I’m peering out of my window on this early Sunday morning and there’s little evidence of the storms that moved through yesterday except for a lot of wet ground. I know that many of my friends and readers are not so lucky this morning, especially those in my home state of North Carolina. My thoughts and prayers are with those of you who suffered damage in the storms yesterday.
Additionally, the Red Cross is setting up disaster relief efforts to assist victims. They are also on the scene in Iowa and Virginia after storms there last week. If you would like to help by making a donation (hey, it’s tax deductible), you can visit www.redcross.org, call 1-800-REDCROSS, or text REDCROSS to 90999. You can also mail your contribution to the American Red Cross, P.O. Box 37243, Washington, DC 20013. Thanks.
With that said, I’m moving on to the Sunday mailbag with an emphasis on tax refunds:
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Taxpayer asks:
Hello Tax Girl,
Every year, I get a nice refund which I use to pay my expenses for the summer when work is much slower. I read that you said that getting a refund wasn’t a good thing. Mind telling me why?
taxgirl says:
It’s not that getting a refund is a bad thing necessarily. I mean, who doesn’t like getting a check instead of writing one?
It’s just that when you get a refund year after year, especially a large one, most tax pros (including me) will advise that it’s time to think about adjusting your withholding. The refund is your money. It’s just being held – without paying you interest – by the government for up to a year.
I have a client who gets about $5000 back every year. If she adjusted her withholding, she would have an extra $400 in her pocket every single month. She could pay off her credit card, pay bills, etc. as she goes instead of relying on one big bucket of money in April. Of course, she sees it differently, noting that she would probably spend it as she went and refers to her refund as her “forced savings.”
So there you go. While it makes the best fiscal sense to adjust your withholding and not rely on a sizable refund, I say to each his or her own.
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Taxpayer asks:
Hi,
Thank you for your site!!
I didn’t get the Making Work Pay Credit last year because I didn’t fill it out. I didn’t know that I had to. Can I amend my tax return and get a refund?
taxgirl says:
I got a lot of variations on this question this year. Basically, a lot of folks believe that they missed out on the Making Work Pay Credit and want to know if it makes sense to amend their 2009 returns in order to claim the credit.
The answer is maybe.
Don’t rush to amend your return without a little bit of investigation. First, figure out whether you qualify for the credit:
- Remember that You must have earned income, meaning something other than interest, dividends and other sources of passive income in order to claim the credit; if you didn’t work, you may not claim the credit.
- You must have a valid Social Security Number to claim the credit; an ITIN does not count.
- You may not claim the credit if someone else claims you as a dependent (sorry, college students).
- You may not claim the credit if you are a nonresident alien.
- You may not claim the credit if your modified adjusted gross income is $95,000 for individual taxpayers or $190,000 for married taxpayers filing jointly.
Next, check your return to determine whether the credit might have been applied and was reduced in 2009. If you were disabled or retired, you may have received an Economic Recovery Payment (ERP) during the year; it would have been a check for $250. You may have also had your payment reduced because you made too little (or too much money).
You should also verify that you didn’t complete a Schedule M with your form 1040 (you didn’t need to do this with a form 1040A or 1040EZ).
Finally, check your refund (or payment due) against what your return actually says. The IRS was making an effort to apply the credit to returns for taxpayers who did not do so themselves in 2009. Just because you didn’t complete the schedule last year doesn’t mean that you didn’t receive the credit.
If, after all of that, you still believe you need to file for the credit, use federal form 1040X (downloads as a pdf). You can find the instructions here (downloads as a pdf).
Keep in mind that you have three years from the date of filing your original return or two years from the date of paying the tax (whichever is earlier) to claim a refund. Allow 8 to 12 weeks for your amended return to be processed.
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Taxpayer asks:
Hi Tax Girl,
I am a low income, semi-retired worker–about $8,000 Earned Income from a combination of earned income, two W2’s with a small bit of taxes taken out ($68) and the other half listed under self employment (Schedule C).
I only paid into the IRS $68 for 2010, but with the Making Work Pay Credit, and lots of Itemized amounts (Sch A), I end up having to pay about $300 something in taxes, (I have other Interest and Capital gains income), but with the MWP credit, it looks like I get a refund of around $150. Is this possible?
Can I get money given to me from the IRS/government if the total with the MWP tax credit and the $68 is more than what I owe?
I was thinking it should come out to zero dollars. That I wouldn’t owe anything. That I wouldn’t get anything back, except maybe the $68 I paid out via an employer’s withholding, not more than what I paid in last year.
Obviously I am confused. I am thinking it’s the Turbo Tax I am using.
Thanks for your help.
taxgirl says:
I’m not sure that I totally understand your situation but I’ll answer what I think is the most important part of your question: is the Making Work Pay Credit refundable? The answer is yes.
The Making Work Pay Credit is refundable. A refundable credit means that if you qualify for the credit, you are entitled to the entire amount even if it exceeds your tax liability. So, yes, you can get back more from the government than you put in.
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Taxpayer asks:
Hey taxgirl,
I filed my return two weeks ago and I didn’t get my check. Can you find out where it is?
taxgirl says:
I’ve said before that I am not your go to girl for this kind of question. Please don’t send (or text, as has happened on two occasions this year) your personal information to me including your Social Security Number. I’m not going to call the IRS for you to check on the status of your refund – and I don’t have any kind of secret direct hotline. To be honest, you shouldn’t be sending that information to anyone to check on your refund unless it’s the IRS or your tax preparer.
I would recommend that you check on the status of your refund on your own. It’s super easy. You can use the IRS’ online tool (wait 72 hours after e-filing or 3 weeks after filing a paper return before trying the system), call the IRS at 1.800.829.1040 (if you haven’t received your refund after 8 weeks) or use an app on your phone.
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Taxpayer asks:
I have an embarrassing question. I left my refund check in my pocket and my mom did my laundry and now the check is ruined. How can I get a new one?
taxgirl says:
I’m not even going to ask why your mom is doing your laundry… I’ll just be *that mom* and say that you should learn to do your own laundry if you’re old enough to be working (and writing to me about it).
So, there’s the judge-y part of my answer.
The actual answer to your question is that you can file a claim for a new check online. If it’s been more than 28 days since the check was issued, use the IRS’ online tool or call the IRS at 1.800.829.1040 to get a replacement check.
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Taxpayer asks:
Hello Tax Girl,
You always ask what we would do with a refund. What would you do with one this year?
taxgirl says:
Fun question but kind of moot since I almost always owe and I expect this year to be no exception. But that said, I’d probably pay bills. I’m still wading through my student loans (the price of two graduate degrees) and at some point, I’ll need to have to paid off so that I can start paying for college for the kids. It’s a never ending cycle.
But if I had a little to play with, I’d buy Flyers play-off tickets. You know, assuming that they actually stay in it… I’d prefer Phillies tickets but those are nearly impossible to get (Go Phils!).
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Thanks for reading.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.