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Thread: It's Tax Season- Do You Know Where Your Refund Is ?

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    Banned Eric Stoner's Avatar
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    Default It's Tax Season- Do You Know Where Your Refund Is ?

    As many as forty states may not be able to pay tax refunds on time this year.
    Many, including N.Y. and N.J., are planning to copy the California model and issue IOU's instead of refunds. The taxpayer gets an IOU; the state gets an interest free loan.

    One way to counter this is to revise your withholding and quarterly estimated tax payments so that you are paying the absolute minimum.

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    Default Re: It's Tax Season- Do You Know Where Your Refund Is ?

    ^^^ yup I have heard that paying out tax refund dollars is beginning to be a major cash flow problem for quite a few states. This is of course understandable since average income levels ( and therefore effective tax brackets ) dropped abruptly in 2009 as the result of layoffs etc. ... resulting in 'huge' tax refunds where paycheck income tax withholding was geared towards the higher tax bracket that would have applied if the worker hadn't been given a 'pink slip' and had instead been able to work throughout 2009.

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    Default Re: It's Tax Season- Do You Know Where Your Refund Is ?

    It's just like not paying your credit card bill, but without interest. Eventually they will have to pay out refunds, but who knows when they will have the cash flow for that?

    If you don't use the prior year's tax paid-in, predict your current year's tax liability and make sure by early next year, January 15 (last quarter extimated payment) you know pretty well how much you'll need to pay. Then pay out that last payment plius about $100 extra, just in case you are wrong by a little.

    The big fallacy there is if the govt changes the rules at the last hour and now you found out, after January 15, that you owe more due to the new tax law, ruling,or practice which you just found out. This is a reason to put a tax accountant on retainer, as they often know the rumors about those chages. IMHO tax law changess should NOT apply to the past tax liabilities and should be finalized in time for taxpayers to plan for that cash flow. Retroactive tax law changes are just BS and should be unconstitutional.
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    Default Re: It's Tax Season- Do You Know Where Your Refund Is ?

    ^^^ unfortunately, where 2010 tax rates which will apply for the 2011 tax return season are concerned, could be some changes in the works. Nut for 2011 tax rates there are a TON of changes in the works. Some are fairly well known, but many are new / speculative.

    - tax rates on 'ordinary' income will return to pre GWB 'tax cut' levels. This is known and very easy to look up ... amounts to about an additional 3% in tax rate ( i.e. from 33% to 36% - which is actually a 10% relative increase) depending on tax bracket.

    - the higher Alternative Minimum Tax rate will apply to lower levels of income. This one is FAR from straightforward to estimate, but is likely to affect a significant number of 'serious full time' dancers

    - capital gains / qualifying dividend taxes will increase ... arguably from 15% to 20%.

    - there are a whole bunch of jokers in the tax deck if national health care passes ... from a cash 'penalty' for those who do not have private health insurance', to taxability of the 'equivalent cash value' of some employer provided health insurance benefits, to income tax surcharges on high 'ordinary income' earnings etc. Nobody has a handle on what this all means ( other than the fact that taxes will be increased ).

    - state and local income tax rates are also likely to experience increases, as states run out of last year's federal stimulus money and are thus forced to collect more tax revenues or fire more gov't workers ( probably both ).

    Again, my acquaintances in the financial industry all say that they are advising their clients to take investment profits in 2010, to accelerate receipt of income streams into 2010 etc. to avoid the significantly higher tax rates that will apply in 2011.


    Retroactive tax law changes are just BS and should be unconstitutional
    I agree. However, in practice, retroactive tax law changes are more likely now than they have been in generations !!! I should clarify that the definition of 'retroactive' being used here refers to the gov't estimating one tax rate in January ( and employers / accountants basing paycheck withholding payments / estimated tax payments on that tax rate), only to have the gov't change the actual tax rate by December 31st. This pisses off everybody concerned since such a last minute tax rate increase usually does not have sufficient paycheck withholding / estimated tax dollars behind it ... meaning tiny refunds or writing out personal / business checks to the IRS come April 15th. But such last minute tax rate increases are legal, and have occasionally been done in the past.

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