This happened today at work.Co-worker: "My husband and I did our taxes over the weekend, we are not happy.:Me: "Why, you owe a lot of money?""You know that tax stimulus we got earlier this year?""Yes.""Well, it almost caused us to owe money in taxes.""Almost?""Yes, we barely got anything back this year. If Obama pushes his tax stimulus through, I would vote against it because we would most likely owe money the next time.""Barely? So you still got money back, right?""Yes, but very little. Every year we use our refund money to either lease a new car or to purchase somethings we need.""So you are using the gov't as a Christmas fund or savings account? And what do you mean you lease a new car every year?""Yes, we look forward to our tax refund. We don't actually lease a new car every year but every couple years. We like to have the newest vehicle so we turn in our previous car and get a new one.""You do realize that the gov't does not pay you interest while it holds your money? As for leasing, doesn't that cost you more than actually purchasing a vehicle and holding onto it for 5 - 10 years?""Well, I know we don't get interest on the money but it is nice to get something back each year. There is no way I am ever going to owe money in taxes. As for the car, we like to have a newer vehicle and leasing does not cost much.""Uh, ok..."Mind you, her job is to create and analyze bids to save our Company money when purchasing items not for re-sale.-NM
Yes, we look forward to our tax refund. Well, I know we don't get interest on the money but it is nice to get something back each yearBeen there. Sandy
My girlfriends sister views a tax refund as tax free income. I was confused at first until she explained "I don't have to claim the refund I got in 2008 [for 2007 overpayment] on my 2008 taxes, so it's tax free".However, my feeling is that a lot of these people who feel like a tax refund is "Free money" would not have the will power to save it over the course of the year. Their interest free loan to the government helps lower borrowing costs, so i'm fine with that.WRJ
I do wonder how many people realized the stimulus check was taxable income. The message was, after all, "spend it all!"Maybe if/when stimulus checks go out this year, they should be net amounts, with 40% Fed'l tax withheld. I realize the top rate is 35%, and most people getting stimulus checks won't hit that, but if extra is withheld, then there will be enough of a Fed'l refund to help cover state taxes.For unemployment checks, MD gives recipients the option of having tax withheld. They don't do any calc's on what your tax bracket is, they'll either withhold 17% (IIRC) or nothing. So it's pretty simple.People do anticipate certain results when they file their taxes, and having to pay extra, or getting less of a refund, is disappointing in the short term even if it's mathematically to their benefit over the course of the year.
I do wonder how many people realized the stimulus check was taxable income. I hope it was just one, because it wasn't taxable income.Phil
I'm confused. How is stimulus check taxable? It was an advance on the refund you would receive in 2009. How many times did Phil tell people "Don't change your withholding or estimated payments"? If some people went ahead and changed it anyway that's tough. Did they consult their tax preparer first? OP said they were still getting a refund. It just won't be enough to buy a car with. The fact that they save for a car by giving an interest-free loan to the gov't tells it all.Disclosure: I got a stimulus check but made no changes to estimated tax. Looks like I'm getting a $60 federal refund and will owe $20 to the state. Federal is due to not being able to exactly predict amount of qualified mutual fund dividends. State was intentional. They have no cash so refunds could be delayed.
...it wasn't taxable income...Good-O!Seems to me that, in that case, it shouldn't have made a difference in OP's coworker's taxes. Which maybe was just further illustration of her mis-calculations.Thanks,YG(obviously did not receive a stimulus check)
It was an advance on the refund you would receive in 2009Seriously? So there was no net difference in income? The only thing it did was take what people were planning to do in Feb 2009, and throw it off by moving some of it up to summer 2008?IMHO... well, never mind.
It was an advance on the refund you would receive in 2009Seriously? So there was no net difference in income? The only thing it did was take what people were planning to do in Feb 2009, and throw it off by moving some of it up to summer 2008?IMHO... well, never mind. That's exactly what it was with the added kicker that if you got more money in the summer of 2008 then you would be entitled to in early 2009, you don't have to repay the excess.Ira
It was an advance on the refund you would receive in 2009.Well, yes and no. It was that, but it was also a corresponding increase in the amount of refund that you would have received in 2009. They enacted a tax year 2008 refundable credit that, in effect, lowered all eligible taxpayers' 2008 tax by $x. Then they sent $x to those taxpayers based on TY 2007 returns. What sorts out on the 2008 returns is additional money for people whose advace payment wasn't as much as the actual 2008 reduction in tax. A couple of examples:1. You had a baby in 2008. There's possibly additional credit money due from that.2. You had an abnormal income spike in 2007 that made you ineligible for the advance payment. Your income is back to normal in 2008, and you qualify for the credit.Going back to the OP of this thread, if the co-worker's refund was abnormally low something that had nothing to do with this stimulus stuff changed from 2007 to 2008.Phil
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