Quote:
Originally Posted by queenfan
I am a single soon-to-be homeowner (depending on the stupid market). I have done my rough calculations. I was laid off at the beginning of the year, triggering pay out of my vacation which is taxed as a bonus. In my new job, I am claiming 2 allowances because the amount of money withheld from my vacation pay out pretty much covers half my tax responsibility. Between that, my education loan interest allowance and the tax credit, I should get my full credit and then some as a refund. Who thought losing one's job had advantages?  |
nomorebenz' last post is correct. I thought I'd point out a few things.
Regarding your vacation being taxed as a bonus... it only *seems* like it's taxed as a bonus. What really happens is the payroll systems take the amount of your individual paycheck and then MULTIPLY that amount by the total number of pay periods in a full year to come up with a project annual amount. This is then used to determine your tax bracket. They are then required to withhold that amount of money as tax.
This is what causes bonus payouts to be taxed particuarly heavy because they create the illusion that your annual income is a lot higher (based on the wrong assumption that you get that much in your check every pay period).
However, at the end of the year when you file your taxes, your tax calulation is based on the amount of income that you ACTUALLY earned (whereas the bonus check was taxed on a PROJECTION of your earning). This means you will have paid too much in that particular pay period (esp. considering your lay off means you were earning a lot LESS than they projected) and the over-payment in taxes in that one pay period would be returned to you.
As for the hybrid credit, think of this as a "store coupon" that is redeemable at the IRS. It merely reduces the amount of your tax debt by the amount of the credit, but you must actually have tax debt to that can be reduced. If you make such a small amount of money that you don't have to pay taxes (e.g. little old widows living on a small fixed income would probably not owe any taxes at all) then the tax credit is worthless. A credit isn't quite the same as cash in that if the amount of your credit exceeds the amount of tax for the year then they will not give you cash back in the amount of the excess.
But the really really big issue is that under no circumstances will the IRS allow you to pay less in tax then the AMT amount for your income. This is the reason that so many of us can't claim our hybrid tax credit *or* we can only claim a portion of the credit.