Tax credit question

[Russael]

*hangs head*  I get to wait on a letter from the IRS to figure out why I am shorted.  Thanks to JATR4, he confirmed that my taxes were done correctly the first time (also jives with what I found using TurboTax).

[Christian Rutherford]

This may be a silly question, but if you only get credit if you owe taxes then why not change your deductions to say 3-5 which would mean you would get more money each payday, but would owe money at the end of the year?  The credit could then offset what you owe and if you do it right you can come close to breaking even when it's tax time.  The extra money would be acquired the year prior each payday.

[blars]

This may be a silly question, but if you only get credit if you owe taxes then why not change your deductions to say 3-5 which would mean you would get more money each payday, but would owe money at the end of the year?  The credit could then offset what you owe and if you do it right you can come close to breaking even when it's tax time.  The extra money would be acquired the year prior each payday.

 

It has nothing to do with what you owe/don't owe, it has to do with what your tax liability is.  If I made 80k a year, and my fed taxes were 15k.  Generally that 15k is supposed to come from with withholdings throughout the year.  If I paid 16k through withholdings, and was due a 1k refund, I could still claim the $4k tax credit for a total refund of 5k.  If I made 30k a year, and my fed taxes were 3k, regardless of how much I had paid already or not, I could not claim the entire 4k tax credit because my tax liability is only 3k.

[dnorris78]

This may be a silly question, but if you only get credit if you owe taxes then why not change your deductions to say 3-5 which would mean you would get more money each payday, but would owe money at the end of the year?  The credit could then offset what you owe and if you do it right you can come close to breaking even when it's tax time.  The extra money would be acquired the year prior each payday.

 

That is what I have done.  I purchased in Feb of 2014.  I revised my withholdings using the calculator on the IRS website.  Instead of waiting for next year when I file to get the credit I am getting the benefit now.

[blars]

That is what I have done.  I purchased in Feb of 2014.  I revised my withholdings using the calculator on the IRS website.  Instead of waiting for next year when I file to get the credit I am getting the benefit now.

 

I think we're talking about two different things here.  Christian said, "but if you only get credit if you owe taxes...", when you can get the credit regardless of whether you have to pay in at the end of the year or get a refund.

 

dnorris68, it sounds like you changed your withholdings knowing that you'll have the $4k credit next year to cover paying in less over the course of the year.  This would make no difference if your yearly federal taxes were under $4k.  Also, you can be assessed a penalty if you have too little tax withheld throughout the year...I'm not sure if you avoid the penalty by being entitled to a tax credit or not.

[Kybuck]

Based on my limited experience, I think the penalty only comes into play if you owe the money when filing taxes, and over a certain threshold.  It may even need to be two years in a row.  So assuming the withholdings are adjusted properly, I don't think you'd be subject to any sort of penalty.  Given all the variables potentially involved (dual incomes, capital gains/losses, etc.), there's no way for the government to know that you've under paid and assess a penalty until you file your taxes.

 

Then again, I'm not a tax professional or accountant, so please don't make any decisions based on my limited experience without further research and without consulting someone who actually deals with this subject for a living.

[jeff_h]

Based on my limited experience, I think the penalty only comes into play if you owe the money when filing taxes, and over a certain threshold.  It may even need to be two years in a row.  So assuming the withholdings are adjusted properly, I don't think you'd be subject to any sort of penalty.  Given all the variables potentially involved (dual incomes, capital gains/losses, etc.), there's no way for the government to know that you've under paid and assess a penalty until you file your taxes.

 

Below is a cut and paste from this year's 1040 instructions starting on page 71 -- there is more there with other stipulations, but below shows the 2 bullet items in the 1040 instructions.

 

Line 77

 

Estimated Tax Penalty

 

You may owe this penalty if:

 

Line 76 is at least $1,000 and it is more than 10% of the tax shown on your return, or

You did not pay enough estimated tax by any of the due dates. This is true even if you are due a refund.

[Russael]

I got a letter from the IRS today.  They've approved the revision and I'll get the rest of my money back.  :)

[JATR4]

I got a letter from the IRS today.  They've approved the revision and I'll get the rest of my money back.  :)

Whoopee!!!

[Michelle]

If you leased the vehicle, then the credit would not be permitted - however as I recall there was an additional rebate in place through part (or all?) of the year for about the same amount to act as a de-facto passthrough.

 

I got a $5,000 rebate for leasing my Fusion Energi.  That is a lot more than the tax credit I would have received had I purchased the car.

[Hybridbear]

I got a $5,000 rebate for leasing my Fusion Energi.  That is a lot more than the tax credit I would have received had I purchased the car.

This is the $4007 tax credit plus $993 of incentive from Ford. How much would the incentive have been to buy?

[Gkinla]

This is the $4007 tax credit plus $993 of incentive from Ford. How much would the incentive have been to buy?

Hello everyone, I'm jumping over from the FFH Forum. I just bought a 2016 Energi yesterday. So I know what this answer is....$4,000 incentive plus $1,000 for having another hybrid in the family, which you don't have to train in, just owning another hybrid qualifies. Ford is also offering a "Zero %", 60 month financing. My 2013 FFH with 35,00 miles, got a $10,600 trade in value.

 

Like the FFH Forum I hope to gain a great deal of knowledge learning to efficiently drive my new 2016 Ruby Red Energi.

 

Gkinla

Edited May 20, 2016 at 03:08 PM by Gkinla

[bdginmo]

You'll love the car. The tax credit was a piece of cake for me. I use TurboTax and all I had to do was specify the make & model, battery capacity, date of purchase, and the VIN. TurboTax filled out form 8936 automatically and added the credit to line 54 on the return. Just remember that to qualify for the full credit line 47 must be >= $4,000. Line 47 is your final yearly tax liability. As long as your financial situation hasn't changed significantly you can use your 2015 return as a rough guess on whether you can take the full credit on your 2016 return. My hunch is that most people who can afford the car and who don't have unusually large deductions will probably qualify for the full credit.

 

Is there anybody here that did not qualify for the full credit?