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Prepare To Pay Back The Tax Credit
And you thought the government was not out to screw you. According to a research report released by the Treasury Department's Inspector General for Tax Administration, over 15 million people may own $250 (and in same cases more than $400) on the tax "credit" received earlier in the year, purely as a function of how the tax break was set up by the IRS. The payment will come as either a smaller tax refund or larger tax bill. As a reminder, Obama's tax break earlier in 2009 (first of many) provided individuals up to $400 and couples up to $800 in one-time benefits. It turns out that money may now have to be repaid. And as the credit impacted 95% of all wage earners, the number of people impacted is estimated at about 15.4 million. But at least it got these 15.4 million soon to be angry taxpayers to consumer a little more than they otherwise would in Q2. And now, it is time for another "one-time" jolt to the system.
The breakdown of those impact is as follows:
- More than 6.3 million pensioners
- More than 1.6 million working dependents
- More than 2.5 million single taxpayers
- More than 4.1 million taxpayers filing jointly
- More than 687,000 Social Security recipients
- More than 87,000 taxpayers filing returns with ITINs
As the report discloses:
To determine the extent to which such taxpayers might be negatively affected7 by the new withholding tables, we developed computer programs to identify taxpayers in the previously discussed situations in TY 2007 and who either owed taxes with their returns and would have owed more taxes, or had small refunds but would have owed had the new withholding tables been in effect. Figure 1 shows that more than 15.4 million taxpayers, or 10.4 percent (15,473,463/149,494,988) of all taxpayers who filed, could be negatively affected.
With the tax implications of various benefit and tax subsidy programs finally being calculated properly, the US population should not be too surprised if comparable adverse outcomes develop out of Cash For Clunkers and all other middle-class "benefiting" programs.
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this has been talked about on the floor of the chicago merchantile exchange since the beginning of the year. there are a few other tax credits out there that will be a surprise slap in the face come april 1st. i think you also have to pay your marginal tax bracket on the cash-for-clunkers nonsense and most people don't qualify for the new home tax credit in spite of their shady real estate broker telling them they did.
i can't wait for the fall out from this stuff next year. they're are gonna be a lot of unhappy middle income americans out there who will go to the elections and throw out the trashy politicians we have after these shenanigans.
Most of this was a withholding dodge from the git go--dressed up as free money by the pols. Better than the first time homebuyers credit which will break all records for flat out tax fraud and abuse.
The Ostumblefuk Administration - so incompetent they could screw-up a tax cut.
Usually you have to work hard to achieve the level of abject bone-jarring buffoonery displayed daily by "the smartest administration in the history of ever".
Hey--someone proof read this thing. I'm really sick and I can tell the difference between owe and own, and affected7 and affected. Oh and one more...to consume--not consumer.
Hey, I did. There is no space in 'proofread'.
Hey Howard. Let's see you knock out 15-20 articles a day. Glad to see you're focused on the important stuff. I guess critical reading ain't your thing. Here's a clue--IT'S FREE.
Hey--cool it. ZH usually tries hard to not have typos and I was just pointing 3 blatant ones out. And yes it's free and I am grateful every day that ZH exists. After I left trading, I ran the DJ global fixed income newswire known as CMR for 2 years--I cranked out hundreds a day.
Then you more than most, should realize "content is king". I'm glad you appreciate the work that's being done here.
Regards.
Now this is what I call transparency!!
Insert comment about free lunches here.
How bout we punt this can down the road again? Or is taking back the money a way to "fight inflation" after a little quantitative diseasing.
as if having to file a schedule M with your taxes they had to screw it up even futher
Try blaming Bush for this one, Obammunists. I double-dog dare ya.
I just had some kind of freudian event, actually read "prisoners" instead of "pensioners".
Considering that this was a tax "credit" and not a tax "cut," the money would have to be paid back by someone anyhow--all the administration did was move some money around to make it look like people got enough of a raise to buy an extra couple of bottles of whiskey and a fresh pair of underwear a month.
Remember, these are the folks who say they are going to eliminate fraud, waste, and abuse in Medicare and efficiently provide complete low-cost, "deficit-neutral" healthcare for another 43 million people.
"Hi I' m from the government and I am here to help you" pay back what I gave you and you thought you could keeeeeep. Just like Imperial China circa 1890.
Everyone knows there is no free lunch.
Actually no, I think that is kind of the problem isn't it?
You could delay the uproar by having another round of consumer stimulus. If you owe 400 in taxes from the last tax credit program but you have a new 800 dollar tax credit this same year you're probably a happy camper. Dumb, but happy.
This is not a new news story per se---the AICPA warned about this earlier this year.
However, it should make one wonder to what extent the Obama "Making Work Pay Tax Credit" contributed to the sharply reduced tax receipts which declined sharply in October on a Y-O-Y basis. (there was an excellent piece on ZH last week about this)
I am a CPA---and I can attest that people are going to get hit 2 ways here. First, if you lost your job and as a result you took a second job, or if you are working 2 jobs all along, then you are likely to end up owing more money come April 15th (or will have a reduced refund).
Why?--because the IRS was essentially forced by the way in which the Obama Administration wrote the credit into law. Specifically, the IRS had to adjust all of its withholding tables to condense the reductions (normally spread of 12 months) into a 7 month period.
As such, the withholding amounts were sharply reduced, especially up-front.
Thus, if you switched jobs or lost your job, you've had reduced withholdings at both jobs because of this adjustment. (However the maximum tax reduction is only $400 for an individual.)
In an era with 17.5% U-6 unemployment, where a lot of people working multiple part-time jobs to make ends meat, they are all going to get a rude awakening come next spring.
I put in a wood stove on the 30% "green" energy credit. Is there a hidden gotcha in those tax credits as well? TIA
innocent sheep
been watching the U.S.Debt Clock.org
numbers were at 11,998,284,etc looked again later expected to see 3 9s. instead i saw 11,991,etc .my gal saw it also
happened again next day. go figure. NO i am not making this up, not on drugs , dont drink alcohol , besides my girlfriend saw it also. i am 59, white contractor, self employed 30 years. Those who know me , trust me.
Didnt know what to do about it, let folks know.
Is there a purported reason for this grab-back? I don't see one mentioned here.
It was always a loan, in a sense (tho our money). It was injected into the economy so we could spend it, on the theory it would jump start it. I was never being just "given back." That was what was such a pisser about it to begin with.