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panteramatt

Is uncle Sam robbing me?

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Has anyone else got a drasticly reduced federal tax return? Last year my wife and I got a combined $1200 from federal where we usually get back over $3000. My tax preparer told me it's because my wife and I didn't have health insurance for 3 months due to having new jobs and Obamacare screwed us. He told us next year we would see a lot higher return. So guess what, this year it's $200! Has something changed I'm not aware of? He added everything he could for deductions but nothing changed. Something has to be off. The only differences are we both changed jobs 2 years ago and tax preparers so it might be him but he came from high praise.

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Has anyone else got a drasticly reduced federal tax return? Last year my wife and I got a combined $1200 from federal where we usually get back over $3000. My tax preparer told me it's because my wife and I didn't have health insurance for 3 months due to having new jobs and Obamacare screwed us. He told us next year we would see a lot higher return. So guess what, this year it's $200! Has something changed I'm not aware of? He added everything he could for deductions but nothing changed. Something has to be off. The only differences are we both changed jobs 2 years ago and tax preparers so it might be him but he came from high praise.

 

Any accountant worthy of the title should have been able to pinpoint exactly why your return was so small compared to previous years. We can guess all day here: different income bracket, different withholding levels, less given to charity, smaller deductions, etc. but he had the actual paperwork in front of him. If he couldn't tell you why your return amounted to less than 10% of previous years (and that is a BIG drop), you need a new accountant.  

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Check your withholding, rates change to make it look like you have more money each pay.  But, I ask, why do you like giving the Feds and State a free loan each year and then get your money back?  Not a real great economic benefit to you at that point, is it?  Big tax refund checks means you are doing something wrong during the year, not something good!  Less in your pocket, more in Uncle Sams.

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Check your withholding, rates change to make it look like you have more money each pay. But, I ask, why do you like giving the Feds and State a free loan each year and then get your money back? Not a real great economic benefit to you at that point, is it? Big tax refund checks means you are doing something wrong during the year, not something good! Less in your pocket, more in Uncle Sams.

So your saying that all these years I've been getting a decent refund something was wrong? It's would have caught on by now for sure.

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So your saying that all these years I've been getting a decent refund something was wrong? It's would have caught on by now for sure.

You both are talking past each other. Maybe I can help explain.

 

The return is basically a "true up to actual" against the estimated tax withholding done throughout the year. If you're getting a large refund, that means your estimate takes too much from your monthly take-home pay.

 

Remember, the tax return is your money that you're getting back. Wouldn't you rather have it right away instead of waiting until April of the following year to get your own money back? If you agree, you now better understand how it works.

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Ok so basically you guys are saying that if I get a large refund than they were taking too much all year? Then how come you get a lot back for having kids, owning other properties, and other write-offs? Hell I have friends that get back $10,000!Sorry for being ignorant when it comes to this stuff it's just that for years I've gotten a nice return and since taking this job it's basically nil.

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You both are talking past each other. Maybe I can help explain.

 

The return is basically a "true up to actual" against the estimated tax withholding done throughout the year. If you're getting a large refund, that means your estimate takes too much from your monthly take-home pay.

 

Remember, the tax return is your money that you're getting back. Wouldn't you rather have it right away instead of waiting until April of the following year to get your own money back? If you agree, you now better understand how it works.

The tax return is NOT the money you are getting back. I don't know why people keep saying that but it's annoying. Heck, you got it right the first time and then you did it, too :D

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Yes. Ideally you want to maybe owe them a little bit in the end or minimize the refund you get. If you get a lot back, the government just borrowed that money from you for free last year.

Why the hell would I want to owe them when they already tax the shit out of me to begin with?

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No because I just got them back. I will do it myself and see what's goin on. Can you guys tell me what the tax bracket breakdowns are? We did make more $ last year.

Tax tables are on the IRS website, as are the brackets. Make sure you get it for the right year.

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Mipa how is it not the money your getting back? How I understand it is throughout the year they "estimate" the amount of taxes that's taken (stolen) from you. Then at the end of the year the true amount that was either over or under paid to you is now corrected and you either owe or get that money back, correct?

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Sounds like it could be a few things.

 

1. You said you both changed jobs and are earning more. This could have pushed you into a higher tax bracket.

 

2. Are the number of exemptions you claim the same at your new jibs as they were at your old jobs?

 

3. If you have a mortgage and have been payimg same one for years the amount of mortgage interest you are paying / deducting is decreasing. The first five years you pay a mortgage you are paying almost all mortgage interest and little principle. Mortgage interests is generally one of largest deductions at tax time. The longer you've lived in same place / had sme mortgage the less mortgage interest you are able to deduct.

 

4. Your new accountant sucks. May be worth it tonhave a xifferent account reviewnto see if they can do better.

 

 

As others stated if you are receiving back a large refund you overpaid the government too much money out of every pay check. Ideally youn want to pretty much break even at tax time.

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The tax return is NOT the money you are getting back. I don't know why people keep saying that but it's annoying. Heck, you got it right the first time and then you did it, too :D

If it pleases the crown, I'll use the terms he is following to get the proper point across. Man alive, you're a stodgy prick.

:D

 

Matt - if you had too little withholding and have to make a small payment on tax day, that means you had MORE money in your pocket all year. If that's $1,000, the benefit is that you could have had that money in an account, perhaps earning interest for YOU! It might not be much, but it would be yours and not the governments interest income.

 

Of course, don't forget you'd have to pay more income tax in that extra income though.

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Why the hell would I want to owe them when they already tax the shit out of me to begin with?

You "owe" the government your tax money no matter what.  It does not matter when you pay (well, there can be penalties if you under pay by too much).  You are not liable to pay any more or less than what you owe (based on a simple formula and a very complex system of deductions, credits, and "loopholes").

 

You can overpay or underpay during the year by having too much or too little withheld from every paycheck.

At the end of the year, you file a tax return and settle up with the govt for the difference.

 

If you could pay nothing all year, and just pay the one lump sum on 4/15, you essentially have a short-term loan from the govt until you pay the bill.

 

If you get $10K back, well then you have just given the govt a short term, no interest loan for $10K.

 

Whether you owe or they owe, you still pay the same amount--unless you owe too much and then they will assess a penalty.

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Mipa how is it not the money your getting back? How I understand it is throughout the year they "estimate" the amount of taxes that's taken (stolen) from you. Then at the end of the year the true amount that was either over or under paid to you is now corrected and you either owe or get that money back, correct?

Tax return is the forms you send to them. I OWE them money, I don't get money back. I still have to send them a tax return.

 

If you get money back, it's called a "tax refund."

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Has anyone else got a drasticly reduced federal tax return? Last year my wife and I got a combined $1200 from federal where we usually get back over $3000. My tax preparer told me it's because my wife and I didn't have health insurance for 3 months due to having new jobs and Obamacare screwed us. He told us next year we would see a lot higher return. So guess what, this year it's $200! Has something changed I'm not aware of? He added everything he could for deductions but nothing changed. Something has to be off. The only differences are we both changed jobs 2 years ago and tax preparers so it might be him but he came from high praise.

There's a lot of variables. Do you make more? Do you claim fewer deductions in your w4? Nothing has changed recently.

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Your total yearly income is $1.00

 

Your tax rate is 10% so you own the government a total of ten cents of your dollar.

 

When you were hired you filled out a W4 and gave it to your employer.  This form is where you your employer how much income tax to withhold out of each paycheck.  Over the course of the year, he took out a total of 12 cents - as per your instructions.

 

Your "take home" pay was therefore 88 cents (one dollar minus the 12 cents)

 

At the end of the year, you fill out a tax return to see if your employer took out too much or too little.  In your case, the employer took out too much so the government sends you a check for 2 cents that you never should have paid in the first place.

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Well, we have to face the facts. Most people don't have that tight of a budgeting behavior and the common tax refund is sort of forced savings.

I call it an interest free loan to the government but your point is valid.

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