Remember those $400.00 and $800.00 tax credits Barack Obama gave you in his stimulus plan? And remember that $250.00 gift he gave social security recipients?
Well, Obama decided he wants them back. Yep. According to the IRS, Obama has never asked for an adjustment of the tax tables, so millions of Americans are going to get taxed for having received the tax credits back in February — typically through adjustments the federal government demanded businesses make in employees’ withholdings.
“While implementing a credit through reduced withholding is an effective way to provide economic stimulus evenly throughout the year, it is difficult to account for everyone’s circumstances,” said J. Russell George, the Treasury inspector general for tax administration. “More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes.”
The tax credit is also available for 2010. Russell said the problems will continue in 2010 if they are not resolved.
Obamathematics
ericstenner Monday, November 16th at 11:20PM EST (link)In Obamathematics:
–An $800 tax credit = you owe us some money
–Unemployment going up to 10.2% = 650,000 jobs saved or created
–13 deaths in 1 terrorist attack = 0 terrorist attacks
Obama's campaign promise
vamoose Monday, November 16th at 11:35PM EST (link)Don’t forget, Obama campaigned on the promise of a $500 for individuals and $1,000 per couple tax credit. That promise has now been broken twice: first to $400/$800, and now to $0/$0.
SUCKERS!
farstar99 Tuesday, November 17th at 2:55PM EST (link)“Faked you out!”
“AGAIN!”
There's no "take-back" here - just a gimmick that backfired
civil_truth Tuesday, November 17th at 12:09AM EST (link)I just checked the IRS site - this Making Work Pay is still posted as a refundable credit, which means so long as you qualify, your 1040 will show up to $800 reduction in your tax liability (or pay-out of the remainder if your liability falls to zero). So there’s no duplicity about the credit itself - we’re still going to see it on our 2009 Form 1040 (again, to the extent that we qualify).
What is backfiring is that instead of waiting unitl people file their 1040s next year, the government wanted to get the money into people’s pockets faster (in the hope that they would spend it). The only other method - mailing out checks got criticized the last time around because some people got more money than they were entitled to - and trying to take it back WAS a political problem, resulting in people being allowed to keep what they got in the mail regardless of whether they deserved to get it or not.
So this time, they decided to work via withholding tables, which avoids the overpayment of checks problem - only to run into the problem that it is devilishly difficult to make withholdings come out even when we have an erratic income stream or a fair amoung of non-wage income or eligibility for various credits.
Unfortunately, too many people assume that their withholding amounts mean that they won’t owe money come April 15th - which means that the government is as likely as not to get things right as wrong when they try to fiddle with withholding schedules to advance pay various credits, etc. The EIC is a long-standing case in point.
So the gimmick backfired, and we can jeer as we wish, but this is really just a surrogate for the real issue worthy of criticism and jeering.
And that issue that the Making Work Pay itself was a gimmick and political pander rather than representing a sensible economic action - just like the rest of what Congress in the weeks after Januray 20th with regards to the Porkulus and the 2009-10 budget resolution.
So let’s fire away - but remember that it’s Congress that is the target, not the people who had the impossible task of changing the withholding tables.
And Rightly So!
civil is right
mom2oneson Tuesday, November 17th at 10:13AM EST (link)When this started I read a few AP articles that said if you worked a second job or were married that you could owe some back. The thing with this is that it wasn’t optional. People couldn’t opt in or out or fill out a form to get it or pick to wait and see.
Civil you said not as likely to get things right as wrong. I don’t think there would be a lot of getting it wrong for the advanced EITC. The advanced part is only a portion, you can’t get the full thing during that tax year. I can’t see there being a big percent of paybacks. I’m not H&R block but I know a lot of women that get and almost none want the advanced part. It doesn’t seem to be a very popular thing to do. There seems to be this mentality of rather have a windfall in Feb than a little extra during that tax year year with a smaller windfall in Feb. It’s the same amount of OPM
in the end though. The income not to qualify for any of it is kind of high most at that level are somewhat aware of taxes and not likely to even mess with the form to get the advanced EITC. They haven’t done as big marketing campaign with it, most employers don’t even keep the forms for it around. When I have gotten it, I downloaded it from the interne at the libraryt and submitted it to my employer. I guess someone that is married with 2 incomes in the home or works 2 jobs could be claiming the advanced part knowingly they won’t qualify but I’ve never seen it, ever, most people at that income level are afraid of owing.
mom2oneson, I think you're basically affirming my argument
civil_truth Tuesday, November 17th at 3:08PM EST (link)in your second paragraph about the EIC.
I see that my comment got a bit convoluted, but the conclusion that we both came up with is that using withholding tables to try to put money in people’s pockets in advance is a bad idea because you run the risk of coming out behind come April 15th. Which is why, as you astutely point out, many EIC eligible people don’t get mixed up with the advance credit - especially since they can’t afford unpleasant surprises when they finish their 1040.
At a basic conceptual level, withholding is a mechanism for taking our tax money from us ahead of time, so using it as an advance credit mechanism doesn’t work out well because it’s a conflicting goal.
And by the way, one can always adjust withholding allowances in response to government games with the tables (unless you’ve zeroed everthing out and your employer refuses your request to take additional dollar-amount withholdings out of your paycheck).
So people weren’t helpless about their withholding amounts - but they do have to choose the hassle of changing them. But increasingly in our handout culture, people want to whine whe things aren’t handed to them on a silver platter rather than step up and push back.
And Rightly So!
thanks civil
mom2oneson Tuesday, November 17th at 5:10PM EST (link)“At a basic conceptual level, withholding is a mechanism for taking our tax money from us ahead of time, so using it as an advance credit mechanism doesn’t work out well because it’s a conflicting goal.”
I guess I missed the point of what you were saying hte first time but now I understand it.:) Thanks for being such a good explainer. I always feel like I understand after reading your explainations. You are so good at giving some type of context to make someone with no prior knowledge understand.
I agree with you about the whine and handouts vs pushing back. It’s permeated our whole culture from the indigent to those better off. Thanks for pointing that out too I was misinformed to think they were forced into it, I think taxes are a burden but people can spend 2 minutes and change their forms.. The IRS will mail you forms if you don’t have a printer, I’ve done that a few times for different things.
I that is really interesting, I never knew it was subject and such an interesting one around how to implement tax things.
His new music video
samdallas Tuesday, November 17th at 10:08AM EST (link)http://www.youtube.com/watch?v=qyPtSB4ofOw
What about those of us who did NOT get the tax credits?
peg_c Tuesday, November 17th at 10:16AM EST (link)Is the IRS going to try to get back from us what we did not get to begin with? It would not surprise me.
OTOH now that I’m unemployed it’s going to be very difficult to get at me via employer withholdings.
Government cannot be the solution when government is the problem.
just your first born peg_c ;) nt
mom2oneson Tuesday, November 17th at 5:11PM EST (link)The tax credit is still in force and will appear on the 1040
civil_truth Tuesday, November 17th at 5:27PM EST (link)This whole fuss is about the withholding tables and that some people who ended up underwithholding their taxes will end up owing taxes come April 15th because they didn’t catch on earlier that the government was playing games with the tables.
But as usual with payroll withholding, it’s pay now or pay later.
And people could still adjust their W-4s for the rest of the year if they’re that worried about April 15th. But they’re probably better off putting more away in savings to cover the bill.
And Rightly So!