Obama's April Fools Joke?

[xenolith]

... according to my tax preparer, a "tax cut" doesn't actually exist! (not until maybe after 2010, to which the dems are now objecting.)

Stay with me here...

My tax guy advised me today that I should adjust my federal income tax withholdings in order to negate the $13 increase that will show up in my pay check (ironically) after April 1st of this year, by law.

Why is that? I make much less than the $75 thousand a year, as does 95% of everyone else, so we get a cut... right?

Well, not so fast. My tax guy informed me that I (as well as all his clients) have misunderstood what was actually passed in Obama's porkulus plan. This is not a "tax cut", it's a "tax credit". A credit that will need to be paid back, kind of like a loan. A $400 interest free federal loan to each of us to help stimulate the economy? I L'dMAO.

To elaborate...

Because the 2009 federal tax tables did not change, this means everyone's 2009 federal tax liability will not change! So, if I take my $13 weekly "tax credit" for the rest of the year, it will result in an under-payment of my 2009 federal income tax by $400, which I'll owe in 2010.

I know, $400. Big deal. Who cares? But it's the principle, or lack there of... the continued slimy dishonesty that continues to ooze out of Washington, all at the expense of the people who elected them.

I wonder how many Americans actually understand this is not a tax cut, or care? I would guess not many at all since no one is talking about it either way.

 

[fskimospy]

Uhmmm, I'm no expert, but I think you should find a new tax guy. The tax credit you are talking about is a $400 refundable tax credit. That means not only does it reduce your tax liability, but if it reduces it below zero, you get to keep the extra money.

Your post would seem to prove your final point that some people don't understand this though... haha.

 

[boomerang]

I like to Bash Obama as much as the next person but I don't follow this reasoning.

2009 tax tables? For what, the purposes of preparing your tax return? Those will not be out until early next year.

If your tax preparer is referring to how taxes will be computed on your pay, if those tables did not change, you won't see less taken out of your check so what's the problem?

I don't know when the federal tax tables will be finalized for the purposes of filing tax returns for the 2009 tax year, but I'm about 100% certain it's not done in March of the previous year.

Either one or both of you have got something mixed up IMO.

 

[Fern]

No, either your tax preparer is confused, or you have misunderstood him.

In previous stimulus payments we received, you had to wait until after your tax return was filed to get it.

So, doing it like that this year would have meant we wouldn't get our $400 (or $800 if MFJ) until sometime after April 15 2010.

Instead, you get to claim a credit of $400 (or $800) on your 2009 tax return instead of getting a check. Now, instead of leaving the withholding tables the same and forcing you to get your credit as a refund in 2010, they've adjusted the WH tables so the $400 (or $800) dribbles out to you throughout the year in small amounts.

Otherwise, there would have been even more complaints about the stim package as too "back-loaded" (benefits stretched out to laters years instead of now).

Another way to look at it:

The "shortage" resulting from the reduced withholding will be offset by the credit you will be able to claim on your 2009 tax return.

In short, you get a $400 tax cut via the (refundable) credit, it doesn't need to be paid back.

1. Individual tax credits for earned income ($116.2 billion cost) ? This is 40% of the total tax reduction. Those who make less than $75,000 a year (150,000 for couples) will pay less income tax. Individuals will get a $400 tax credit. Couples will receive twice that, or $800. Unlike President Bush?s 2008 tax stimulus/cuts, the IRS won't mail out rebate checks. Instead, withholding tables are being adjusted, thereby automatically boosting paychecks for those eligible. Starting in July 2009, wage earners will get about $15 per week extra in their paychecks. Starting in 2010, the same benefit will be spread out for the full year, reducing the per-week tax reduction in half, to about $7.50 per worker.

Link

Fern

 

[Ns1]

I don't know how the tax cuts work, but I know what a tax credit is.

(Income LESS deductions) * tax rate = tax liability LESS withholdings LESS credits = tax due

Therefore, if this $13 you speak of is a tax credit, and the tax tables don't change, and NOTHING ELSE CHANGES, your tax due at the end of the year is less (due to said tax credits) and your "tax guy" is an idiot.

THIS ENTIRE POST operates under the assumption that this $13/paycheck is a tax "credit".

 

[xenolith]

Originally posted by: boomerang

2009 tax tables? For what, the purposes of preparing your tax return? Those will not be out until early next year.

Yes, I believe he meant the 2009 tax tables for purposes of preparing your tax return.

I know they won't be out until January 2010, but it's my understanding they don't change annually, unless of course they change the rates by submitting and passing a bill into law.

Originally posted by: Fern
The "shortage" resulting from the reduced withholding we be offset by the credit you will be able to claim on your 2009 tax return.

In short, you get a $400 tax cut via the (refundable) credit, it doesn't need to be paid back.

Sorry, I am as far from a tax expert as you can get, hence the tax preparer, so I'm only going by what my tax guy told me. If this is true, I need to get a new tax preparer.

 

[WHAMPOM]

April Fool came early, I see. So here's a :beer:for you Xeno.

 

[soccerballtux]

Originally posted by: xenolith
... according to my tax preparer, a "tax cut" doesn't actually exist! (not until maybe after 2010, to which the dems are now objecting.)

Stay with me here...

My tax guy advised me today that I should adjust my federal income tax withholdings in order to negate the $13 increase that will show up in my pay check (ironically) after April 1st of this year, by law.

Why is that? I make much less than the $75 thousand a year, as does 95% of everyone else, so we get a cut... right?

Well, not so fast. My tax guy informed me that I (as well as all his clients) have misunderstood what was actually passed in Obama's porkulus plan. This is not a "tax cut", it's a "tax credit". A credit that will need to be paid back, kind of like a loan. A $400 interest free federal loan to each of us to help stimulate the economy? I L'dMAO.

To elaborate...

Because the 2009 federal tax tables did not change, this means everyone's 2009 federal tax liability will not change! So, if I take my $13 weekly "tax credit" for the rest of the year, it will result in an under-payment of my 2009 federal income tax by $400, which I'll owe in 2010.

I know, $400. Big deal. Who cares? But it's the principle, or lack there of... the continued slimy dishonesty that continues to ooze out of Washington, all at the expense of the people who elected them.

I wonder how many Americans actually understand this is not a tax cut, or care? I would guess not many at all since no one is talking about it either way.

Wow. OP, can you tell me what NOT to file to avoid taking this tax credit? I want to make sure I'm not fooled by this.

 

[JJChicken]

Originally posted by: WHAMPOM
April Fool came early, I see. So here's a :beer:for you Xeno.

:thumbsup:

 

[PokerGuy]

Either you need a new tax guy, or your tax guy need brighter clients

Good explanation Fern :thumbsup:

 

[GTKeeper]

Tax people are a waste of time. Unless you make a lot of money or have some serious tax complications, such as owning an S-Corp or something, just invest 50 bucks in Turbo Tax (it worked for Timmay!) and do your own return online. It litelarly takes a couple of hours and anyone can do it. That way you see exactly what you get.

 

[EXman]

The joke was on people who voted for Obama thinking they would reap some instant cash reward to go buy a flatscreen and an Xbox360.

Hey thanks Obama for $13! My ass I wanted a flatscreen!

Sorry folks you got more of the same plus a healthy dose of socialism too. Thanks for planting that seed GWB!

 

[JCE10]

lol

 

[LTC8K6]

The 2009 Federal tax tables did change, of course. That's why you are getting a little more in your paycheck.

The IRS issued these tables early,

http://www.irs.gov/pub/irs-pdf/n1036.pdf

and then sent out new books, which I receved a few days ago.

 

[retrospooty]

Originally posted by: eskimospy
Uhmmm, I'm no expert, but I think you should find a new tax guy. The tax credit you are talking about is a $400 refundable tax credit. That means not only does it reduce your tax liability, but if it reduces it below zero, you get to keep the extra money.

Your post would seem to prove your final point that some people don't understand this though... haha.

You owned this thread in .... 1 post =)

 

[xenolith]

Originally posted by: LTC8K6
The 2009 Federal tax tables did change, of course. That's why you are getting a little more in your paycheck.

The IRS issued these tables early,

http://www.irs.gov/pub/irs-pdf/n1036.pdf

and then sent out new books, which I receved a few days ago.

Yes, we know. I never said the federal income tax withholding tables did not change. In fact, I insinuated that they did.

The tax tables to prepare a tax return will not change for this year (according to my preparer.)

Conclusion: Fern's explanation that we will be able claim the credit on our 2009 tax return in order to lower our overall liability honestly makes the most sense.

 

[rbV5]

The withholding change occured on my last paycheck. If there is indeed a $400 credit, it will definately come up short of the $739 "extra" I will receive for the year ($36.95 extra per pay period, 20 total payperiods for the year with the new witholding rate)