Tax credit is coming back to bite millions AP News article

More than 15 million taxpayers may owe the government $250 or more because of how the IRS last spring set up President Barack Obama's tax break that was designed to help consumers spend the U.S. economy out of recession. Individuals with more than one job and married couples in which both spouses work may have to repay the government $400, either through a smaller tax refund or a larger tax bill, according to a report released Monday by the Treasury Department's inspector general for tax administration. Social Security recipients who also earn taxable wages may have to repay $250. The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was Obama's signature tax break in the massive stimulus package enacted in February. The credit has increased weekly paychecks for 95 percent of working families, giving them cash to help boost consumer spending during the worst economic recession in decades.

Full Article:

http://www.msnbc.msn.com/id/33974446/ns/business-tax_tactics/

Why can't they just use a headline saying people who got the tax credit twice have to give back what they weren't entitled to? This alarmist crap is irritating..

The good news just keeps on coming!

Deficit could cause more IRS audits, experts say

More ‘soft notices’ sent to encourage filers to recalculate amount owed

DES MOINES, Iowa - With the federal deficit topping a record $1 trillion and rapidly on its way to nearly doubling by this fall, the government desperately needs to squeeze out every tax dollar it can find. That could translate into more audits or at least a letter from the IRS politely asking you to refigure your taxes.

"You're not going to find a document that says this, but it's very clear that in a budget deficit, increased tax collection is another source of revenue," said Ohio State University professor Bill Raabe, a federal tax expert. "It's revenue that should be there that doesn't come in."

The IRS estimates that it fails to collect about $345 billion in taxes each year. The largest chunk of the uncollected portion comes from individual income taxes, which accounts for nearly $200 billion. That explains why you now have a one in 99 chance of getting audited when just 10 years ago it was a one in 202.

"That means that who's going to really feel the brunt of this, who's going to get audited more often in a real sense is the bartender, the waitress, the construction guy," Raabe said.

Xnarg said: The good news just keeps on coming!

Deficit could cause more IRS audits, experts say

More ‘soft notices’ sent to encourage filers to recalculate amount owed

Penny wise pound foollish.

hungp12ccs said: Besides, as I look at it, this is ended up to be a good thing for those folks as they've essentially gotten an interest-free loan from the government until tax filing time!
Except that, for many people, coming up with $250 at tax time will break their budget. Remember that most Americans don't exactly have a lot of savings.

This kind of stuff makes me glad that I always double-check withholding a couple times per year, and file a new W-4 (and state equivalent) as necessary. For many years, messing with employer withholding formulas has been a favorite pastime of tax agencies.

Problem is most folks dont understand the tax code and may or may not have the ability to repay the amount. The average American that is expecting a tax credit is expecting to get exactly what they deserve and no more. I operate 3 tax offices and am sure this will bring a ton of greif for many of my blue collar clients. It's not a citizens fault that their government overpaid them. While they obviously need to pay it back, are the banks that were overpaid for AIG's risk products from the AIG bailout going to pay back the overpayment this year? Probably not.

Because 15 million people are adversely affected by this, that suggests that root problem is with the original plan, which was created and implemented with haste.

Xnarg said: Because 15 million people are adversely affected by this, that suggests that root problem is with the original plan, which was created and implemented with haste.I would not call a zero interest loan an adverse effect.

I think the surprise factor is way overblown here. $250 is just a blip in anyone's tax refunds if he held more than one jobs.

PMonkeyDishwasher said: nycll said: Xnarg said: The good news just keeps on coming!

Deficit could cause more IRS audits, experts say
...I think I sensed some sarcasm. But it is indeed good news for those who file honest tax returns. Why should I subsidize the 4-year old first time buyers or the cash restaurants?
Exactly. I won't be crying because someone who cheated on their taxes gets caught. And I don't get Xnarg's opposition to this, either. Doesn't it seem likely that a few people claiming the EITC will get audited? How is that a bad thing?I think it's GREAT when tax fraud is reduced.

What I oppose is not clamping down on that, but on having NEW programs such as the one being discussed which, because it was hastily put together and not well thought out, causes about 10% of taxpayers to be at risk through no fault of their own.

Supposedly we're making it easier to file taxes correctly, but the "stimulus" program was a big leap in the opposite direction, putting innocent and unsuspecting people at risk.

ThePessimist said:
Except that, for many people, coming up with $250 at tax time will break their budget. Remember that most Americans don't exactly have a lot of savings.

This kind of stuff makes me glad that I always double-check withholding a couple times per year, and file a new W-4 (and state equivalent) as necessary. For many years, messing with employer withholding formulas has been a favorite pastime of tax agencies.

That will be material for another topic. How can people earning a decent income get to that point? Why check cashing places are opening up even in affluent neighborhoods?

Xnarg said: PMonkeyDishwasher said: I won't be crying because someone who cheated on their taxes gets caught. And I don't get Xnarg's opposition to this, either. Doesn't it seem likely that a few people claiming the EITC will get audited? How is that a bad thing?I think it's GREAT when tax fraud is reduced.

What I oppose is not clamping down on that, but on having NEW programs such as the one being discussed which, because it was hastily put together and not well thought out, causes about 10% of taxpayers to be at risk through no fault of their own.

Supposedly we're making it easier to file taxes correctly, but the "stimulus" program was a big leap in the opposite direction, putting innocent and unsuspecting people at risk.
When did it stop becoming someone's personal responsibility to handle their taxes? Even in the worst case, this is a zero-interest loan being given to you by the government.

retmil said: may have to repay the government $400, either through a smaller tax refund or a larger tax billMost on this website are perfectly aware that the vast majority of taxpayers (75%) get annual refunds. The average refund is $2,700. Can we stop worrying about these poor, dumb busturds only getting a $2,300 or $1,900 refund?

As hungp12ccs stated, they got an interest-free loan.

Excerpt from UPI.com (http://www.upi.com/Business_News/2009/11/16/Report-154M-tax-refu... "The IRS said 75 percent of taxpayers receive refunds, with the average refund at $2,700. The Treasury watchdog said that would change due to the amount withheld from taxes after the stimulus bill passed in January."

nycll said: Xnarg said: What I oppose is not clamping down on that, but on having NEW programs such as the one being discussed which, because it was hastily put together and not well thought out, causes about 10% of taxpayers to be at risk through no fault of their own.At risk of what? Interest and penalty on the $250? Being audited?Possibly you disagree with MSNBC's title:

"Tax credit is coming back to bite millions

Federal filers will have to pay $250 or more because of how it was set up"

nycll said: Supposedly we're making it easier to file taxes correctly, but the "stimulus" program was a big leap in the opposite direction, putting innocent and unsuspecting people at risk.No, none of the new programs since 1986 was for the purpose of making filing tax returns simpler. They have always been adding to the complexity of the tax code. This one is no different.That makes it ok? We were promised that the tax filing process would be made easier, not more difficult.nycll said: Xnarg said: ...inconvenienced, Huh? what do you tell people like me who are equally inconvenienced by the responsibility of filing a tax return but got no stimulus check?I agree with you, the program was unfair.

Xnarg said: I agree with you, the program was unfair.Not giving me a stimulus check is unfair.

But making people pay back the extra stimulus check they don't deserve to get under the program is fair.

Given the best response you can come up with is the above distortion of my view, we know you just made up the "audit and penalties" parts as I pointed out in my post. I think we can move on.

IcemanPk said: Xnarg said: Because 15 million people are adversely affected by this, that suggests that root problem is with the original plan, which was created and implemented with haste.So were you, but we're not attacking your parents.Who is attacking elderly parents, other than the purveyors of this plan which put many of them in a difficult situation.

depalma13 said: None of these people are going to have to pay anything. Congress in it's infinite wisdom will just give everyone below a certain income level a $250 economic stimulus bonus that will cancel out any tax bill they might have.

It's an election year and incumbants need all of the votes they can get.Most of the people have no idea how their taxes work, hence won't even notice their refund is $250 less.

But the $250 check to seniors due to zero COLA (so what?) is winning support.

Instead of the silly w/h change, employers should have just put the following in front of people:

"This year, your taxes will be $400 lower than normal (single; $800 married). Would you like that money slowly over 24 paychecks, or would you prefer it in a lump sum next year?"

I still think the best solution to all of these withholding messes is to create more transparency with the W-4 form. A lot of HR departments treat it like an act of congress to make changes.