Questions on Taxes

[disney junky]

I was reading an article in the paper. The way it read confused me so I want to ask this question to anyone who knows here on the DIS.

Can a person get a bigger refund than the taxes he or she paid? That seemed to be the gist of the article. I know there are tax credits. I'm not talking about those.

 

[Acklander]

The article was probably talking about the earned income credit (for people who work, but make low wages) OR one of the corporate rebates (where companies get credits and rebates, for I'm not sure why) OR maybe farm credits (where farms are paid not to grow crops). There are a few different ways where you could get back more than you paid in.

 

[Cheshire Figment]

Yes. You have to be fairly low income. For many years the Earned Income Credit has been available. Also, for the last two years there has been the "Making Work Pay" using Schedule M. If you are using a tax program it will automatically compute these for you.

Those are the two most common ones. There are others related to dependents and education, new home purchases, and others which are refundable. Some credits are non-refundable and will not let your tax go below zero; in these situations usually the unused credit can be carried forward to future years.

Mike (CPA Retired)

 

[Handbag Lady]

It must exist. There's no other explanation as to why we have to pay so much each year. Taxes are killing me this year.

 

[Janet Hill]

These are the ones I know of

Refundable Tax Credits
■ Earned Income Tax Credit – This is a tax credit available to low income individuals. It increases dramatically if you have kids. The amount of the credit varies greatly based on your income. The maximum for qualifying people with 2 or more kids is around $5,000.
■First Time Home Buyer Tax Credit – First time home buyers, and existing home buyers who are upgrading can qualify for this big credit. Up to $8,000 for first timers. The deadline to buy has been extended into 2010.
■Making Work Pay Credit – This credit was part of the latest economic stimulus. It’s for up to $400 per person who works. If you didn’t get it credited to your paycheck make sure you get it when you file.
■American Opportunity Tax Credit - This is another temporary credit which really just upgrades the HOPE Credit, a credit for post secondary education expenses. One aspect to the upgrade is that it’s now a partially refundable credit. Maximum credit is $2,500, with $1,000 being refundable