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Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
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The expectations of tax returns. What a deception!

    Not that I wanted for us as a family to get tons of money back, but today I am ranting about what the surprise was when our tax preparer told us that only $1,000 was going back into our hands after paying tons of money on closing costs, points, property taxes and else. Not only my wife made less money than last year but the house practically gave her only $1,000 back. Last year we received $2,500 and this year only $3,500. I am rounding the numbers so you can understand my point.

 

   Since my wife makes more than $50K a year, she didn't receive a credit. She didn't put more into her retirement account, thus she received less money. It seems that in order to succeed or at least make it better in life you need to be at poverty level. Ah? :smileyvery-happy:

 

  But, to those who can say we would be better renting, not!. We would be paying in rent what equals to paying our mortgage and property taxes combined, and the freedom of calling it my home, but I didn't expect to get just peanuts over thousands of thousands of $ paid in those expenses already explained. Maybe we heard the siren's songs?

 

  Did we miss anything or we could have had better returns if we hired a crook preparer than the puritan one? :smileyvery-happy:

 

  I guess we need to go out to paint some houses. Anyone needing my services? :smileyvery-happy:

 

  Lastly, I don't know if cry or laugh:smileysad:

Silver Contributor
DealHunter0
Posts: 395
Registered: ‎04-05-2011

Re: The expectations of tax returns. What a deception!

For a normal family in the current interest rate environment, that's how it goes.  With a 3.25% interest rate and 1% property tax, the standard homeownership deductions (mortgage interest, property tax) only start to kick in on the portion of your loan balance over 300,000.  The people getting the big tax breaks have 600, 700 and 800k loans.  Classic case of how the mortgage interest deduction benefits the upper middle class, not the average joe.

Platinum Super Contributor
Nanomug
Posts: 10,290
Registered: ‎05-30-2009
0

Re: The expectations of tax returns. What a deception!

The lower the interest rate the lower the tax benefit.  The actual tax benefit is not what people think.  Because it is enough (usually) for itemized deductions it offers the benefit of deducting other items such as charitable contributions.

 

 

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
0

Re: The expectations of tax returns. What a deception!

  Because there was a "subordinate" loan, they gave my wife a 4.25%. Up to now, I don't know if it's true that subordinate loans require an extra point on our mortgage. My wife paid points for Christ's sake!.

 

  What I gather from all this mumble jumble is that we are going to be playing smarter this year. It's better to hold a garage sale and the proceeds be donated so you can have proof of the donations rather than give anything to the Salvation Army because as the tax guy said, you can't put that much on the material donation said because you get audited. I gave the salvation army around $1200 VHS movies and so many things when we moved out but we were told by this guy not to report it. Maybe it's better to use that donated money to pay the mortgage, we'll see.

 

  Also, it seems that when you get to the $43,001 a year income you belong to another category that will be taxed the hell! My wife surpasses the $50K threshold, so, no deductions there. Also, she paid too little on the mortgage side and I was surprised that the almost $15K-$20K she paid in closing costs and so were not of any help. Not even the property taxes helped at all.

 

  As part of the perks of working for the county, she'd have the benefit of childcare. But, again, earning more than $39K a year she doesn't qualify for it. But, they say at Kidango, that she can have a juicy discount of $960 a month for our daughter. So, if we put an amount of $ to childcare, let's round it to $1K a year, that equals $12K. Those $12K go to somebody who makes $39K, and if we add those $39K to $12K me come up with $51K, am I right?

   So, that means that my wife, earning $51K minus $12K will end up earning $39K! The system is not helping her here but hurting her!

 

   Gee, my head is spinning around  like the exorcist girl. I need to use my imagination to start making money. I am going to open an Ebay store and start to log in all the expenses of driving, paying for this and for that. Years ago we got a good return by declaring losses on my job as a painter. I think I like that idea, gee, rich people do it at Walls Street level, why not a poor and broke guy?:smileyhappy:

 

  This means, buyinghouse will be gone from Redfin because he got to make a buck!

  Don't smile just yet......:smileyvery-happy:

Gold Super Contributor
norcalnative
Posts: 3,277
Registered: ‎05-04-2009
0

Re: The expectations of tax returns. What a deception!

$1600 for our under 1 kid and $1350 for our 3.5yr old. $980 a month would be a dream come true.

 

Get over it Buyinghouse good friends in SF who own a house in SF and have two kids in private school. Wife makes in the 150K range Hubby is in the 300K range they were the one's that told us to GET OUT OF SF while we still could. Her paycheck pays for the tax bill and the kids schooling.

Gold Regular Contributor
sheriff
Posts: 2,270
Registered: ‎06-01-2012
0

Re: The expectations of tax returns. What a deception!

[ Edited ]

Points are deductible the same as interest or property taxes.  Maybe you should check with another tax service.  On the internet you can check his work for free on www.freetaxusa.com.  See if you come out with the same answer.

Trusted Contributor
NathanSF
Posts: 166
Registered: ‎04-01-2011

Re: The expectations of tax returns. What a deception!

[ Edited ]

"Not only my wife made less money than last year but the house practically gave her only $1,000 back. Last year we received $2,500 and this year only $3,500."

 

The tax refund is just a true-up.  Although it implies tax savings, it does not.  The refund is just the difference betweem the tax you paid and required to pay.  Perhaps your refund got diluted by partial year home ownership or simply less money withheld, or investment income and dozens of other possibilities.  What about state income tax.  In any case, you disclosed that retirement contribution was lower which explains partailly the higher tax before it is netted lower by MID and state tax.

 

The sweespot for MID and related is in the 180K - 250K level in CA.  Below 80K income and based on current interest rates, it is probably worthless. 

 

"Since my wife makes more than $50K a year, she didn't receive a credit. She didn't put more into her retirement account, thus she received less money. It seems that in order to succeed or at least make it better in life you need to be at poverty level. Ah?"

 

It's beyond Earned income credit, but within reach of child tax credit.  Really, how much income tax are you paying.  10% of 50K or 0% of 30K.   To be jelous of working poverty does not make sense.

 

What I gather from all this mumble jumble is that we are going to be playing smarter this year. It's better to hold a garage sale and the proceeds be donated so you can have proof of the donations rather than give anything to the Salvation Army because as the tax guy said, you can't put that much on the material donation said because you get audited. I gave the salvation army around $1200 VHS movies and so many things when we moved out but we were told by this guy not to report it.

 

Since you itemize your donation counts for something.  Donations is the most abused deduction at the individual level so people get what they create.  Under $500 no form between 500 and another amount requires a little more and over a certain amount is even more proof.  It makes sense to stop some of the abuse.

 

Your donation has to go a a 501c3 to qualify.  I don't know how much VHS is worth.  50 cents market value.  You report the market value but I think he was saying the VHS is not worth $1200 becuase chances are the salvation army will sell it for 50 cents.  Just like your old $300 leather jacket is sold for $20 at the goodwill store.  In any case, you can report $500 with no little disclosure, more than that and you should be prepared to have receipts and pass the "reality test"  Two bags of used clothing is not 2K in FMV. just like a box of old VHS does not pass the smell test.  If you can really get 1,200 for VHS from the garage sale, you should have just done that and kept the 1200 (and likely not report it).  Instread, you think claiming 1200 will get you more cash. 

 

If you can convince the CPA the VHS is worth $1200, he will consider it in its merit and sign the return ( A receipt and consideration of the facts).  All he needs is due dlligence to fulfill his professional responsibility.

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
0

Re: The expectations of tax returns. What a deception!


norcalnative wrote:

$1600 for our under 1 kid and $1350 for our 3.5yr old. $980 a month would be a dream come true.

 

Get over it Buyinghouse good friends in SF who own a house in SF and have two kids in private school. Wife makes in the 150K range Hubby is in the 300K range they were the one's that told us to GET OUT OF SF while we still could. Her paycheck pays for the tax bill and the kids schooling.


  It took me 10 minutes to understand you, lol. Wow! I wouldn't care to pay that but me, being a brain dead can't work as you do and get the money you get.

    I have talked to ladies who work as nannies, (gun for hire) and they charge $25/hr. And they told me parents working for those big shots we are tired of mentioning "don't blink" to the $25/hr. Cash!

  

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
0

Re: The expectations of tax returns. What a deception!


NathanSF wrote:

"Not only my wife made less money than last year but the house practically gave her only $1,000 back. Last year we received $2,500 and this year only $3,500."

 

The tax refund is just a true-up.  Although it implies tax savings, it does not.  The refund is just the difference betweem the tax you paid and required to pay.  Perhaps your refund got diluted by partial year home ownership or simply less money withheld, or investment income and dozens of other possibilities.  What about state income tax.  In any case, you disclosed that retirement contribution was lower which explains partailly the higher tax before it is netted lower by MID and state tax.

 

The sweespot for MID and related is in the 180K - 250K level in CA.  Below 80K income and based on current interest rates, it is probably worthless. 

 

"Since my wife makes more than $50K a year, she didn't receive a credit. She didn't put more into her retirement account, thus she received less money. It seems that in order to succeed or at least make it better in life you need to be at poverty level. Ah?"

 

It's beyond Earned income credit, but within reach of child tax credit.  Really, how much income tax are you paying.  10% of 50K or 0% of 30K.   To be jelous of working poverty does not make sense.

 

What I gather from all this mumble jumble is that we are going to be playing smarter this year. It's better to hold a garage sale and the proceeds be donated so you can have proof of the donations rather than give anything to the Salvation Army because as the tax guy said, you can't put that much on the material donation said because you get audited. I gave the salvation army around $1200 VHS movies and so many things when we moved out but we were told by this guy not to report it.

 

Since you itemize your donation counts for something.  Donations is the most abused deduction at the individual level so people get what they create.  Under $500 no form between 500 and another amount requires a little more and over a certain amount is even more proof.  It makes sense to stop some of the abuse.

 

Your donation has to go a a 501c3 to qualify.  I don't know how much VHS is worth.  50 cents market value.  You report the market value but I think he was saying the VHS is not worth $1200 becuase chances are the salvation army will sell it for 50 cents.  Just like your old $300 leather jacket is sold for $20 at the goodwill store.  In any case, you can report $500 with no little disclosure, more than that and you should be prepared to have receipts and pass the "reality test"  Two bags of used clothing is not 2K in FMV. just like a box of old VHS does not pass the smell test.  If you can really get 1,200 for VHS from the garage sale, you should have just done that and kept the 1200 (and likely not report it).  Instread, you think claiming 1200 will get you more cash. 

 

If you can convince the CPA the VHS is worth $1200, he will consider it in its merit and sign the return ( A receipt and consideration of the facts).  All he needs is due dlligence to fulfill his professional responsibility.


  You were right on the spot in some comments. But, believe me, I don't envy nobody but I despise the system, that's it. I, at some points in my life in the US was under the poverty guidelines even though I never got to collect anything but once the benefit of unemployment. What I criticize is the abysmal difference from one earning this much to just by a mere $1.00 get into another bracket without any "prorated" increase or discount.

  What the heck, as I said, I am a guy who invents himself in one minute. I have some ideas and they will make me go through anything.

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
0

Re: The expectations of tax returns. What a deception!


sheriff wrote:

Points are deductible the same as interest or property taxes.  Maybe you should check with another tax service.  On the internet you can check his work for free on www.freetaxusa.com.  See if you come out with the same answer.


  Thanks sheriff.