Author Topic: Canabalize Taxable Account To Reduce Taxes, gain EIC  (Read 10382 times)

FarmerPete

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Canabalize Taxable Account To Reduce Taxes, gain EIC
« on: March 02, 2015, 12:59:02 PM »
I've been playing around with the CashFlow.xls file to do some preliminary tax planning.  Currently, I'm making around 75k a year.  I'm 33, married, have 1 kid and 1 more due in August.  According to this spreadsheet, if I maxed out my 401k and 457, I could lower my AGI down to $36k, and thus qualify for $2942 in EIC.  Combined with the child tax credit, I should get a net tax payment of $4942 from the US Government.  So here is the problem, to do this, I would have to go in the hole roughly $7k a year.  The good news is, I have $65k in a taxable brokerage account.  So here is the options:

Option 1
(15% to 457 and max IRA)
457: $11,340
IRA: $11,000
Tax: -$163
Free Cash: $1388 (Unbudgeted surplus money)
Net: $23891

Option 2
(Max 457 and 401k)
457: $18000
401k: $18000
Tax: -$4942
Gross: $40942
Net (After $7k in brokerage liquidation): $33,942

Obviously, I know the "CashFlow.xls" sheet is no substitute for legal tax advice, but assuming it was true, this seems like it would be totally worth it.  I'm thinking that I'll play around with TurboTax or whatnot to see how it works out for me.  Obviously, I would have to do a little bit of planning to figure out if I could liquidate enough cash from my brokerage to cover the budget deficit while not generating enough gains to undo the EIC!  I certainly should be able to do that this year, as I have a bunch in cash that I was just about to invest.

On a side note, from looking online, is it possible that reducing my AGI so low could actually qualify us for WIC?

Quote
To be eligible on the basis of income, applicants' gross income (i.e. before taxes are withheld) must fall at or below 185 percent of the U.S. Poverty Income Guidelines.

Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.

bacchi

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #1 on: March 02, 2015, 01:02:40 PM »
Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.

Seriously? WIC isn't a bottomless pit of money. There are people that truly need it and your family isn't one of them.

FarmerPete

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #2 on: March 02, 2015, 01:18:07 PM »
Seriously? WIC isn't a bottomless pit of money. There are people that truly need it and your family isn't one of them.

Neither is the US Government in general,  but I've never seen someone pass up on a credit on their taxes because they feel bad for the US Government.  Like I said, I don't know how I feel about WIC, or if I would even qualify.  I was just curious if there were other benefits to lowering your AGI by such an extreme amount and did a little looking around.  Obviously, you feel like it would be pretty scumbagish.  Feedback noted.  Personally, after looking at WIC in general, I feel like it's income level requirements is way to high.  Around here, a family of 4 living off of $43,568 is easily in the middle class.  I don't know of many who have "drunk the MMM koolaid" who would complain about $43k.

ioseftavi

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #3 on: March 02, 2015, 01:27:17 PM »
I would agree with cannibalizing your taxable account to get more money in qualified accounts.  Sound strategy.

I would agree with Bacchi's post and stance on your idea of possibly qualifying for WIC.  I don't know that I'd call you a scumbag for thinking about it. 

...but yes, it sounds like you don't need the help.  So don't ask for it.

mandy_2002

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #4 on: March 02, 2015, 01:30:46 PM »
Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.

Seriously? WIC isn't a bottomless pit of money. There are people that truly need it and your family isn't one of them.

WIC (Women Infant and Child) is totally different from EIC (Earned Income Credit).  I don't believe the original poster is going for WIC.

ETA:  (Sorry, I didn't see the last reference ti WIC.  Many of these programs take your equity into account to prevent this kind of abuse, which I personally wouldn't try to get if I had kids.)
« Last Edit: March 02, 2015, 01:40:53 PM by mandy_2002 »

dunhamjr

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #5 on: March 02, 2015, 01:34:17 PM »
WIC (Women Infant and Child) is totally different from EIC (Earned Income Credit).  I don't believe the original poster is going for WIC.

the OP asked about both.

>>>
On a side note, from looking online, is it possible that reducing my AGI so low could actually qualify us for WIC?

Quote
To be eligible on the basis of income, applicants' gross income (i.e. before taxes are withheld) must fall at or below 185 percent of the U.S. Poverty Income Guidelines.

Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.
>>>

teen persuasion

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #6 on: March 02, 2015, 01:38:15 PM »
What about your state taxes?  My state matches EITC at 30% and CTC at 33%.  I definitely try to put as much as possible in the HSA and 401k to lower our w2 wages to capture more EITC. 

For us the phaseout is ~21%, so every dollar in the HSA saves us .21 + .063 matching +.10 fed tax + .04 state tax + .0765 FICA, nearly 49%.

marblejane

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #7 on: March 02, 2015, 01:39:15 PM »
Yeah, no the original poster is talking about both EIC and WIC.

According to the USDA website, WIC serves 53% of infants born in the US. It is an entitlement program, meaning that it isn't a finite bucket of money where they stop serving people once it runs out. They serve everyone that qualifies. So I don't see a moral issue with the OP using it if he qualifies.

Source: http://www.fns.usda.gov/wic/about-wic-wic-glance



sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #8 on: March 02, 2015, 01:40:03 PM »
The only problem I see here is why you didn't do this sooner.  You managed to put $65k into a taxable account while you weren't maxing your tax-deferred 401k and 457?  Why oh why, for the love of humanity WHY?  From that perspective, you've been voluntarily paying extra taxes for years and years. 

Your new plan brings in a few thousands in EITC.   It also reduces your tax liability on your current income by utilizing all of the tax deferred space to which you are legally entitled, saving you more money. 

These are the sorts of games we play around here, it's the very reason this forum exists.  Find a way to optimize your personal financial situation under the current law and don't feel bad about doing so.

Of course, the best answer here would be to just reduce your spending by $7k/year, gain all of those benefits, and not deplete your taxable account either.  Consider it a temporary exercise in frugality while you build your stash. 

dunhamjr

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #9 on: March 02, 2015, 01:47:17 PM »
Yeah, no the original poster is talking about both EIC and WIC.

According to the USDA website, WIC serves 53% of infants born in the US. It is an entitlement program, meaning that it isn't a finite bucket of money where they stop serving people once it runs out. They serve everyone that qualifies. So I don't see a moral issue with the OP using it if he qualifies.

Source: http://www.fns.usda.gov/wic/about-wic-wic-glance

my issue is that the OP would be working the numbers through savings increases so that he is forcing his way into a WIC qualification, versus having a true need be the reason for qualification.

sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #10 on: March 02, 2015, 01:57:16 PM »
Our tax code is chock FULL of income phase outs.  Why is this one any different?

Would you be so judgmental of someone "working their numbers" by utilizing a 401k to reduce their income enough to qualify for a Roth IRA? 

How about someone who contributes to an HSA so they can qualify for the child tax credit?

Or maybe someone who itemizes their charitable donations rather than taking the standard deduction so that they can lower their tax bracket enough to qualify for the 0% long term capital gains rate for the sole purpose of being able to donate even more to charity?

Which of these people do you deem to "have a true need" for the benefit?

I'm sorry, but your post is dumb.  I know we're not supposed to make personal attacks on people, but yours is just the latest example of people saying the same damn stupid thing over and over again. [MOD EDIT: Then don't.  You made your point.] We have tax laws.  Stop criticizing people for following them.
« Last Edit: March 02, 2015, 08:42:09 PM by sol »

bacchi

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #11 on: March 02, 2015, 02:05:55 PM »
Yeah, no the original poster is talking about both EIC and WIC.

According to the USDA website, WIC serves 53% of infants born in the US. It is an entitlement program, meaning that it isn't a finite bucket of money where they stop serving people once it runs out. They serve everyone that qualifies. So I don't see a moral issue with the OP using it if he qualifies.

Source: http://www.fns.usda.gov/wic/about-wic-wic-glance

Keep reading...

Quote
WIC is not an entitlement program as Congress does not set aside funds to allow every eligible individual to participate in the program. WIC is a Federal grant program for which Congress authorizes a specific amount of funds each year for the program.

In other words, if someone who maxes out their 401k and 457 gets it, someone else doesn't.

beltim

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #12 on: March 02, 2015, 02:07:45 PM »
my issue is that the OP would be working the numbers through savings increases so that he is forcing his way into a WIC qualification, versus having a true need be the reason for qualification.
I'm sorry, but your post is dumb.  I know we're not supposed to make personal attacks on people, but yours is just the latest example of people saying the same damn stupid thing over and over again.  We have tax laws.  Stop criticizing people for following them.

No, his post is not dumb.  There is a huge difference between programs that "safeguard the health of low-income women, infants, and children up to age 5 who are at nutritional risk" (Purpose of WIC: http://www.ers.usda.gov/media/327957/fanrr27_1_.pdf) and income phase outs in the tax code that determine whether your retirement savings are eligible for a tax deduction.

WIC isn't even administered in the tax code, so I have no idea why you think the situations are remotely comparable.

dunhamjr

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #13 on: March 02, 2015, 02:08:49 PM »
I'm sorry, but your post is dumb.  I know we're not supposed to make personal attacks on people, but yours is just the latest example of people saying the same damn stupid thing over and over again.  We have tax laws.  Stop criticizing people for following them.

classy.
don't like someone's opinion... call them dumb AND stupid in the same post.
way to go.

i am sorry you dont agree with this.
but a family of 4 easily living on an income of $75k a year and saving so much of that income that they force themselves into a WIC qualification, really isn't in the spirit of social welfare benefit programs.

i just assumed people here wouldn't resort to name calling.
i guess i forgot i was still on the internet for a couple of minutes, won't happen again.

Mississippi Mudstache

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #14 on: March 02, 2015, 02:10:09 PM »
Question from an interested party: Two years ago, I qualified for a small EIC refund after maxing out the 401k, two IRAs and an HSA for the first time. Looks like I might be eligible again this year if I don't have unexpected income like last year. I noticed, though, that there is a max of $3000 in "investment income" in order to qualify. How is this calculated? And (in FarmerPete's situation), is it possible that having to pull cash from the taxable account could preclude eligibility for the EIC?

dunhamjr

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #15 on: March 02, 2015, 02:11:11 PM »
Yeah, no the original poster is talking about both EIC and WIC.

According to the USDA website, WIC serves 53% of infants born in the US. It is an entitlement program, meaning that it isn't a finite bucket of money where they stop serving people once it runs out. They serve everyone that qualifies. So I don't see a moral issue with the OP using it if he qualifies.

Source: http://www.fns.usda.gov/wic/about-wic-wic-glance

Keep reading...

Quote
WIC is not an entitlement program as Congress does not set aside funds to allow every eligible individual to participate in the program. WIC is a Federal grant program for which Congress authorizes a specific amount of funds each year for the program.

In other words, if someone who maxes out their 401k and 457 gets it, someone else doesn't.

even better reply, thanks.

marblejane

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #16 on: March 02, 2015, 02:14:08 PM »
Yeah, no the original poster is talking about both EIC and WIC.

According to the USDA website, WIC serves 53% of infants born in the US. It is an entitlement program, meaning that it isn't a finite bucket of money where they stop serving people once it runs out. They serve everyone that qualifies. So I don't see a moral issue with the OP using it if he qualifies.

Source: http://www.fns.usda.gov/wic/about-wic-wic-glance


Keep reading...

Quote
WIC is not an entitlement program as Congress does not set aside funds to allow every eligible individual to participate in the program. WIC is a Federal grant program for which Congress authorizes a specific amount of funds each year for the program.

In other words, if someone who maxes out their 401k and 457 gets it, someone else doesn't.


Yup, that was an epic reading comprehension fail on my part. I stand corrected.
« Last Edit: March 02, 2015, 02:16:46 PM by marblejane »

FarmerPete

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #17 on: March 02, 2015, 02:21:44 PM »
My budget is fairly tight as things are.  The numbers in my budget include postponed spending ($250 house maintenance, $250 car replacement, $100 car maintenance) that would cover the $7200 in shortage.  I still wouldn't stop saving for those things.  I could tweak them to be a little less generous maybe, but I want to have the cash on hand for expenses as they come up.

The only problem I see here is why you didn't do this sooner.  You managed to put $65k into a taxable account while you weren't maxing your tax-deferred 401k and 457?  Why oh why, for the love of humanity WHY?  From that perspective, you've been voluntarily paying extra taxes for years and years. 

Your new plan brings in a few thousands in EITC.   It also reduces your tax liability on your current income by utilizing all of the tax deferred space to which you are legally entitled, saving you more money. 

These are the sorts of games we play around here, it's the very reason this forum exists.  Find a way to optimize your personal financial situation under the current law and don't feel bad about doing so.

Of course, the best answer here would be to just reduce your spending by $7k/year, gain all of those benefits, and not deplete your taxable account either.  Consider it a temporary exercise in frugality while you build your stash. 

I wont go into details on how I accumulated that much in cash, but needless to say, I'm a fairly paranoid person.  I like having large amounts of money available for issues that come up.  The money is typically invested, although it will grow cash as I make regular deposits to it.  My current financial situation changed a LOT in the last 7 years.  I went from making $26k a year 9 years ago to making $75k a year today.  The last 2 years has been the most dramatic increase.  Because of that and my adoption of using YNAB, I'm finally feeling free to save money in a place where I can't get to it.  My wife and I are accountable to our budget, and everything is fully planned.

As to the WIC stuff, I do want to clarify that my statement, "Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.", the "Low" in that statement is not my AGI, but my moral lowness in doing so.  To qualify for the EIC, I'm already well below the 185% limit, so I would qualify if it's AGI that they look at.  My question about it was more about whether AGI is what they look at or gross income.  Think of it as a scholastic exercise.

teen persuasion

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #18 on: March 02, 2015, 02:22:41 PM »
WIC (Women Infant and Child) is totally different from EIC (Earned Income Credit).  I don't believe the original poster is going for WIC.

the OP asked about both.

>>>
On a side note, from looking online, is it possible that reducing my AGI so low could actually qualify us for WIC?

Quote
To be eligible on the basis of income, applicants' gross income (i.e. before taxes are withheld) must fall at or below 185 percent of the U.S. Poverty Income Guidelines.

Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.
>>>

It seems the WIC eligibility is based on your GROSS income, not AGI per the Fed tax return.  Contributions to retirement accounts won't improve your eligibility for free and reduced lunches, which also uses gross income.

FarmerPete

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #19 on: March 02, 2015, 02:54:58 PM »
WIC (Women Infant and Child) is totally different from EIC (Earned Income Credit).  I don't believe the original poster is going for WIC.

the OP asked about both.

>>>
On a side note, from looking online, is it possible that reducing my AGI so low could actually qualify us for WIC?

Quote
To be eligible on the basis of income, applicants' gross income (i.e. before taxes are withheld) must fall at or below 185 percent of the U.S. Poverty Income Guidelines.

Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.
>>>

It seems the WIC eligibility is based on your GROSS income, not AGI per the Fed tax return.  Contributions to retirement accounts won't improve your eligibility for free and reduced lunches, which also uses gross income.

Aren't 401k/457 contributions withdrawn before taxes are applied as well?

mandy_2002

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #20 on: March 02, 2015, 04:13:02 PM »
My budget is fairly tight as things are.  The numbers in my budget include postponed spending ($250 house maintenance, $250 car replacement, $100 car maintenance) that would cover the $7200 in shortage.  I still wouldn't stop saving for those things.  I could tweak them to be a little less generous maybe, but I want to have the cash on hand for expenses as they come up.

The only problem I see here is why you didn't do this sooner.  You managed to put $65k into a taxable account while you weren't maxing your tax-deferred 401k and 457?  Why oh why, for the love of humanity WHY?  From that perspective, you've been voluntarily paying extra taxes for years and years. 

Your new plan brings in a few thousands in EITC.   It also reduces your tax liability on your current income by utilizing all of the tax deferred space to which you are legally entitled, saving you more money. 

These are the sorts of games we play around here, it's the very reason this forum exists.  Find a way to optimize your personal financial situation under the current law and don't feel bad about doing so.

Of course, the best answer here would be to just reduce your spending by $7k/year, gain all of those benefits, and not deplete your taxable account either.  Consider it a temporary exercise in frugality while you build your stash. 

As to the WIC stuff, I do want to clarify that my statement, "Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.", the "Low" in that statement is not my AGI, but my moral lowness in doing so. 

Thanks for clarifying that.  I really like the distinction :).

mcneally

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #21 on: March 02, 2015, 05:31:53 PM »
I noticed, though, that there is a max of $3000 in "investment income" in order to qualify. How is this calculated? And (in FarmerPete's situation), is it possible that having to pull cash from the taxable account could preclude eligibility for the EIC?
Investment income includes interest, capital gains, rents, royalties and other passive income. See worksheet on page 6. http://www.irs.gov/pub/irs-pdf/p596.pdf The current max for investment income is $3,300. If you exceed that your EITC is zero.

sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #22 on: March 02, 2015, 06:11:05 PM »
[MOD EDIT:   You made your point.]

Consider me reprimanded. 
 
I apparently did not make my point, though, because this discussion is still centered around how the qualifications of this benefit are worded.  What does it matter?  As a society we have decided that people with an AGI below a certain threshhold are eligible for child tax credits, or the EITC, or WIC.  How are they different?

I can understand someone being angry that you think the benefits are being awarded to people you don't like, or don't think are worthy.  That's the common justification for slashing unemployment benefits (lazy bums), and medicare (old freeloaders) and our anti-poverty programs (welfare queens).

But not liking the program doesn't mean you get to tell anyone who legally qualifies for these programs that they are somehow immoral for taking advantage of them.  Who are you (the general you, not anyone here in particular) to claim the moral authority to judge someonne's fitness to receive government benefits that already have clearly delineated numerical qualifying guidelines?

If you qualify for these programs, you should feel not feel guilty about taking advantage of them.  Whether you qualify because you are disabled, or unemployed, or born in the ghetto should not matter.  How you qualify doesn't matter.  All that matters is that you qualify, and if you qualify then you qualify.  Why is this so complicated?

Blindsquirrel

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #23 on: March 02, 2015, 06:50:48 PM »
If you can get free money from the feds, by all means take it. They can just print more. :)

bacchi

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #24 on: March 02, 2015, 08:28:57 PM »
Why is this so complicated?

Because sometimes acting within the law doesn't mean that the action isn't unethical or immoral. Why is that so complicated?

sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #25 on: March 02, 2015, 08:46:04 PM »
Because sometimes acting within the law doesn't mean that the action isn't unethical or immoral. Why is that so complicated?

Why do you think you have the moral authority to tell someone what is and isn't morally permissible from the universe of laws?

If society didn't want to make WIC available to people below a different AGI, they would just change the law.  But we haven't done that.  Instead, we decided on the current AGI level.

You can certainly argue that the level should be changed.  You can even argue that it should be based on gross income, not AGI.  But you're not doing any of that, you're instead suggesting that your opinion of who should qualify for WIC is more valid than the legislature's opinion, and that's just demonstrably false. 

teen persuasion

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #26 on: March 02, 2015, 09:00:18 PM »
WIC (Women Infant and Child) is totally different from EIC (Earned Income Credit).  I don't believe the original poster is going for WIC.

the OP asked about both.

>>>
On a side note, from looking online, is it possible that reducing my AGI so low could actually qualify us for WIC?

Quote
To be eligible on the basis of income, applicants' gross income (i.e. before taxes are withheld) must fall at or below 185 percent of the U.S. Poverty Income Guidelines.

Not sure if I would go so low as to try and apply for WIC, but if we could...it may be compelling.
>>>

It seems the WIC eligibility is based on your GROSS income, not AGI per the Fed tax return.  Contributions to retirement accounts won't improve your eligibility for free and reduced lunches, which also uses gross income.

Aren't 401k/457 contributions withdrawn before taxes are applied as well?
Generally, these programs use the terms gross income and "before taxes" to mean the total at the top of your pay stub, before anything is removed (whether it is medical, dental, HSA, FSA, taxes, retirement).  They also usually ask you to include non-payroll income: child support, SSI, investment income, royalties, etc.  But it really depends  on each program's rules; every one is different.

I missed the post earlier about the investment income test (skipping over the moral squabbling).  That is a big gotcha to watch out for.  You will have to make sure your investment income doesn't exceed the limit, or no EITC at all.  So selling from your taxable account will have to be done carefully, with an eye to capital gains on top of dividends and interest.

Cathy

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #27 on: March 02, 2015, 09:02:08 PM »
In principle, I would agree with you about taking advantage of the law, sol.

However, to inject some facts into the discussion, the statutory basis for WIC is 42 USC 1786. According to 42 USC 1786(d)(1), one of the mandatory requirements to qualify for WIC is that the applicant has been "determined by a competent professional authority to be at nutritional risk". According to 42 USC 1786(b)(8), a "nutritional risk" means:

(A) detrimental or abnormal nutritional conditions detectable by biochemical or anthropometric measurements,
(B) other documented nutritionally related medical conditions,
(C) dietary deficiencies that impair or endanger health,
(D) conditions that directly affect the nutritional health of a person, such as alcoholism or drug abuse, or
(E) conditions that predispose persons to inadequate nutritional patterns or nutritionally related medical conditions, including, but not limited to, homelessness and migrancy.


If the applicant does not meet those requirements, they are legally not eligible for WIC. So in this case, we aren't talking about the "spirit" of the program but rather its actual legal requirements.

sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #28 on: March 02, 2015, 09:14:54 PM »
It seems the WIC eligibility is based on your GROSS income, not AGI per the Fed tax return.

Yes, a quick google search agrees that WIC eligibility is determined by gross income, not AGI. 

And it's a really high gross income, I think.  I have three kids, so my family of five can make over $51,000 per year and still qualify for WIC.  Not only is that significantly higher than my planned retirement budget, it's also approximately equal to the national average household income.  So it looks like this program was designed to support roughly half of all American households.

And that's typical consumerist households, not lean and efficient mustachian households.  I'd wager that the vast majority of people here are planning on less than $51,000 per year in earned income in retirement, meaning that VIRTUALLY ALL OF US will technically qualify for WIC if we have a child under five years old.

Maybe it's time we had a more serious discussion about how many people here will take advantage of this program?  Honestly I'm not even sure how it works, and the website isn't very clear.  Do they just send people a check?

bacchi

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #29 on: March 02, 2015, 09:21:04 PM »
Why do you think you have the moral authority to tell someone what is and isn't morally permissible from the universe of laws?

...because anyone can do so. What kind of question is that?

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But you're not doing any of that, you're instead suggesting that your opinion of who should qualify for WIC is more valid than the legislature's opinion, and that's just demonstrably false.

Obviously, my opinion has no bearing on the legal requirements and what the WIC office decides. That hardly means that I can't have an opinion or make a moral judgment.

MDM

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #30 on: March 02, 2015, 10:43:25 PM »
Obviously, I know the "CashFlow.xls" sheet is no substitute for legal tax advice, but assuming it was true, this seems like it would be totally worth it.  I'm thinking that I'll play around with TurboTax or whatnot to see how it works out for me. 

So back to the OP's original main question (i.e., ignoring the WIC side issue) - if you find something significantly different when using TurboTax or whatnot, please advise and I can look at updating the spreadsheet to make it more accurate/predictive.  That's what it's there for.

teen persuasion

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #31 on: March 03, 2015, 06:34:47 AM »
It seems the WIC eligibility is based on your GROSS income, not AGI per the Fed tax return.

Yes, a quick google search agrees that WIC eligibility is determined by gross income, not AGI. 

And it's a really high gross income, I think.  I have three kids, so my family of five can make over $51,000 per year and still qualify for WIC.  Not only is that significantly higher than my planned retirement budget, it's also approximately equal to the national average household income.  So it looks like this program was designed to support roughly half of all American households.

And that's typical consumerist households, not lean and efficient mustachian households.  I'd wager that the vast majority of people here are planning on less than $51,000 per year in earned income in retirement, meaning that VIRTUALLY ALL OF US will technically qualify for WIC if we have a child under five years old.

Maybe it's time we had a more serious discussion about how many people here will take advantage of this program?  Honestly I'm not even sure how it works, and the website isn't very clear.  Do they just send people a check?
Ok, my experience with WIC is nearly 20 years old, but it was a PITA, totally not worth the hassle.  At the time they issued you a "check" not for cash, but for a very specific list of approved foods, intended for the appropriate person only (pregnant/nursing mom, baby/toddler).  The amounts were odd: 5 quarts of milk, 4oz of cheese,  a 12 oz box of Kix cereal.  You had to get the exact item, no close substitutions.  The items might have saved me <$5 a week. Oh, and you had to go to some govt office frequently to pick them up and be reevaluated, of course.

Now, why I had WIC at the time: DH worked for Wal-Mart and I was expecting DD3.  Their health insurance was so poor that NY didn't recognize it as health insurance, and I was put on Medicaid for the pregnancy, which made me eligible for WIC.  I wasn't given the option to turn it down, it was a package deal.  A whole lot of work (required meetings, etc) for very little benefit.  Never again.

Sol, if you want to pursue WIC, have at it.  A much more useful one to pursue, IMO, is free/reduced lunches, especially if your kids are approaching college.  That is one of the qualifying programs for the Simplified Needs Test and Auto EFC = 0, and it only requires a single application per year.  It also makes your students eligible to take the SAT for free.  Much less hassle, if you qualify.
« Last Edit: March 03, 2015, 06:46:30 AM by teen persuasion »

sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #32 on: March 03, 2015, 08:11:51 AM »
My own family won't use wic just because we won't have any young kids when we retire.

But I'm pretty sure the judgmental people on this thread don't see a distinction between WIC and free lunches, or the EITC, or SNAP. 
« Last Edit: March 03, 2015, 08:43:56 AM by sol »

Mississippi Mudstache

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #33 on: March 03, 2015, 08:30:49 AM »
My own family won't use wic just because we won't have any young kids when we retire.

Bit I'm pretty sure the judgemental people on this thread don't see a distinction between WIC and free lunches, or the EITC, or SNAP. 

I imagine my family will be eligible for the EITC for at least a few years after we FIRE. I intend to have a small business that brings in about $1000/month in earned income. If we are eligible, I certainly won't have any qualms with accepting it.

We will likely also be under the income limits for SNAP. However, SNAP has a limit of $2250 in "countable assets". This includes things like savings, checking, and taxable accounts, but not retirement accounts like 401ks  and IRAs. I suppose we could technically arrange our affairs such that we frequently withdraw small amounts from a Roth IRA when needed (and quickly contribute any excess cash) so as not to exceed the asset limit, but frankly, it seems like you would be walking a tightrope to do it legally. Good for you if you want to go through that trouble, but I certainly wouldn't. I'm uncommitted on whether or not I would consider it unethical, but it seems that if one could apply the same amount of effort to running a small business as they do to gaming the system, they would be likely to come out ahead. YMMV.

FarmerPete

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #34 on: March 03, 2015, 11:04:29 AM »
I'll certainly have to be careful about the investment income for the EIC.  I should have enough to qualify this year and cover the loss of income.  If not, I could certainly imagine doing it every other year or 2 out of 3 years kind of thing.  Front load my investment gains.  I'll repost once I've run it through tax software.

beltim

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #35 on: March 03, 2015, 04:18:54 PM »
[MOD EDIT:   You made your point.]

Consider me reprimanded. 
 
I apparently did not make my point, though, because this discussion is still centered around how the qualifications of this benefit are worded.  What does it matter?  As a society we have decided that people with an AGI below a certain threshhold are eligible for child tax credits, or the EITC, or WIC.  How are they different?

As has been explained to you several times in this thread alone, the differences are in societal intent, legislative intent, and the law itself.  Seriously, the law for WIC requires the recipient to be at nutritional risk.  Cathy even quoted the statute for you.

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I can understand someone being angry that you think the benefits are being awarded to people you don't like, or don't think are worthy.  That's the common justification for slashing unemployment benefits (lazy bums), and medicare (old freeloaders) and our anti-poverty programs (welfare queens).

You're better than using dog-whistle arguments to belittle those on the other side of a debate when no one in this thread has made any of those arguments.

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If you qualify for these programs, you should feel not feel guilty about taking advantage of them.  Whether you qualify because you are disabled, or unemployed, or born in the ghetto should not matter.  How you qualify doesn't matter.  All that matters is that you qualify, and if you qualify then you qualify.  Why is this so complicated?

And again, people on this thread have quoted legislative intent and the legislation itself.  You're not responding to these arguments.  And given your professed and demonstrated ignorance on this issue:
Honestly I'm not even sure how it works, and the website isn't very clear.  Do they just send people a check?
you would probably be better off not making any more statements like:
But I'm pretty sure the judgmental people on this thread don't see a distinction between WIC and free lunches, or the EITC, or SNAP. 
when you're the one who doesn't get or isn't responsive to the distinctions people have already given you, with appropriate sourcing.

sol

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #36 on: March 04, 2015, 12:00:54 AM »
Cathy even quoted the statute for you.

Duly noted.  In which case, if the OP doesn't qualify for the benefit then he doesn't get to take the benefit.  I wasn't suggesting anyone try to cheat anything, I was expressing my frustration that some people try to discourage others from receiving benefits to which they are fully, wholly, legally entitled.

Like, I said, if you qualify then you qualify and you shouldn't feel about taking it.  If you don't qualify, then you don't qualify and too bad for you.  Only the rules of the program itself get to decide who qualifies and who doesn't, but it seemed to me that some people here were suggesting that a person should turn it down for moral reasons even if they are clearly the target recipient.

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You're better than using dog-whistle arguments

For the record, I'm not better than poopy.  But thanks for your vote of confidence anyway.

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you would probably be better off not making any more statements like:
But I'm pretty sure the judgmental people on this thread don't see a distinction between WIC and free lunches, or the EITC, or SNAP. 

But that's the whole point I was trying to make.  WIC is no different from the EITC or the Roth IRA or the the student loan deduction.  It's a benefit provided to people below a certain income level, and if you qualify then you're turning down free money by not taking it.

I feel that much of the common "don't take welfare" sentiment is related to the same ideology that convinces poverty stricken southerners to vote for rich white politicians who are in the pocket of big corporations.  It's just a scam to convince people to vote against their own interests by telling them to turn down government assistance that could make their lives better.  It's the same ideology that was pushing that whole "don't sign up for subsidized Obamacare, you're better off without health insurance" campaign last year because they were trying to undermine the first real attempt at healthcare reform we've seen in three generations. 

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when you're the one who doesn't get or isn't responsive to the distinctions people have already given you, with appropriate sourcing.

I think I get the distinctions, thanks.  As for being unresponsive, if you feel I've still omitted something that requires addressing please remind me and I'll do my best.

beltim

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Re: Canabalize Taxable Account To Reduce Taxes, gain EIC
« Reply #37 on: March 04, 2015, 10:44:15 AM »

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you would probably be better off not making any more statements like:
But I'm pretty sure the judgmental people on this thread don't see a distinction between WIC and free lunches, or the EITC, or SNAP. 

But that's the whole point I was trying to make.  WIC is no different from the EITC or the Roth IRA or the the student loan deduction.  It's a benefit provided to people below a certain income level, and if you qualify then you're turning down free money by not taking it.

It is, though, which is the point Cathy and I were making.  WIC is specifically for people who are at nutritional risk.  A Roth IRA is designed for people to save for retirement.  Student loan deductions are designed to reduce the tax burden for people who have student loans.  So people who take advantage of those provisions in the tax code are doing exactly what they were designed to do.  Even daisy chaining it using a 401k to reduce your taxable income, to be able to contribute to a Roth, or to qualify for the EITC  is still completely within the intent and bounds of the laws.

But WIC specifically has a provision that recipients have to be at nutritional risk.  There's no equivalent provision for the programs you've mentioned through the tax code eligibility for an IRA is not dependent on being at "retirement risk," and there's no requirement to be at "housing risk" to be eligible for a mortgage deduction, or "educational risk" for a student loan deduction.

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I feel that much of the common "don't take welfare" sentiment is related to the same ideology that convinces poverty stricken southerners to vote for rich white politicians who are in the pocket of big corporations.  It's just a scam to convince people to vote against their own interests by telling them to turn down government assistance that could make their lives better.  It's the same ideology that was pushing that whole "don't sign up for subsidized Obamacare, you're better off without health insurance" campaign last year because they were trying to undermine the first real attempt at healthcare reform we've seen in three generations. 

I think my responses have pretty clearly shown that none of that applies to my arguments.