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Post by Deleted on Feb 10, 2011 7:03:05 GMT -5
I just finished filing taxes for three of my cousins.
Cousin 1 -> Income $15,108.75 -> Dependents 2 -> Federal Refund: $7,910 -> State Refund: $1,110
Cousin 2 (not actual cousin, but dating my cousin) -> Income $18,027.19 -> Dependents 2 -> Federal Refund: $8,091 -> State Refund: $1,015
Cousin 3 -> Income $7,673.79 -> Dependents 1 -> Federal Refund: $4,620 -> State Refund: $639
They are all about my age (1 younger, 2 older) and maybe I am a bit bias since they are family but I don't envy them at all. Even if we had kids we would not qualify for the EIC (under 40K with 1 child, under 45K with 2 kids)
Cousin 1 and 2 are actually boyfriend and girlfriends. They have 4 kids together and split the kids each year (live together, but never married). They have been together for over 8 years now, live in a part of town in New Jersey I would not want to leave in (East Orange) and my mom refused to let me go there at night when I used to live in NJ.
As for cousin number 3, she still lives at home and get some support from my aunt. She is working on going back to school this fall, her son was born last october. She is a good kid, just made some bad choices.
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michelyn8
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Post by michelyn8 on Feb 10, 2011 8:12:46 GMT -5
I have to say I think the amounts cousins one and two are getting back are ridiculous. Even when I was lower income and receiving the child tax credit and EIC, I never had a refund over $3,000.
That said, I won't be a hypocrite now that I make a much higher income, have grown children and can't receive these credits. I do believe they can help some families who have children. I know that in my case, there were years that as soon as I received that check, 90% of it was gone because I used it to pay off the pediatrician for charges not covered by my insurance, my mother who didn't push me to pay my full share of household expenses every month and maybe purchase a few goodies for the kids and clothes for the upcoming season. It made up for the gap lack of child support caused. I think I managed to increase my income to the point I no longer received EIC about the time my middle child was in high school. I'll admit it hurt, but I was more relieved to finally be making a good enough salary that I no longer felt like I needed that extra money every spring.
In the case of cousin #3, you have stated that she is younger than you (I assume early 20's) and is working to improve her situation. In her case, I have no problem with her receiving the credit right now because if she does stick with schooling and obtain a better paying job with her education, her reliance on the credit will decrease and the amount she receives will decrease each year her income increases or go away completely.
In the case of cousins #1 and #2 - I think those are the ones that cause the ire of people like those on this board. They are late 20's, still each making under $20k a year, unmarried and have had 4 kids already. You don't say, but I am assuming they are also receiving Medicaid or other state sponsored insurance for the kids. Just by looking that the numbers, I am left to assume that they have no motivation to improve their situation and will be milking the public teat for as along as they can. That I do have a problem with.
I would like to see EIC phased out for those that receive large sums like this for more a certain amount of time. If they aren't willing to do what is needed to improve their circumstances, they don't deserve this much extra help from those who have and actually have to pay taxes because of it.
I guess I do kind of sound like a hypocrite but as my situation in life has improved I find myself less tolerant of those who have the smarts to improve theirs but don't.
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Post by Deleted on Feb 10, 2011 8:29:33 GMT -5
I like EIC as an incentive to get off of welfare.
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Post by Deleted on Feb 10, 2011 8:31:12 GMT -5
Cawiau,
Can you tell us the amount of the refund that was over and above what they had withheld? I think that would be helpful.
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resolution
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Post by resolution on Feb 10, 2011 8:41:14 GMT -5
Overall I like the EIC and think it is a good way to help people that are not on welfare. However I hate the way it is working to reward cousin 1 and 2 for not getting married. I would like to see it set up for couples with common children that they do not receive more than a married couple would receive for the same amount of kids.
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telephus44
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Post by telephus44 on Feb 10, 2011 8:52:58 GMT -5
Personally, I think EIC IS welfare. It's just not called welfare. So my opinions are the same as if you said "How do you feel about welfare?" If it's helping someone get through a rough patch and a hand up, great. If it's enabling people to milk the system, then not great. But I really do consider EIC a form of welfare, it's just easier to keep it under the radar from a political standpoint.
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Post by tea4me on Feb 10, 2011 9:37:55 GMT -5
Cousin 1: EIC brings his income up to $24,128.75 Cousin 2: EIC makes her income $27,133.19 Cousin 3: EIC makes her income $12,932.79 (and she lives at home)
There are plenty of people out there that are responsible, no children, work more hours, and earn that same amount. The first two are approaching my income and where I live it is considered good money.
I do not like EIC. I think it makes people feel "why work my ass off all year if I can receive a windfall every spring." I personally know someone waiting for her EIC return so she can go on vacation and get the new I-phone at Verizon. As for me, I cannot go on vacation when I get my return because I have the opportunity to work overtime January through April and I don't want to miss out on that.
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Cookies Galore
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Post by Cookies Galore on Feb 10, 2011 9:39:28 GMT -5
Overall I like the EIC and think it is a good way to help people that are not on welfare. However I hate the way it is working to reward cousin 1 and 2 for not getting married. I would like to see it set up for couples with common children that they do not receive more than a married couple would receive for the same amount of kids. They would still get the EIC if they were married.
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stats45
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Post by stats45 on Feb 10, 2011 9:46:47 GMT -5
I like the EITC program compared to other welfare programs. The benefit is at least tied to workforce participation.
That said, I think that the program should replace other programs rather than be used along with other programs. There is a 'sweet spot' if you have kids where you can make below the income requirements to qualify for a large amount of assistance during the year (housing vouchers, food stamps, etc.) and then receive a large refund at the end of the year. This is even without the situation described above where two people are doing it simultaneously while living together.
A tax credit of this size should count as income for eligibility for government programs.
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resolution
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Post by resolution on Feb 10, 2011 9:47:47 GMT -5
Overall I like the EIC and think it is a good way to help people that are not on welfare. However I hate the way it is working to reward cousin 1 and 2 for not getting married. I would like to see it set up for couples with common children that they do not receive more than a married couple would receive for the same amount of kids. They would still get the EIC if they were married. Right now it looks like they are each getting the EIC for two children. If they were married filing jointly it would cap out at the amount for three or more children. Unless I am misunderstanding they are getting $5000 more because they are able to split up the children into two households. Tax Year 2010 maximum credit: $5,666 with three or more qualifying children $5,036 with two qualifying children $3,050 with one qualifying child $457 with no qualifying children
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Post by Deleted on Feb 10, 2011 9:47:54 GMT -5
I think families should have a certain minimal level of income. The one thing that bothers me about the EIC is that it's not transparent - people don't seem to realize that they have gotten back more than they paid in taxes.
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haapai
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Post by haapai on Feb 10, 2011 10:08:16 GMT -5
It definitely would be helpful to know how much was withheld. When the EITC is mentioned I've trained myself to ignore the size of the refund and pay attention to AGI, gross income, or after-tax income instead.
Usually, the thought of raising kids on the after-tax income involved makes me feel fortunate, or at least makes me pause before voicing my opinions.
I haven't yet found the proper words to describe my unease with the credit. It bugs me a bit that two people working the exact same job for the exact same wages could have such different after-tax incomes. A lot of the low-skilled jobs that were previously done by young uneducated men seem to be done by single mothers these days. I'm sure the difference in take-home pay is part of the reason behind this.
I wonder a lot about how much the EITC effectively subsidizes low-wage employers and how it tends to divide such workplaces into "mommies and managers".
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schildi
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Post by schildi on Feb 10, 2011 10:26:17 GMT -5
It's a bad bad tax credit because I don't get it.
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shelby
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Post by shelby on Feb 10, 2011 10:27:51 GMT -5
I recieved the EIC this year, I got more back than I thought even possible. I only worked 6 months and had been seperated/divorced this year for the first time and have 3 dependants. I have to admit I feel guilty getting so much back when I know I did not pay yhat much. I don't know how I feel about it I have a friend who gets it every year and a very large amount, she manages to blow it all very quick. But she recieves other benefits like food and daycare so therefor she cannot keep it in her account. If you have more than a certain amount of money you are denied benefits no matter your income. I wonder how much good it can do if the money cannot be saved as an EF for a "hand up" if any other benefits are recieved. Not that my friend spends the money for that reason, it is purely irresponsible spending but thats another story.
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Post by Deleted on Feb 10, 2011 10:29:05 GMT -5
I haven't yet found the proper words to describe my unease with the credit. It bugs me a bit that two people working the exact same job for the exact same wages could have such different after-tax incomes. That sentiment describes the entire convoluted tax code, not just the EIC.
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NoNamePerson
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Post by NoNamePerson on Feb 10, 2011 10:29:05 GMT -5
I'll throw out a different scenario for you. When I quit working, a client asked if I would be interested in "fill in" work for them. I claimed exempt on Fed and State withholding since I knew I wouldn't be making a lot of money. The person that does my tax return emailed me to tell me that I had a refund from Feds. I asked why - yep you guessed it - EIC. I was shocked - no kids, etc. But each year that I did this fill in work I got a refund. Even though at 62 I drew early social security. But EIC did end at age 65. Go figure - but I didn't turn it down or send it back
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michelyn8
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Post by michelyn8 on Feb 10, 2011 10:35:55 GMT -5
I have a friend who gets it every year and a very large amount, she manages to blow it all very quick. But she recieves other benefits like food and daycare so therefor she cannot keep it in her account. If you have more than a certain amount of money you are denied benefits no matter your income. I wonder how much good it can do if the money cannot be saved as an EF for a "hand up" if any other benefits are recieved. Read more: notmsnmoney.proboards.com/index.cgi?board=finance&action=display&thread=3169#ixzz1DZQvZWrzThere is no reason she cannot still have an EF. She would just have to be disciplined enough to keep it in a lockbox or home safe instead of a bank.
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stats45
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Post by stats45 on Feb 10, 2011 10:36:37 GMT -5
It isn't so much that the EITC subsidies low-wage workers in general but that it subsidizes low-wage workers with children. It really should be called the 'Earned Income Child Tax Credit' because that it what it really is. The benefits to low-wage single workers are vey low by comparison.
Haapai, I really like the 'mothers and managers' line. It really does provide strong incentives for single women with kids to work at certain types of employment.
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Post by Deleted on Feb 10, 2011 10:41:29 GMT -5
some facts about EIC from wiki:
It is difficult to measure the cost of the EITC to the Federal Government. At the most basic level, federal revenues are decreased by the lower, and often negative, tax burden on the working poor for which the EITC is responsible. In this basic sense, the cost of the EITC to the Federal Government was more than $36 billion in 2004.
It is also estimated that between 22% and 30% of taxpayers claiming the EITC on their tax returns do not actually qualify for it. This led to an additional cost to the government (in 2010) of between $8 and $10 billion. [19]
Millions of American families who are eligible for the EITC do not receive it, leaving billions of additional tax credit dollars unclaimed. Research by the Government Accountability Office (GAO) and Internal Revenue Service indicates that between 15% and 25% of households who are entitled to the EITC do not claim their credit, or between 3.5 million and 7 million households.
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thyme4change
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Post by thyme4change on Feb 10, 2011 10:47:09 GMT -5
When you say "refund" - did she have anything withheld, or was her tax liability actually a credit of $7,020?
I mean - I could get a $50,000 refund if I wanted to - I just have to up my withholdings by an extra $1000 per week.
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Post by tea4me on Feb 10, 2011 10:55:51 GMT -5
I really doubt if they had 45 or 50 percent of their income withheld.
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Angel!
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Post by Angel! on Feb 10, 2011 11:54:29 GMT -5
I hope you did some research on how you filed #1 & #2. If they are living together & have the kids together, then they both can't claim head of household even if they split the kids. One can be head of household & the other has to be single.
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doxieluvr
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Post by doxieluvr on Feb 10, 2011 11:58:36 GMT -5
It's a bad bad tax credit because I don't get it. Thats exactly what it boils down to.
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ugga81
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Post by ugga81 on Feb 10, 2011 12:07:33 GMT -5
I worked in a tax office (for only 1 season!). We had a large number of clients receiving the EIC. Before I started taking the class to become a tax preparer I didn't know anything about the EITC. I was rather apalled that people could get a "refund" when they never paid anything in. I thought the only certain thing in life was death and taxes... but I guess it's just death. (yes, yes, I know there's sales tax and all other sorts of taxes)
What bothered me the most from some people was the sense of entitlement. I actually had a client that became very upset when she realized her refund was "only" $1,500. (she had about $5K of income). She started arguing with me and told me she should get more because she has a son. Then she started giving me other scenarios like what if the baby's father claimed him. I asked if the baby lived with his father for more than 6 months of the year or if he provided greater than 50% of the support for the child. She replied "Well, let's say he did...". At that point, I kindly told her I refused to lie on her taxes and I had reason to believe she was being untruthful. Since my name goes on the return and I become accountable in the case of an audit it just didn't settle well with me. She left the office rather upset and my manager had the gall to get upset with me- like I said I only worked 1 season. I think that year my husband and I paid in over $20,000 in taxes and here there are people trying to scam the system so they get back money after paying $0. It became very difficult to not become jaded by the whole thing.
Not to say they were all bad. I had some people who really did use it as a hand up. One lady received a large refund because of EITC and she used it to open a retirment account. This further increased her refund because of the Saver's credit. She said she wanted to open the account because she hadn't been able to save anything for retirement and thought this would be a good start. Similarly I had a man who had gone from making $80K/yr to less than $20K due to a job loss. He had just moved from another state to start over and the money was extremely helpful. He was actually GRATEFUL for having the money to help him through the rough patch.
Unfortunately, there is no "does this person actually deserve this" question. No "are they just down on their luck" or "are they trying real hard" or "are they actually a deadbeat who is going to buy a new flatscreen". Overall, there is no "is this fair" question on a tax return. And who could actually answer it?
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Gardening Grandma
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Post by Gardening Grandma on Feb 10, 2011 12:19:43 GMT -5
"How do you feel about EIC"
I feel happy that I'm not poor enough to qualify.
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Post by tea4me on Feb 10, 2011 12:23:45 GMT -5
"How do you feel about EIC" I feel happy that I'm not poor enough to qualify. I try and tell myself this. Sometimes thinking about EIC gets me down though. I would really like to receive a huge cash bonus. (I am not talking about a regular refund from taxes I paid in either.)
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haapai
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Post by haapai on Feb 10, 2011 12:26:36 GMT -5
Here's another description of the EITC, with more geekiness. www.taxpolicycenter.org/briefing-book/key-elements/family/eitc.cfmI like the line graphs and the calculations of phase-in and phase-out rates. They can be quite helpful in deciding whether to pursue more money and how to allocate it. On the other hand, the calculated phase-ins and phase-outs should not be conflated with marginal tax rates. Social security, state, and local taxes reduce the phase-in rates slightly and federal income tax seem to kick in at pretty much the same moment that the credit begins to phase out. When you add up all of the marginal rates that apply during the phase-out, it's a pretty stiff bite. Surprisingly large increases in gross income can produce surprisingly small increases in net income during the phase-out. This has to be shocking to someone who has been in the phase-in and plateau stages for a while. Disregarding for a moment the eligibility requirements of any social welfare programs, it really pays to earn more during the phase-in. In my state, a single parent with one child nets $1.24 for each additional dollar of income during the phase-in. That drops to netting an additional 63 cents for each dollar of income once the phase out begins and federal income taxes kick in at 10%.
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Post by mtshastawriter on Feb 10, 2011 12:57:29 GMT -5
Our AGI for last year was about 14K. This means that our EITC payment will be about 6K. (Equal to a year's worth of our mortgage payment....) We paid $0 federal income taxes...
The screwy thing is that in addition to my "earned income" of the 14K, we also receive SSDI for DH and the kids which totals about $24K in additional income for the year. So, while we have a low AGI it is not reflective of our actual income.
I think the SSDI should be considered as part of the AGI and lower the EITC payment, but it does not. This makes our income appear much lower, on paper, than it is in reality. And, because it is this way for us, I am sure it is for other people in our situation as well.
Working at a "real job" makes no sense in our situation because of DH's health coverage needs in addition to loosing our Medicaid coverage and the big EITC payment each year. We live in an area where a "good job" is likely to pay well less than $15 per hour and not offer decent health insurance options for a spouse who is on dialysis.
Our kids are 16 and 18 now, so we are getting to the end of their SSDI payments and the EITC payments each year.
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Post by tea4me on Feb 10, 2011 13:04:15 GMT -5
Our AGI for last year was about 14K. This means that our EITC payment will be about 6K. (Equal to a year's worth of our mortgage payment....) We paid $0 federal income taxes... Sweet!
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Post by Deleted on Feb 10, 2011 13:12:34 GMT -5
I dislike all programs which reward having children.
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