LOAN or GIFT?
March 20, 2009 11:28 AM Subscribe
Today was the first day the stimulus withholding showed up in my paycheck. I can't tell: is this additional $13 just a change in withholding, or is my annual income tax actually reduced by $400? If it's just another bullshit rebate, I do not want this money. Please advise.
Links and authoritative citations much appreciated!
Links and authoritative citations much appreciated!
Response by poster: 'refundable tax credit,' right. what the fuck does that mean? if it's refundable, who is it refundable to? the feds? if so, fuck that!
posted by mwhybark at 11:54 AM on March 20, 2009
posted by mwhybark at 11:54 AM on March 20, 2009
Response by poster: also, under what conditions is it refundable to whoever? high-income persons get the withholding change and then have to repay it? is that what this means?
posted by mwhybark at 11:55 AM on March 20, 2009
posted by mwhybark at 11:55 AM on March 20, 2009
Best answer: A refundable tax credit is a credit available to those whose income tax liability is below the amount of the credit. Therefore, a tax refund will still be issued to the filer even if that amount of tax has not been paid.
posted by coryinabox at 12:06 PM on March 20, 2009
posted by coryinabox at 12:06 PM on March 20, 2009
Best answer: It's refundable to you. A normal tax credit can reduce your tax liability, but not below zero. A refundable tax credit, however, can reduce your tax liability below zero to the point that the government owes you money.
And to answer your original question: yes, your annual income tax is reduced.
More discussion here and here.
posted by Xalf at 12:10 PM on March 20, 2009
And to answer your original question: yes, your annual income tax is reduced.
More discussion here and here.
posted by Xalf at 12:10 PM on March 20, 2009
Best answer: If it's just another bullshit rebate, I do not want this money. Please advise.
If you do not want to keep an additional $400 of your own money, I know someone who would like very much to have it.
In all seriousness, though, this is not a particularly complicated concept: it's a tax credit. Which means it reduces the amount of your actual liability (differentiated from a deduction, which reduces the amount of income on which you are taxed -- more detailed explanation).
Tax credits typically cannot generate refunds. In other words, if you owe $0 in taxes and have a $100 tax credit, you get nothing. This credit is different in that it is refundable, which is why it's being given back to you per-paycheck rather than something you add to your 1040 at the end of the year.
That said, be very careful if you have two jobs or if both you and your spouse work (god help you if you and your spouse both have two jobs) because the way the withholding is being done (to the best of my understanding) is that each employer assumes that it is your only employer, so they'll ALL give you a $400 credit. Problem is, at the end of the year, you've been given more of a tax credit than you deserve and you'll owe Uncle Sam the difference.
Doomsday example: both you and your wife work two jobs. You're entitled to $400 a piece or $800 filing jointly. If all four jobs assume that you're filing jointly and that they're the only job, you'll get $3200 in credits when you're only entitled to $800. When tax season rolls around next year, the Gov't will want $2400 of it back.
If you're married and/or have more than one job, you should probably talk to HR soon to make sure you're not getting too much.
posted by toomuchpete at 12:20 PM on March 20, 2009
If you do not want to keep an additional $400 of your own money, I know someone who would like very much to have it.
In all seriousness, though, this is not a particularly complicated concept: it's a tax credit. Which means it reduces the amount of your actual liability (differentiated from a deduction, which reduces the amount of income on which you are taxed -- more detailed explanation).
Tax credits typically cannot generate refunds. In other words, if you owe $0 in taxes and have a $100 tax credit, you get nothing. This credit is different in that it is refundable, which is why it's being given back to you per-paycheck rather than something you add to your 1040 at the end of the year.
That said, be very careful if you have two jobs or if both you and your spouse work (god help you if you and your spouse both have two jobs) because the way the withholding is being done (to the best of my understanding) is that each employer assumes that it is your only employer, so they'll ALL give you a $400 credit. Problem is, at the end of the year, you've been given more of a tax credit than you deserve and you'll owe Uncle Sam the difference.
Doomsday example: both you and your wife work two jobs. You're entitled to $400 a piece or $800 filing jointly. If all four jobs assume that you're filing jointly and that they're the only job, you'll get $3200 in credits when you're only entitled to $800. When tax season rolls around next year, the Gov't will want $2400 of it back.
If you're married and/or have more than one job, you should probably talk to HR soon to make sure you're not getting too much.
posted by toomuchpete at 12:20 PM on March 20, 2009
Response by poster: Right, I think that clears it up. Short answer: no second gig, no surprise tax bill, no end-of-year collection for the money, no need to foce it back into the Money Bin.
If you do not want to keep an additional $400 of your own money, I know someone who would like very much to have it.
Yeah, I'm one of those higher-taxes-please libuurls, actually.
posted by mwhybark at 12:26 PM on March 20, 2009
If you do not want to keep an additional $400 of your own money, I know someone who would like very much to have it.
Yeah, I'm one of those higher-taxes-please libuurls, actually.
posted by mwhybark at 12:26 PM on March 20, 2009
toomuchpete: "Doomsday example: both you and your wife work two jobs. You're entitled to $400 a piece or $800 filing jointly. If all four jobs assume that you're filing jointly and that they're the only job, you'll get $3200 in credits when you're only entitled to $800. When tax season rolls around next year, the Gov't will want $2400 of it back. "
$3200 should be $1600 and $2400 shound be $800, so it's not that bad.
posted by alexei at 1:42 PM on March 20, 2009
$3200 should be $1600 and $2400 shound be $800, so it's not that bad.
posted by alexei at 1:42 PM on March 20, 2009
$3200 should be $1600 and $2400 shound be $800, so it's not that bad.
Nope. toomuchpete is correct. Read it again. John and Jane both have two jobs. If John's first employer knows that John and Jane file jointly, but thinks that a) they are John's only employer, and b) that Jane does not have a job, that employer will give John a total of $800. If John's second employer makes the same mistake, as does Jane's two employers, the two of them will receive a total of $3200, but only be entitled to $800. They will need to return $2400 of it.
posted by ericc at 1:54 PM on March 20, 2009
Nope. toomuchpete is correct. Read it again. John and Jane both have two jobs. If John's first employer knows that John and Jane file jointly, but thinks that a) they are John's only employer, and b) that Jane does not have a job, that employer will give John a total of $800. If John's second employer makes the same mistake, as does Jane's two employers, the two of them will receive a total of $3200, but only be entitled to $800. They will need to return $2400 of it.
posted by ericc at 1:54 PM on March 20, 2009
Well thank god for AskMe. Between us, mr nax and I get 7 W2s. I'll need to work out new W4s for all of them. Thank you, hivemind.
posted by nax at 6:41 PM on March 20, 2009
posted by nax at 6:41 PM on March 20, 2009
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posted by ejaned8 at 11:38 AM on March 20, 2009