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How do people afford bungalows?
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amother
Black


 

Post Thu, May 28 2020, 1:51 pm
amother [ Lemon ] wrote:
I am not sure if you understand.

When you fill out the W-4 form or the equivalent for 1099 income you can choose how much you want to be deducted. Therefore you can have the use of income that is "refunded" throughout the year.

It's your money - always was your money and it's not a bonus from the government.

The money is automatically deducted if you are salaried but the amount is within control your control. If you are getting a significant refund, then you need to adjust your withholding so that you are NOT overpaying taxes for the year.

Having the government over-withhold is not any kind of tax planning or savvy tax deduction - it is the antithesis of good economic planning because you are giving someone your money for a year.


You are missing one crucial point. The child tax credit can only be received once your taxes are filed. The child tax credit essentially IS a "gift" from the government, because it is not deducted from your income, and it is a partially-refundable credit, so you can receive it even if your tax bill was zero.

So even if someone follows your advice, and fills in their W-4 properly, so they are not over-witholding, they will still be receiving a bonus from the government, per child.

This is all on the assumption that you have children, of course.
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Mommyg8




 
 
    
 

Post Thu, May 28 2020, 1:59 pm
amother [ Black ] wrote:
You are missing one crucial point. The child tax credit can only be received once your taxes are filed. The child tax credit essentially IS a "gift" from the government, because it is not deducted from your income, and it is a partially-refundable credit, so you can receive it even if your tax bill was zero.

So even if someone follows your advice, and fills in their W-4 properly, so they are not over-witholding, they will still be receiving a bonus from the government, per child.

This is all on the assumption that you have children, of course.


Lemon is right. That's not how it works.

I think people here are talking about the earned income credit or refundable child tax credits, which are indeed literally gifts from the government.
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amother
Lemon


 

Post Thu, May 28 2020, 2:00 pm
amother [ Black ] wrote:
You are missing one crucial point. The child tax credit can only be received once your taxes are filed. The child tax credit essentially IS a "gift" from the government, because it is not deducted from your income, and it is a partially-refundable credit, so you can receive it even if your tax bill was zero.

So even if someone follows your advice, and fills in their W-4 properly, so they are not over-witholding, they will still be receiving a bonus from the government, per child.

This is all on the assumption that you have children, of course.


A tax credit is not a refund. A refund is what the government pay when you have had too much withheld. I posted on the difference in a prior post up thread.

If you are having the government withhold too much it is not a smart financial decision.

If you are using a government payment to fund discretionary expenses because you don’t think of that money as part of your entire financial picture, it is not a sophisticated way to deal with your financiers.

If you don’t pay taxes and only get a credit I would suspect your income isn’t that high but I Am not a CPA so I don’t know how that would be calculated in terms of earned income.

My post is only dealing with using withholding incorrectly so that one gets a refund of amounts one overpaid for taxes.

I give up. LOL LOL
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amother
Black


 

Post Thu, May 28 2020, 2:04 pm
amother [ Lemon ] wrote:
A tax credit is nit a refund. A refund is what the government pay when you have had too much withheld. I posted on the difference in a prior post up thread.

If you are having the government withhold too much it is not a smart financial decision.

If you are using a government payment to fund discretionary expenses because you don’t think of that money as part of your entire financial picture, it is it a sophisticated way to deal with your financiers.

I give up. LOL LOL


I understand the difference between a refund and a tax credit. My point is that (unsophisticated?) people mix it up into one, and call it "tax refund" and use it to fund discretionary expenses.

I agree with you that over-withholding is not a smart decision.

Whether the child tax credit can/should be viewed as a "bonus" is up for debate.
It really isn't part of your income, ie money that you worked for, and those with a large family can be receiving a size-able amount in tax credits, even if they withheld correctly.
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amother
Black


 

Post Thu, May 28 2020, 2:05 pm
Mommyg8 wrote:
Lemon is right. That's not how it works.

I think people here are talking about the earned income credit or refundable child tax credits, which are indeed literally gifts from the government.


This is what I am trying to say.


Lemon is right that's not how what works?
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Mommyg8




 
 
    
 

Post Thu, May 28 2020, 2:17 pm
amother [ Black ] wrote:
This is what I am trying to say.


Lemon is right that's not how what works?


Ok. Lemon is right that for people who actually have that money withheld from their check, it may not be the best financial decision (especially if you have any credit card debt). It sounds like you are arguing apples and oranges.

Apples - higher income people - should withhold less. Oranges - people who are getting government programs - which is what earned income credits and refundable credits are - don't have that option.

"Refundable" in this case means money that was not withheld from your check and was never money that ever came from you. It is literally free money.
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amother
Black


 

Post Thu, May 28 2020, 2:32 pm
Mommyg8 wrote:
Ok. Lemon is right that for people who actually have that money withheld from their check, it may not be the best financial decision (especially if you have any credit card debt). It sounds like you are arguing apples and oranges.

Apples - higher income people - should withhold less. Oranges - people who are getting government programs - which is what earned income credits and refundable credits are - don't have that option.

"Refundable" in this case means money that was not withheld from your check and was never money that ever came from you. It is literally free money.


Huh? All people, no matter their income, should withhold the least possible, ie the correct amount.
Why don't low income people have that option?

And the child tax credit, which is a partially refundable credit, starts phasing out at $400K. I don't consider that low income.

Earned income credit and non-refundable credits are for low income people.
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amother
Black


 

Post Thu, May 28 2020, 2:38 pm
Mommyg8 wrote:
Ok. Lemon is right that for people who actually have that money withheld from their check, it may not be the best financial decision (especially if you have any credit card debt). It sounds like you are arguing apples and oranges.

Apples - higher income people - should withhold less. Oranges - people who are getting government programs - which is what earned income credits and refundable credits are - don't have that option.

"Refundable" in this case means money that was not withheld from your check and was never money that ever came from you. It is literally free money.


I agree we are arguing apples and oranges.

Lemons point is that people should not over-withhold as a way to force themselves to save. And if they do, they should definitely not use the refund they receive as a result of over witholding as bonus money.

My point is that I don't believe most people are actually over-withholding. I believe most are incorrectly labelling their tax credits as tax refunds and are using THAT money to fund bungalows.
Lemons am I correct?
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Mommyg8




 
 
    
 

Post Thu, May 28 2020, 3:09 pm
amother [ Black ] wrote:
Huh? All people, no matter their income, should withhold the least possible, ie the correct amount.
Why don't low income people have that option?

And the child tax credit, which is a partially refundable credit, starts phasing out at $400K. I don't consider that low income.

Earned income credit and non-refundable credits are for low income people.


Ok so let me explain. Low income people get something called earned income credit. It is not withdrawn from their check at all, and not deducted from the amount they would owe. It's a completely separate amount - literally the government handing them money - so there is nothing to not withdraw from their paycheck.

The refundable credit may phase out at $400k, but you'd need an awful lot of kids to hit that.

To give an illustration - family X earned $60k last year. I don't think they would be eligible for the earned income credit, but they will definitely be eligible for the child tax credit.

So it would be calculated like this - $24k standard deduction, so we're left with $36k. Taxes on that are around 10%, so their tax liability would be $3600. But let's say they have eight kids under 18. So the first two would be a tax credit of 2k each (very approximate numbers), but the next six would get refundable tax credits. Even if they withheld nothing at all, they would still get another $6k. If they do indeed withhold the original $60k, that would be the money you are arguing about. So it's only that first $3600 that's up for debate. Some may like to withhold it anyway so that they can get a nice size check at the end, but the other $6k is not really optional either way.

Your last sentence should read - earned income credit is for low income people and refundable credits for people with enough kids. Non-Refundable credits only apply to actual tax liability so it's not necessarily relevant for low income people.
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amother
Slategray


 

Post Thu, May 28 2020, 4:29 pm
Where I live in Brooklyn, many people will literally just do whatever it takes to go. Whether it’s borrowing, credit card debt, using the tax return money and obviously there’s many who can actually afford to, too.
I live in a Fairly new development (4 yrs old) and the majority of apartments are bought, and I’m floored anew each year at the summer mass exodus going on here. Granted, there’s no greenery but the apts are not small and the kids have a fairly big backyard to run amok. The way I look at it is ‘monkey see monkey do’ or the cliched ‘keeping up with the cohens.’

When my kids plead and whine that we are literally the only ones to stay home And how come some of our neighbors who seem to be of lesser means can go, I tell them It is none of our business and we do what we can and that’s that. And that is really that.
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amother
Azure


 

Post Thu, May 28 2020, 4:39 pm
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