How can someone pay let’s say pay 4K in taxes all year but get a refund of let’s say 8k?
Wether or not there are dependants that are being claimed when they file, this doesn’t make sense to me. If you pay 4K in taxes all year but get back 8k as a refund then you aren’t paying any taxes to the government at all. I though we all are supposed to do our part and pay our fair share of taxes. I pay a combined (state, federal) 12k+, no dependants, own a home and barely see 2.5k to 3k in returns. I think I’m paying my fair share!!
More Questions From This User See All
Answers & Comments
This is what is wrong with the system. people get refunds for more than they paid in taxes. just plain wrong
Beyond "deductions" (which reduce taxable income) there is a more generously accounted for aspect known as a "tax credit".
If you do something which the politicians have decided is a "very good" thing to do, you may be eligible for certain specific tax credits. Some examples for the U.S. include building low cost housing, donating tuition for certain types of students, installing solar electric generation (as on your own house), restoring historical buildings, purchasing certain types of low energy or special fuel vehicles (such as a Tesla), etc.
Several reasons.
First, you are confusing the amount of tax paid through withholding to be the same as tax owed. It's not. Someone who paid in $4k may owe no tax. They would get every penny of that $4k refunded.
Second, there is a tax credit of $2,000 per child under the age of 17. A single person who is head of household, or a married couple, that has two or three children, could have their tax bill completely wiped out by this credit. And for the first time, up to $1,400 of unused credit is refundable. In the past, if the Child Tax Credit was more than the tax you owed on your income, you got no refund of the unused credit.
So, someone who paid in $4,000 and gets the full allowable refund on that credit is up to $5,400.
Third, depending on the income level and the number of children, they may qualify for the Earned Income Tax Credit, which is fully refundable. This can amount to a refundable credit of up to $6,431 for Head of Household or Married Filing Jointly with three or more qualifying children and their adjusted gross income is below the limit.
In the right situation, with $4k paid through withholding, no tax owed due to the Child tax Credit and receiving the maximum refundable amounts of credits, a refund could be close to $12,000.
You can look at the Earned Income Tax Credit as a form of welfare/redistribution of wealth.
The way people get an $8k refund with only $4k paid is by having a net tax liability of $0 and qualifying for $4k worth of refundable credits.
The 3 most common refundable credits are the Earned Income Credit, the refundable portion of the child tax credit, and the refundable portion of the HOPE credit (a credit for college tuition).
If you don't like it, then run for congress. But I doubt you're going to win any elections if you're running on a platform of tax increases for low income families.
Your question is rambling and incoherent.
Earned income credit and a couple other smaller refundable credits plus all they paid in.
"do our part and pay our fair share of taxes" - Yes. For some people, that fair share is nothing.
The main idea is everyone feels they get punched in the gutt about the same when tax time comes.
The better you are off the bigger tax punch in the gutt you can take and still keep walking, the worse you are the lighter a punch you can take. This way everyone feels the pain about the same.
Yes sometimes even to the point where life hits them so hard already they get a little extra cash to try and relieve the other gutt punches they already took.
These small half measures like the EITC were adopted so that the poor don't revolt, like they did in Russia or France.
There is also the thought that if you had no idea how much money you/anyone else will be born into, what abilities you/anyone will have, no idea what health problems you/anyone will face, no idea of any uncontrollable disadvantages/advantages one gets out of life, what would be the fairest tax system you could design, and the progression federal income tax system is almost ideal.
There are a couple of "refundable credits" that let you get money "back" that you didn't pay in, sometimes thousands of dollars. That's a big reason why only about half of people pay tax.
How? The Earned Income Tax Credit.
From each according to their ability, to each according to their need. It isn't fair, but we elect socialists to govern us in America. Just be grateful they haven't started killing millions of people yet, like in China and the USSR.