05-03-2008, 10:57 AM | #1 |
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Tax Refunds
Could someone satisfy my curiosity, please?
Fictionwise say "Since many of our US customers will be receiving tax refunds this week...." Why does one receive a "tax refund"? The way that the British tax system works is that, unless you run your own business, or something like that, income tax is simply deducated automatically from your salary by your employer, so you automatically pay the right amount of tax. How does it work in the US to result in so many "refunds" being given? |
05-03-2008, 11:07 AM | #2 |
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Is it to with Pres. Bush's plan to boost the US economy?
http://business.timesonline.co.uk/to...cle3228105.ece "He wants the Internal Revenue Service to mail out rebate cheques to all taxpayers. The Administration hasn’t publicly put a number on the plan yet, but officials say they are thinking about $800 for individuals and $1,600 for families. In total that would inject about $150 billion (£77 billion) into the US economy." |
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05-03-2008, 11:52 AM | #3 |
Beepbeep n beebeep, yeah!
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Le Shrub is having the Treasury send out $600 per person and $300 per child to stimulate the economy. If you filed taxes in 2007, you get a check. Unless you make too much money, then you get squat. My son and his fiancee are getting $1800 just in time for their wedding and honeymoon. My daughter and her husband are getting $1500 and going along on the honeymoon. My wife and I are getting squat. 8?(
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05-03-2008, 12:04 PM | #4 | |
Chocolate Grasshopper ...
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Quote:
Squat , as in diddly squat ... |
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05-03-2008, 12:10 PM | #5 |
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The $300 and $600 dollar "Economic Stimulus" checks (equivalent to a cupcake a day, "Let Them Eat Cake", Lewis Black) are not the Tax Refund.
It's simple: employers are required to essentially estimate (yes, there is a mathematical formula involved) how much income tax you have to pay based on your earnings. They deduct it from your paycheck and send it off to the government. Some states also have personal income tax. But because the US tax system is completely screwed up, this amount paid by your employer is always wrong. There are exemptions and deductions and credits and unreported earnings. So each US citizen is required to sit down with a huge set of forms and esoteric and even contradictory instructions and figure out their taxes all over again, or hire a "tax professional" to do so. Everything is recalculated and you are left with either: my employer didn't collect enough taxes from me and thus I own the government even more money, or, hey guess what, the government took too much money and owes me (here we get to it) a "Tax Refund". Yippee!! The government took too much money, used it for months and months without me having access to it or even earning interest on it, and now they'll kindly give it back and I'll treat it like an unexpected present, and go out and spend it on luxury items I probably don't even need. I, personally, haven't had a "Tax Refund" in years, which many would find a bit depressing, but to me means "I manage my income correctly". |
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05-03-2008, 12:36 PM | #6 |
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Thanks for the explanation, Taylor!
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05-03-2008, 12:48 PM | #7 |
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Actually, it is not always the employers or the systems fault and might be implied from other messages. The tax system in the US allows for deductions for charities, taxes paid to the state such a property tax, and interest charges, as well as others. The standard deduction taken by the employer is based on a user taking a standard deduction and not itemizing thus if you itemize you will get a refund. It is possible to tell you employer not to take so much out and thus equalize the deductions with the taxes but many people actually use the tax system as a forced savings plan (without interest) and allow the extra deductions to be taken out of their paycheck in order to get a refund. I know it is wasteful since their is no interest paid but many people still do it because it is easy.
This is different, of course, from the tax rebate being offered this year to attempt to stimulate the economy. Rebates like this one are taxable by the way so next year a tax will be paid. You asked for facts and got a bunch of opinions but I thought you really needed the facts. Dale |
05-03-2008, 01:17 PM | #8 |
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Except that the "facts" need to be true. From the IRS website:
"Q. Is my stimulus payment taxable? A. No. You will not owe tax on your payment when you file your 2008 federal income tax return. But you should keep a copy of the IRS letter you receive later this year listing the amount of your payment." Jim |
05-03-2008, 01:19 PM | #9 | |
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Dale |
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05-03-2008, 01:38 PM | #10 |
Wizard
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still waiting for my check
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05-03-2008, 02:01 PM | #11 |
Manic Do Fuse
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If you want to know how much you are getting you can check out the Economic Stimulus Payment Calculator put out by the IRS.
http://www.irs.gov/app/espc/ Welcome to the Economic Stimulus Payment Calculator In order to determine whether you qualify for a stimulus payment, we will ask you a series of questions. Your entries are anonymous and the information will be used only for the purpose of determining your eligibility. All entries are erased when you exit or start over. See the "IRS Privacy Policy" for more information. Here’s how the checks will roll out: If you file your return on time and request that your federal income tax refund is directly deposited, the stimulus payments will directly go into your bank account by May 2 if the last two digits of your Social Security number are 00-20. If the last two digits are 21-75, the date to remember is May 9. If the last two digits are 76-99, you’d get that money by May 16. But if you do not use direct deposit to get your federal income tax refund – or you are paying taxes owed when you file that 2007 return – you’re going to get your tax rebate check later. The rollout times are more complicated, too. If your last two digits of your Social Security number are 00-09, you could expect that rebate check to be mailed by May 16. It’s by May 23 if the last two digits are 10-18. It’s May 30 if the digits are 19-25. It’s June 6 if the digits are 26-38. It’s June 13 if the digits are 39-51. It’s June 20 if the digits are 52-63. It’s June 27 if the digits are 64-75. It’s July 4 if the digits are 76-87. It’s by July 11 if the digits are 88 -99 and the person did not use direct deposit of a refund this year – or if you wrote a check to cover money owed for the 2007 tax year. |
05-03-2008, 02:07 PM | #12 |
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Mine was deposited electronically on 4/29 so I guess they're on schedule.
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05-05-2008, 06:06 PM | #13 | |
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Quote:
There are a couple of issues. First, as others have already stated here... the "refunds" they are talking about are probably the Economic Stimulas (but will make things worse in the long run) refunds. (Although some will be getting there normal filing refunds in May too. I filed back in February due to needing to apply for financials aid for my college bound son and have already recieved, and spent my refund.) But, in general the calculation of your tax liability is extremely complicated. The US tax code is about the size of 7 bibles. There are thousands of deductions, credits, and all types of rules as to what is table income, etc. So, while we do have a payroll deduction taken from each pay check it doesn't necessarily equate to your tax liablity. Also, many people "like" getting refunds so they purposly have extra tax taken from their check either by specifing an additional amount or claiming less exemptions on they payroll document (known as a W-4) than they claim when they file their return. This is also why many people here favor a "flat tax" or a "sales tax" (reform). Not that anyone thinks it will reduce the taxes, but it will reduce the taxing compilance that we all have to go through... such as the keeping of reciepts for tax deductable purchases or donations and keeping track of all taxable income, etc., plus the preperation time each spring needed to file. Hope this expalains it. BOb |
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05-05-2008, 07:36 PM | #14 | |
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05-06-2008, 08:59 AM | #15 |
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Income tax is based on earned income (and income from interest bearing accounts and stock dividends and sales, etc....). If you are paid for sick leave then that is earned income and you are taxed on it. The United States tax code is so complicated that I purchase a $$ program to calculate my taxes or pay a professional tax preparer $$$$ to do the same.
The big reason why taxes are so insanely hard here is special interests having laws passed to give their industries tax benefits. Generally, we can deduct from our income mortgage interest paid, state income tax (yes, most states in the US have their own form of income tax), real estate property tax (tax you pay on your home), personal property tax (tax you pay on cars, boats, etc...) and certain expenses above fairly high thresholds. You also get deductions for your minor (under 21ish) children living at home. I'd rather see a flat tax or a national sales tax. Our current system is ridiculous. |
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