have only got a refund once in the last 15 years... and that was because of a transactions that occurred on December 31st that I was notified about on January 5th.... kind of hard to plan for something before it actually occurs... oh wait, that's what happens every year with our Congress passing material tax law changes each and every December....

[Deleted]

Jan 16, 2011 21:54:27 GMT -5 jkscott said:

Im so frusterated.

I was really looking forward to tax time this year because my wife and I had a child. I heard from a coworker who makes less than me that due to her son, she gets back thousands of dollars every year. I just prepared my taxes (quickly) to estimate my refund and im getting a laughable $500 back.

Whats the deal with that?

How much did you get back last year? And, other than the new baby, is everything else basically the same?

[TheOtherMe]

My guess would be the Earned Income Credit can be claimed on your co-worker's return and you may not be entitled to it.

[jkscott]

Jan 17, 2011 9:09:23 GMT -5 ArchietheDragon said:

Jan 16, 2011 21:54:27 GMT -5 jkscott said:

Im so frusterated.

I was really looking forward to tax time this year because my wife and I had a child. I heard from a coworker who makes less than me that due to her son, she gets back thousands of dollars every year. I just prepared my taxes (quickly) to estimate my refund and im getting a laughable $500 back.

Whats the deal with that?

How much did you get back last year? And, other than the new baby, is everything else basically the same?

I got back close to 2k last year and yes everything is basically the same.

[Deleted]

Jan 17, 2011 11:08:55 GMT -5 jkscott said:

Jan 17, 2011 9:09:23 GMT -5 ArchietheDragon said:

How much did you get back last year? And, other than the new baby, is everything else basically the same?

I got back close to 2k last year and yes everything is basically the same.

Something is definitely wrong.

With the additional personal exemption plus the child tax credit, you should have gotten back at least $3000 this year.

[Deleted]

what income do you make?

[TheOtherMe]

Did you change your withholding when you had the baby? Did your wife take time off from work when the baby was born? Do you itemize?

[Deleted]

Actually, your story sounds more plausible. The personal exemption is now something like $2,500. At most, if you're in the 30% tax bracket, another mouth to feed will reduce your taxes by $750. If you're not in that high a tax bracket, the reduction will be less.

[TheOtherMe]

Personal exemption is now $3650.

[michelyn8]

It really depends on your individual situation. I did a draft of my taxes claiming my BF's daughters as dependents and it showed I would receive over $3k back. This was if I filed as head of household with two dependents under 17, standard deduction with an income of $39,000 (before adjustment).

Worked it up as single without the kids, same income and standard deduction and I owe over $500. Unfortunately, I can't claim the BF's kids because we don't live together and they aren't legally my step-children.

[jkscott]

Jan 17, 2011 11:17:47 GMT -5 ArchietheDragon said:

Jan 17, 2011 11:08:55 GMT -5 jkscott said:

I got back close to 2k last year and yes everything is basically the same.

Something is definitely wrong.

With the additional personal exemption plus the child tax credit, you should have gotten back at least $3000 this year.

I see that Im getting the child tax credit. I do not qualify for the EIC.

What is the retirement savings contributions credit. Attach Form 8880? I contributed quite a bit to my 401k. Does ths apply?

[Deleted]

Unfortunately, I can't claim the BF's kids because we don't live together and they aren't legally my step-children.



So in other words, you are NOT providing over 50% of the upkeep of said children?.... Maybe if you offered to reimburse the parent 50% of the expenses they incured over the year in the upkeep of said children, they'll let you claim the girls...

Think you'll come out ahead?

[TheOtherMe]

Jan 19, 2011 12:47:41 GMT -5 jkscott said:

What is the retirement savings contributions credit. Attach Form 8880? I contributed quite a bit to my 401k. Does ths apply?

Retirement Savings Credit for a married couple phases out at $55,500. Yes, you use Form 8880 to calculate it.

[taxref]

Both MWCPA and Taxpro give good answers in the above thread.

MWCPA's answer is especially on point. Getting a refund or having a balance due, and the amount of the refund or balance due, is the result of total tax compared to total withholdings and credits. It is impossible to reason that someone I know got $X refund and therefore I'm going to get that amount as well.

I'm afraid a number of other responses in this thread are seriously incorrect. One cannot agree with someone else to claim their children as dependents, except under very limited circumstances. Those circumstances are prescribed by law, and taxpayers cannot make agreements which are contrary to the code.

Its also impossible to say that someone will get a large refund without knowing the details of their circumstances. Everyone should re-read MWCPAs answer.

[michelyn8]

Jan 19, 2011 13:49:43 GMT -5 oped said:

Unfortunately, I can't claim the BF's kids because we don't live together and they aren't legally my step-children.



So in other words, you are NOT providing over 50% of the upkeep of said children?.... Maybe if you offered to reimburse the parent 50% of the expenses they incured over the year in the upkeep of said children, they'll let you claim the girls...

Think you'll come out ahead?

Actually in looking at the requirements there are several reasons I cannot claims. True, I don't provide their support but there is also the fact that they do not live with me and are not truly my dependents in any way. I just worked it up that way out of curiosity because BF mentioned me claiming them so I wouldn't have to pay and I wanted to see just how much I could get. BF doesn't have any earned income so he won't even be filing this year. His doctor's won't release him to work but SSDI keeps denying him assistance so they live off SS benefits the girls receive due to a deceased mother, money he can make under the table, and food stamps. No welfare because he owns a house which fortunately has no mortgage.

One cannot agree with someone else to claim their children as dependents, except under very limited circumstances. Those circumstances are prescribed by law, and taxpayers cannot make agreements which are contrary to the code.



Read more: notmsnmoney.proboards.com/index.cgi?action=display&board=taxes&thread=1737&page=1#ixzz1BaFSC6vD

taxref - I am well aware of the requirements for claiming dependents. I was audited in 1997 because my ex claimed our children without written permission from me on his 1995 and 1996 returns to get EIC. Since I was also paid EIC, it sent up a red flag and I had to prove to the IRS they lived with me those years, went to school in my county those years, etc. I have no desire to go through that again. And even if I thought I could get away with it, I wouldn't claim them unless I was married to their Dad and was helping support them.

[jkscott]

Jan 19, 2011 19:37:03 GMT -5 TheOtherMe said:

Jan 19, 2011 12:47:41 GMT -5 jkscott said:

What is the retirement savings contributions credit. Attach Form 8880? I contributed quite a bit to my 401k. Does ths apply?

Retirement Savings Credit for a married couple phases out at $55,500. Yes, you use Form 8880 to calculate it.

I do not qualify for this either? Could the diffence in refunds (2k - 500) be because I bought a new car in 09 and claimed the sales tax?

[Deleted]

How much was the sales tax? I imagine it was around $1500, at 28% marginal tax rate that would save you $420, so that could be part of it. But still, at that tax rate adding a dependent and the child tax credit should save you around $2000k in taxes, so your $2000 refund should be more like $3500 ($2000-420+2000).

[jkscott]

According to Turbo Tax, Im getting the max refund guarantee.

Do you guys recommend a place like HR Block instead?

[Deleted]

Jan 20, 2011 11:41:29 GMT -5 jkscott said:

According to Turbo Tax, Im getting the max refund guarantee.

Do you guys recommend a place like HR Block instead?

I doubt most people here would recommend HR Block, but they may be able to see something that you are missing.

As a first step, I would get out your 2009 1040 and compare it line by line to your 2010 return and see where the differences are and if they make sense. If you find big discrepancies between the years you can post here and ask about them.

[nancy65]

" BF doesn't have any earned income so he won't even be filing this year. . . . money he can make under the table"

You (and especially he) should be aware that money he makes "under the table" is in fact "earned income" and should be reported. Not reporting it is tax fraud on his part.

Besides, it might actually benefit him to report it, because with two children it might make him eligible for EIC (if the children live with him).

[TheOtherMe]

" BF doesn't have any earned income so he won't even be filing this year. . . . money he can make under the table"

Thank you, Nancy. As you state, all income, including the under the table income, is taxable.

[TheOtherMe]

Jan 20, 2011 11:41:29 GMT -5 jkscott said:

According to Turbo Tax, Im getting the max refund guarantee.

Do you guys recommend a place like HR Block instead?

Archie's advice is excellent. I've told people many times, that you do need some tax knowledge to use Turbo tax. If you answer a question incorrectly, you will not get the correct result.

One question I would have for you: Where it asks if the child lived with you all year, did you answer yes? That is the correct answer for a child born during the year.

[NoNamePerson]

Jan 16, 2011 21:54:27 GMT -5 jkscott said:

Im so frusterated.

I was really looking forward to tax time this year because my wife and I had a child. I heard from a coworker who makes less than me that due to her son, she gets back thousands of dollars every year. I just prepared my taxes (quickly) to estimate my refund and im getting a laughable $500 back.

Whats the deal with that?

I love it when someone compares their refund to someone else's. Are all things equal, wages, deductions, IRA 401K? Comparing apples to oranges will get different results every time.

[TheOtherMe]

You got that right, NoNamePerson.

We don't usually actually see each other's tax returns and don't know all of the circumstances that is on the tax return.

[mithrin]

When your coworker claims to get back thousands per year because of her son, she may be mistaken. She may be looking at the DEDUCTION and thinking that's how much she saves on taxes. Her return is so large because she has too much withheld from her paycheck all year.

Or she might be the only wage-earner in her family, and make a small enough amount to claim EITC.

As for the saver's credit:
My wife and I have made close to the limit for the credit the last several years. Some years we are just below the line and can simply claim it. Other years, we are just above. What we can do then is contribute to a Traditional IRA (available through any brokerage and many banks). Say our adjusted gross income comes to 57.5K, but it needs to be below 55.5K to claim the credit. If we contribute 2K or more to a TIRA, our AGI will now meet the requirement and we can claim the credit. The best part is that you can contribute to an IRA up until April 15th and have it count as a 2010 contribution. So we can wait until we have all our tax info, figure out exactly what's needed and make the contribution. Last year we put 2K into the TIRA, saved 15% on our regular taxes from the deduction ($300), and then both got to claim a $200 savers credit. So we put 2K into retirement, but saved $700 on our tax bill.

[ShoreEA]

So we can wait until we have all our tax info, figure out exactly what's needed and make the contribution. Last year we put 2K into the TIRA, saved 15% on our regular taxes from the deduction ($300), and then both got to claim a $200 savers credit. So we put 2K into retirement, but saved $700 on our tax bill.

I love this situation! The Saver's Credit produces some spectacular results. I once had a client who had been contributing a small amount to her 401(k), but got laid off before the end of the year. The wages plus unemployment put her in the (very narrow) 20% Savers Credit bracket. As it turned out, a contribution to an IRA for the previous year moved her into the 50% Saver's Credit bracket, and increased her refund, even after the outlay for the IRA contribution!
Rare, but beautiful.
Seriously, isn't after-tax performance the true test of an investment? And isn't an up-front tax saving part of that calculation?