Paul Mitchell

wife and i had a discussion about illegals and the financial burden last night.

 

She says amnesty will help the tax income of this country. I disagreed by saying that the majority of illegals are only going to show a < $20k annual income - most have > 1 child and that leads to large tax refunds.

 

I have a child and have never agreed with the concept of getting paid by the GubMent for having a child. You should only get back equal or less than you put in.

 

My step-son (27, 2 kids, disability most of his adult life - paralyzed one side of his body, still tries to work - legally) called up earlier this week pretty upset that he worked last year and now he's not getting $4500 tax refunds. He's getting $0.

I asked how much did he put into the system? He gave a low figure, I said 'when is it logical to expect more out of something than you put in?'

 

I know METH HEADS with kids that are getting 5-6-$7k tax refunds this year that haven't worked all year and been a drain on the system getting food stamps (then selling them for PENNIES on the dollar, i.e. $200 in groceries for $75 cash).

 

THIS MADNESS HAS TO STOP

 

our government is a joke.

Obviously I don't know your sons tax situation or income but it's possible he may qualify for the earned income credit (EIC) that was introduced some time ago to help those with minimal income. It's a refundable credit so you can have a return greater than what you paid in taxes. The EIC was established to help those people who are trying to help themselves by working at a legitimate job even if they don't make a lot of money. Some people who have also been laid off in the calendar year qualify for EIC as their income level has dropped. If he needs assistance in filing his taxes and determining his legitimate deductions and credits he can go to an AARP Tax Site and have his taxes prepared for free. If he's already prepared his return he may ask at the AARP site if they would review his return. If he's made errors the return can be amended.

As far as the drug dealers, the only way they would receive a tax return of $5,000.00 plus is if they filed and were eligible for refundable credits. It's possible if they had a spouse working or they had a job for part of the year that would qualify them for EIC. Technically your're supposed to report all income, legal or otherwise, on your return including revenue from the sale of illegal drugs. Al Capone wasn't arrested for being a gangster - he was arrested for income tax evasion and not reporting income.

Here are refundable credits that can lead to a substantial return:

Earned income credit

Adoption credit

First time homebuyer credit (for past years)

Additional child tax credit

Health coverage tax credit

American opportunity credit

An earlier post referenced a woman with an $8,000.00 refund and it would be my guess that she qualified for EIC. Even if you file a correct W-4 you still have the potential to receive a tax return far in excess of what you've paid, if any, into the system.

The tax system is too complex and I agree that a flat tax is the way to go but I doubt we'll see it in our lifetime.

I keep seeing this "8,000" refund... who is it for and where do I sign up?

I'll take a guess that the $8,000.00 refund they're talking about is the $8,000.00 credit for first time home buyers that I believe took place in 2008 through 2010 and was extended until April 2011 for some military personnel. The dates may be incorrect. I believe the first home buyer credit was in 2007 for $7,500.00 but you had to pay that one back over a fifteen year period which actually made it a loan so it wasn't that great a deal. I believe the latter credits from 2008 on did not require repayment.

Nail = Head

 

I read an article the other day that says that the top 1% pay 95% of all the tax revenue in this country. Also, over 75% of people get more in a tax return than they put into the tax system. Is it a tax revenue system, or another government charity organization?

I haven't done enough research on how much the top 1% pay in tax revenue so I won't comment on that portion of the above post.

However the 75% figure of people receiving more in their tax return than they paid in taxes seems high. I prepared tax returns through AARP for two years and the majority of returns were for the elderly and the low income.The best way to lower your tax bill is through deductions, exemptions and credits and credits will have more effect on your return as credits affect your tax return dollar for dollar so each dollar of credit will reduce your tax liability by one dollar. There are two types of credits - refundable and non-refundable. Let's say you had a tax liability of $1,000.00 prior to taking your applicable non-refundable credits. You have $2,000.00 in credits but since they are non-refundable your tax liability will be reduced to zero. Non-refundable tax credits can lower your tax liability to zero and they consist of the following:

Child and dependent care credit

Education credits

Credit for the elderly and disabled

Child tax credit

Residential energy credits

Retirement savings contribution credit

Refundable tax credits can lower your tax liability below zero so you can actually receive more in your refund than you paid in income tax deducted from your pay check. They consist of the following:

Earned income credit

Adoption credit

First time homebuyer credit

Additional child tax credit

Health coverage tax credit

American opportunity credit

The most common refundable tax credit I found was the earned income credit. You could actually obtain a refund even if you paid no tax. It's based on the number of dependents and the amount of money earned and only a few people qualify for this credit. If you have a minimum wage job and three or four dependents you most likely will quality and will receive a refund for more than you paid in income tax if you paid any federal income tax at all. Many people who found themselves unemployed during the tax year also qualified. I'd say maybe ten percent of the returns I completed for the non-elderly fell into this category. Statistics show that most people who qualify for this type of return only do so for one to two years as they find a better job or return to the workforce..

Another thing to consider are the federal taxes that are paid by all people regardless of their income level such as federal payroll taxes and the federal gas tax which is about .18 per gallon. Some state and local taxes also fall into this equation and everybody is going to pay those taxes regardless of their income status.

I would like to see the tax system revised to make it more equitable for all but what's "equitable" for one is not "equitable" for another.