Are tax returns a scam

Discussion in 'Off Topic Forum' started by pc747, Mar 17, 2018.

  1. Sajo

    Sajo Diamond Member

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    I think the best thing we can do is educate the younger generations on how W2 exemptions work, and how that affects whether you get a return or owe more. I am amazed all the time at younger people that have never been educated on the subject and have the impression that everyone receives a refund every year...no matter what.

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    #25 Sajo, Mar 18, 2018
    Last edited: Mar 18, 2018
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  2. Jonny Kansas

    Jonny Kansas Administrator
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    Definitely need more life skills courses in school that covers things like this. My dad did everyone's taxes for years. It wasn't until I moved a thousand miles away that I began trying to figure it out on my own. Had I been smart, I would've at least sat down with him when he was doing mine through high school & college.

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  3. kodiak799

    kodiak799 Gold Member

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    Yeah, but the point I was making was additional estimated payments so you DON'T underpay.

    Forget that the govt doesn't pay interest. If you overpaid $2000, you lost out on $250 in stock market gains last year. I would think that's enough money for most people to care about.
     
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  4. kodiak799

    kodiak799 Gold Member

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    Sad part is, I took tax accounting and have a degree in finance from a good undergrad. I never knew, until a few years ago after a google search, that you could put whatever number of exemptions you want. I always thought you were limited to your number of dependents, and that it was illegal to take more.
     
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  5. Jonny Kansas

    Jonny Kansas Administrator
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    Yeah, that one always seemed weird to me, people who'd claim a bunch for a good part of the year & then change it close to tax time. Still don't get that.

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  6. JandN2639

    JandN2639 Active Member

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    I’m surprised too! Our accountant never mentioned that. Do you have a source for this?


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  7. me just sayin

    me just sayin Diamond Member

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    that what software is for :)
    A simple Google search will give you a source. one thing for sure, if you do not pay enough there could be a penalty. I worked payroll years ago and I have seen this happened. Most of the time this was done at the advice of a tax accountant/lawyer.
     
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  8. JandN2639

    JandN2639 Active Member

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    Let me clarify my question:

    Is there a verifiable source for the information that one can claim all exemptions one wants? I thought—and our CPA never said anything different—that unless additional exemptions have legal basis, one cannot legitimately claim them. I figured *anything* that isn’t verifiable can lead to audits and, most likely, penalties.


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  9. me just sayin

    me just sayin Diamond Member

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    it would be better if you did your own search for a source. it is apparent you will not be accepting any given here. or ask your own CPA. there are lots of rules CPA don't tell about unless asked or if it may apply. You can claim any amount but unless the rules changed recently, any over 9, the paperwork will have to be sent to the irs for whatever reason. as I said before, if you claim too many and don't pay enough tax, you will be penalized.
     
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  10. me just sayin

    me just sayin Diamond Member

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    I failed to mention, you are right about exemptions BUT it is not exemptions you are claiming on the w-4, it is allowances. big difference with it comes to legality.
     
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  11. JandN2639

    JandN2639 Active Member

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    I thought you meant on the 1040s. As I understand it, on those, you can only claim exemptions you actually have. For example, I don’t have children, so I understand that to mean I cannot claim I have any.


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  12. pc747

    pc747 Administrator
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    Yeah, I know people who will work a lot of ot around Thanksgiving and Christmas time and will change their exemptions to 99 so they can get more money back for Christmas shopping.

    This tip has been known for awhile. They say by December (in theory) the irs already collected the money you owe by then so this is a way to "dip" into your tax returns early. Just set it back before the first of the year and know your tax returns will be much lower.

    Everyone have a different situation. For some that extra money for the holidays is more important than at tax time. For others it is just too risky, and they would rather have that big return after the holidays.

    This is just meant to open people's minds about the tax code. It's up to each individual how they handle it. If you're smart with money, out of debt, and disciplined enough to invest your money then you may be better off claiming more exemptions so that you are getting less, because you will make more on your return then what the irs will.

    But if you're the average American living paycheck to paycheck with little or no savings, and trying to work through student loan debt and life. Then I would suggest leave your exemptions where they are at. Last thing you need on your plate is an IRS bill at the start of spring that you're not prepared for. Instead that refund may be considered a forced savings account that you can cash every year. And for many it comes at the perfect time. And if it wasn't for that, life's circumstances would have gobbled up the extra $200-$250 per month with none left in savings.

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