Author Topic: Someone explain taxes to me...  (Read 1493 times)

Bearblastbeats

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Someone explain taxes to me...
« on: February 25, 2020, 05:59:04 AM »
Good Morning,

I just received notice this weekend that my estimated tax refund for 2019 had been edited and reduced by the IRS due to an 'error' they found in calculation of my schedule a. The only itemized deductions I put in my sched. a was my house.

This situation doesn't make sense. Last year I filed single and claimed the standard deduction for 2018. I purchased a house in 2019 and had my son also in 2019, so these weren't eligible.

This year, I claimed my son on my taxes and HOH. I initially chose the standard deduction of for HOH which resulted in a refund of $4790. I thought to myself 'what would happen if I itemize my house?'. So I did, and the refund estimate was still at $4790. But what I received was $1676.

Someone explain that to me? Should I file a 1040x and choose standard deduction? How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

YttriumNitrate

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Re: Someone explain taxes to me...
« Reply #1 on: February 25, 2020, 06:04:23 AM »
How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

By decreasing the number of exemptions they take, and being bad at math. If you're getting a $10k refund, you're doing something wrong.

DadJokes

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Re: Someone explain taxes to me...
« Reply #2 on: February 25, 2020, 06:22:00 AM »
If you used online software, and the refund amount didn't change after entering in your itemized deductions, then the software probably calculated that the standard deduction was better for you automatically. That would be why the refund amount on there didn't change.

As to why the IRS reduced it, I don't know without seeing your paperwork. However, I agree with YttriumNitrate that you shouldn't strive for a large refund, but should instead focus on reducing both your refund amount and (more importantly) your overall tax liability.

If you think the IRS made a $3k mistake, then it may be worth your time to take your stuff to a CPA and have it looked over.

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #3 on: February 25, 2020, 06:30:18 AM »
I claim 6 on my exemptions. I know not to give the government an interest free loan and should get as close to zero for a refund. I just figure having a baby and a house in the mix that that situation changes a bit.

dcozad999

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Re: Someone explain taxes to me...
« Reply #4 on: February 25, 2020, 06:36:09 AM »
With the new standard deductions, most homeowners in LCOL and MCOL areas probably don't itemize.

The child would give you an extra $2,000 tax credit. So your tax situation is close to what it was last year, your refund should have gone up around that amount.

Did the child's other parent claim them on their return?
« Last Edit: February 25, 2020, 06:37:53 AM by dcozad999 »

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #5 on: February 25, 2020, 06:39:18 AM »
With the new standard deductions, most homeowners in LCOL and MCOL areas probably don't itemize.

The child would give you an extra $2,000 tax credit. So your tax situation is close to what it was last year, your refund should have gone up around that amount.

Did the child's other parent claim them on their return?

Last year I received $2700 back. This year less while claiming him. She didn't claim him.

teen persuasion

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Re: Someone explain taxes to me...
« Reply #6 on: February 25, 2020, 06:53:42 AM »
Good Morning,

I just received notice this weekend that my estimated tax refund for 2019 had been edited and reduced by the IRS due to an 'error' they found in calculation of my schedule a. The only itemized deductions I put in my sched. a was my house.

This situation doesn't make sense. Last year I filed single and claimed the standard deduction for 2018. I purchased a house in 2019 and had my son also in 2019, so these weren't eligible.

This year, I claimed my son on my taxes and HOH. I initially chose the standard deduction of for HOH which resulted in a refund of $4790. I thought to myself 'what would happen if I itemize my house?'. So I did, and the refund estimate was still at $4790. But what I received was $1676.

Someone explain that to me? Should I file a 1040x and choose standard deduction? How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

What does "itemize my house" mean?

We've gotten $10k+ refunds (federal + state) in the past.  We are MFJ with 5 kids, and at the time we got those large refunds they were based on 5 CTC refundable credits (and 33% state matching) plus EITC at the 3+ kids level (plus 30% state matching), and our gross income was under $40k.  Later when a few kids dropped out off CTC (over 16) they were in college, so we had AOTC instead ($1k refundable each).

We've never itemized, even when we had an ugly 9.75% rate mortgage and high NYS property taxes.  The standard deduction was always better for us.

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #7 on: February 25, 2020, 07:00:16 AM »
Good Morning,

I just received notice this weekend that my estimated tax refund for 2019 had been edited and reduced by the IRS due to an 'error' they found in calculation of my schedule a. The only itemized deductions I put in my sched. a was my house.

This situation doesn't make sense. Last year I filed single and claimed the standard deduction for 2018. I purchased a house in 2019 and had my son also in 2019, so these weren't eligible.

This year, I claimed my son on my taxes and HOH. I initially chose the standard deduction of for HOH which resulted in a refund of $4790. I thought to myself 'what would happen if I itemize my house?'. So I did, and the refund estimate was still at $4790. But what I received was $1676.

Someone explain that to me? Should I file a 1040x and choose standard deduction? How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

What does "itemize my house" mean?

We've gotten $10k+ refunds (federal + state) in the past.  We are MFJ with 5 kids, and at the time we got those large refunds they were based on 5 CTC refundable credits (and 33% state matching) plus EITC at the 3+ kids level (plus 30% state matching), and our gross income was under $40k.  Later when a few kids dropped out off CTC (over 16) they were in college, so we had AOTC instead ($1k refundable each).

We've never itemized, even when we had an ugly 9.75% rate mortgage and high NYS property taxes.  The standard deduction was always better for us.


Crazy. WHat i mean is that I itemized deduction ILO standardized, because adding all the mortage interest and what have you was greater than the standard.

I only made about $62k last year. GF lives with me but made less than $12k. I made too much for any EIC.

What I will do is submit a 1040x and change it to standardized deductions.
« Last Edit: February 25, 2020, 07:05:12 AM by Bearblastbeats »

teen persuasion

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Re: Someone explain taxes to me...
« Reply #8 on: February 25, 2020, 07:11:28 AM »
I think we need more information from your tax return to figure this out: AGI, taxable income, withholding, tax due, and credits.

Changing from single to HOH should reduce taxes owed ($6k+ extra deduction), and CTC is an extra $2k tax credit...

If GF's income is low, it might make sense for her to claim the child, if eligible for EITC.  You'd have to run both of your returns both ways to see what nets the largest combined refunds for you 2 as a couple.  We do this with the kids and the decision  on  who claims college expenses - usually ends up best for us to put taxable scholarships on the kid's return as taxable income, then we get a higher AOTC credit (which the child can't claim, even the refundable part).  We pay the additional tax the child owes, on their behalf.

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #9 on: February 25, 2020, 07:20:07 AM »
I don't know what CTC means. However, my GF neglected her student loans prior to us meeting and her wages are now being garnished at 15%. So, I claimed the child because of this.

Cranky

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Re: Someone explain taxes to me...
« Reply #10 on: February 25, 2020, 07:25:36 AM »
CTC means "Child Tax Credit".

So, the standard deduction for HOH is $18,350. Did you have more interest, property tax, state tax, and donations than that? If not, you aren't going to itemize, and most people don't.
« Last Edit: February 25, 2020, 07:28:13 AM by Cranky »

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #11 on: February 25, 2020, 07:35:41 AM »
CTC means "Child Tax Credit".

So, the standard deduction for HOH is $18,350. Did you have more interest, property tax, state tax, and donations than that? If not, you aren't going to itemize, and most people don't.

I had $23,750 in mortgage interest, property tax and state tax. I filled out the paperwork on the IRS.gov site and followed their rules yet they said I made a calculation error.

Laura33

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Re: Someone explain taxes to me...
« Reply #12 on: February 25, 2020, 07:49:58 AM »
Just call the IRS and ask them what is going on.  We had an issue a year or two ago, and it turned out it was bad math on the IRS's part (they had double-counted something).  Cleared it up with a couple of phone calls and a letter.

acepedro45

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Re: Someone explain taxes to me...
« Reply #13 on: February 25, 2020, 08:02:19 AM »
I don't think there is enough information from the OP for the forum to guess what's going on (and I'd be careful posting too much personal information on the internet, even anonymously).

OP you seem very confused on the nature of the change the IRS made. Before submitting any 1040x stuff, your best bet is to scrutinize the 2018 and the 2019 returns side by side to puzzle it out, plus carefully read whatever the IRS sent. My experience is that the IRS does explain changes it makes but sometimes uses confusing terms. @Laura33 's advice to call is good if you're still stuck.

Some OP comments seem na´ve enough that maybe this isn't in his skill set ("I filed standard deduction, then switched to itemized but got the same refund"). In that case, I'd look for help from a pro.

erutio

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Re: Someone explain taxes to me...
« Reply #14 on: February 25, 2020, 09:40:28 AM »
Does calling into the IRS work?  I have never done it, but I'd imagine one would be on hold forever, then get stuck with a front line CSR who knows jack. 

nereo

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Re: Someone explain taxes to me...
« Reply #15 on: February 25, 2020, 09:46:37 AM »
Does calling into the IRS work?  I have never done it, but I'd imagine one would be on hold forever, then get stuck with a front line CSR who knows jack.

Yes, when there is a changing in your filed taxes the IRS is responsive to phone calls.  Yes, you might spend some time on hold and you need to have paperwork in front of you when you call, but I've found the IRS to be one of the most straightfoward and helpful agencies to deal with.  So long as they don't suspect you of commiting out-and-out fraud, they are very willing to work with you to get your documents right.

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #16 on: February 25, 2020, 09:48:22 AM »
Does calling into the IRS work?  I have never done it, but I'd imagine one would be on hold forever, then get stuck with a front line CSR who knows jack.

Yes, when there is a changing in your filed taxes the IRS is responsive to phone calls.  Yes, you might spend some time on hold and you need to have paperwork in front of you when you call, but I've found the IRS to be one of the most straightfoward and helpful agencies to deal with.  So long as they don't suspect you of commiting out-and-out fraud, they are very willing to work with you to get your documents right.

I just got off the phone with them actually, they explained that they found the calculation errors and that they changed my deductions to standard because it ended up being more than when I itemized. I still don't find it accurate but now I know that for next year.


teen persuasion

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Re: Someone explain taxes to me...
« Reply #17 on: February 25, 2020, 10:19:43 AM »
CTC means "Child Tax Credit".

So, the standard deduction for HOH is $18,350. Did you have more interest, property tax, state tax, and donations than that? If not, you aren't going to itemize, and most people don't.

I had $23,750 in mortgage interest, property tax and state tax. I filled out the paperwork on the IRS.gov site and followed their rules yet they said I made a calculation error.

The tax changes a few years back capped SALT deductions at $10k, which would leave $13750 for mortgage interest alone.  Interest rates are really low right now, compared to the 9.75% rate we had.  You'd have to have an enormous mortgage to get > $1k /month in interest (not principal) payments.  You weren't including your whole mortgage payment, were you?  Even then, nearly $24k in mortgage plus property and state taxes is high for your stated income.

teen persuasion

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Re: Someone explain taxes to me...
« Reply #18 on: February 25, 2020, 10:38:36 AM »
If your w2 income and your federal tax withheld were pretty much the same from 2018 to 2019, then changing from single to HOH and adding one dependent should decrease your taxes (or increase your refund) by roughly $2750. 

That's $2k for the child tax credit (CTC) and the reduction in tax on the ~$6k difference between S and HOH (and 2018 to 2019), where you are in the 12% bracket (6350 * .12).

If either one was different, that throws the comparison off.

ETA: No, wait, I was wrong.  As a S last year, you had $10k-ish in the 22% bracket, not just the 12% bracket.  That's at least another $1k in tax savings this year, based on your earlier comment of $62k income (which I'm interpreting as w2 income).  That is, the tax bracket difference between 22% and 12% is an additional 10% on the $10k in that bracket for singles, or 10% of $10k = $1k less tax (more refund).
« Last Edit: February 25, 2020, 10:51:58 AM by teen persuasion »

Bearblastbeats

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Re: Someone explain taxes to me...
« Reply #19 on: February 25, 2020, 11:09:45 AM »
If your w2 income and your federal tax withheld were pretty much the same from 2018 to 2019, then changing from single to HOH and adding one dependent should decrease your taxes (or increase your refund) by roughly $2750. 

That's $2k for the child tax credit (CTC) and the reduction in tax on the ~$6k difference between S and HOH (and 2018 to 2019), where you are in the 12% bracket (6350 * .12).

If either one was different, that throws the comparison off.

ETA: No, wait, I was wrong.  As a S last year, you had $10k-ish in the 22% bracket, not just the 12% bracket.  That's at least another $1k in tax savings this year, based on your earlier comment of $62k income (which I'm interpreting as w2 income).  That is, the tax bracket difference between 22% and 12% is an additional 10% on the $10k in that bracket for singles, or 10% of $10k = $1k less tax (more refund).

When the women on the phone said they changed my return to standard deductions, my new taxable wages to $44,911. I don't think they captured the CTC? Maybe there is a $2k error on their side which should be owed back to me?

teen persuasion

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Re: Someone explain taxes to me...
« Reply #20 on: February 25, 2020, 11:20:08 AM »
If your w2 income and your federal tax withheld were pretty much the same from 2018 to 2019, then changing from single to HOH and adding one dependent should decrease your taxes (or increase your refund) by roughly $2750. 

That's $2k for the child tax credit (CTC) and the reduction in tax on the ~$6k difference between S and HOH (and 2018 to 2019), where you are in the 12% bracket (6350 * .12).

If either one was different, that throws the comparison off.

ETA: No, wait, I was wrong.  As a S last year, you had $10k-ish in the 22% bracket, not just the 12% bracket.  That's at least another $1k in tax savings this year, based on your earlier comment of $62k income (which I'm interpreting as w2 income).  That is, the tax bracket difference between 22% and 12% is an additional 10% on the $10k in that bracket for singles, or 10% of $10k = $1k less tax (more refund).

When the women on the phone said they changed my return to standard deductions, my new taxable wages to $44,911. I don't think they captured the CTC? Maybe there is a $2k error on their side which should be owed back to me?

Ok, so HOH taxable income $44,911 is tax owed $5114.  Subtract whatever was already withheld thru payroll.  Then subtract $2000 for CTC (it's a credit, not a deduction - it directly reduces your tax, not your taxable income as deductions do).

Some of the CTC is refundable, some is not.  Up to $1400 is refundable.

partdopy

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Re: Someone explain taxes to me...
« Reply #21 on: February 25, 2020, 11:52:36 AM »
How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

By decreasing the number of exemptions they take, and being bad at math. If you're getting a $10k refund, you're doing something wrong.

That's not entirely accurate.  Plenty of low income people get extremely large 'refunds' (other people's money given to them) using the EITC and child tax credits.  I've got quite a few family members that partake in this practice, helping themselves to $6k+ of my money every year, then spending it on dumb shit like purses and clothes, or a car they can't afford and will lose to repossession by July.

dougules

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Re: Someone explain taxes to me...
« Reply #22 on: February 25, 2020, 12:03:22 PM »
This is kind of tangential, but I've been operating off the assumption that it's better to aim to owe at tax time.  That way I get several months of returns off the money.  Is that logic sound?

the_fixer

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Re: Someone explain taxes to me...
« Reply #23 on: February 25, 2020, 12:06:56 PM »
This is kind of tangential, but I've been operating off the assumption that it's better to aim to owe at tax time.  That way I get several months of returns off the money.  Is that logic sound?

As long as you have the money to pay it when due and you do not owe so much that you get hit with a penalty.

I strive to owe them $100




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nereo

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Re: Someone explain taxes to me...
« Reply #24 on: February 25, 2020, 12:07:28 PM »
How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

By decreasing the number of exemptions they take, and being bad at math. If you're getting a $10k refund, you're doing something wrong.

That's not entirely accurate.  Plenty of low income people get extremely large 'refunds' (other people's money given to them) using the EITC and child tax credits.  I've got quite a few family members that partake in this practice, helping themselves to $6k+ of my money every year, then spending it on dumb shit like purses and clothes, or a car they can't afford and will lose to repossession by July.

Why do you keep giving them $6k every year if you don't approve of their life choices?

wellactually

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Re: Someone explain taxes to me...
« Reply #25 on: February 25, 2020, 12:55:22 PM »
If you are worried there was an error, re-run your numbers through a few different online tax prep websites (just run, don't file!).

It sounds like maybe you filed by hand? It's highly likely the mega complicated system tripped you up at some point. As others have mentioned, maybe you tried to apply a full credit when that credit was not 100% refundable.

Not knowing much about what you withheld and your other deductions and credits, about 90% of people take the standard deduction now. Even buying a home and spending significantly over 10% of our income on medical expenses didn't get us there for 19. It is unlikely that the standard deduction wasn't the correct choice for you.

As for how some people get more money back, they just had more money withheld than they owed.

partdopy

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Re: Someone explain taxes to me...
« Reply #26 on: February 27, 2020, 11:02:35 AM »
How do a million other families get a larger refund upwards of $10k or more, yet they reduce mine?

By decreasing the number of exemptions they take, and being bad at math. If you're getting a $10k refund, you're doing something wrong.

That's not entirely accurate.  Plenty of low income people get extremely large 'refunds' (other people's money given to them) using the EITC and child tax credits.  I've got quite a few family members that partake in this practice, helping themselves to $6k+ of my money every year, then spending it on dumb shit like purses and clothes, or a car they can't afford and will lose to repossession by July.

Why do you keep giving them $6k every year if you don't approve of their life choices?

The government does this for me.  Apparently having a bunch of kids they can't support on their income qualifies them to get other people's money.   Crazy world

mm1970

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Re: Someone explain taxes to me...
« Reply #27 on: February 27, 2020, 11:19:44 AM »
If you are worried there was an error, re-run your numbers through a few different online tax prep websites (just run, don't file!).

It sounds like maybe you filed by hand? It's highly likely the mega complicated system tripped you up at some point. As others have mentioned, maybe you tried to apply a full credit when that credit was not 100% refundable.

Not knowing much about what you withheld and your other deductions and credits, about 90% of people take the standard deduction now. Even buying a home and spending significantly over 10% of our income on medical expenses didn't get us there for 19. It is unlikely that the standard deduction wasn't the correct choice for you.

As for how some people get more money back, they just had more money withheld than they owed.
basically this.

We were not able to itemize in 2019, after 15+ years of itemization.

If you adjusted your tax withholdings when you bought your house and had your kid, and it resulted in less being taken out of your paycheck, that might do it.