Curious on tax return for mom and dad..

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Topic Author
UpstateNY86
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Curious on tax return for mom and dad..

Post by UpstateNY86 »

A little embarrassed to post this income, but oh well.
Mom and Dad and 1 full time student
Total income 13,000
No federal taxes taken out
94.17 state taxes taken out.
Also, one daughter who is full time college student. Does her residency impact the EIC credit? I am confused and baffled because I punched in numbers on turbotax and est. refund is 3250. Is this correct? I told mom I had to come to bogleheads.
jebmke
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Re: Curious on tax return for mom and dad..

Post by jebmke »

I ran this through my tax software. This looks right. I came up with the same answer. $13K earned income, zero withholding, one child dependent.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
earlyout
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Re: Curious on tax return for mom and dad..

Post by earlyout »

Since they did have earned income, you could increase their refund significantly by giving them the funds to make their IRA contributions for 2013. At their low income, the saver's credit (which is a refundable credit) would be worthwhile.

EDIT: This is not correct. This is NOT a refundable credit.
Last edited by earlyout on Mon Mar 17, 2014 5:17 pm, edited 1 time in total.
Topic Author
UpstateNY86
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Re: Curious on tax return for mom and dad..

Post by UpstateNY86 »

earlyout: How much would they get back relative to 1k investment in a roth? Thanks for the heads up. My question is why are they getting 3250 back? I don't understand when they did not have even pay fed taxes. Is that EIC, or both EIC and having kid in college? Curious if anyone knows the breakdown.
jebmke
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Re: Curious on tax return for mom and dad..

Post by jebmke »

earlyout wrote:Since they did have earned income, you could increase their refund significantly by giving them the funds to make their IRA contributions for 2013. At their low income, the saver's credit (which is a refundable credit) would be worthwhile.
Retirement savings credit is non-refundable.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Novine
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Re: Curious on tax return for mom and dad..

Post by Novine »

"My question is why are they getting 3250 back?"

Between the standard deduction of $12,200 for MFJ and the exemptions for your parents, they have zero tax liability. The $3250 refund is coming from the EIC. The tables for the EIC are here. I didn't do the worksheet but $3250 corresponds with $13,000 for MFJ. Is the daughter claimed as an eligible dependent? Is she eligible per page 10 of Pub 596? If so, they may be entitled to even more back.
jebmke
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Re: Curious on tax return for mom and dad..

Post by jebmke »

Novine wrote:"My question is why are they getting 3250 back?"

Between the standard deduction of $12,200 for MFJ and the exemptions for your parents, they have zero tax liability. The $3250 refund is coming from the EIC. The tables for the EIC are here. I didn't do the worksheet but $3250 corresponds with $13,000 for MFJ. Is the daughter claimed as an eligible dependent? Is she eligible per page 10 of Pub 596? If so, they may be entitled to even more back.
$3,250 is with daughter claimed as dependent by parents.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Topic Author
UpstateNY86
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Re: Curious on tax return for mom and dad..

Post by UpstateNY86 »

What do you mean elgible dependant? She lives at home when not at college(where she lives in dorm). No job.
jebmke
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Re: Curious on tax return for mom and dad..

Post by jebmke »

UpstateNY86 wrote:What do you mean elgible dependant? She lives at home when not at college(where she lives in dorm). No job.
Under age 19 OR under age 24 and full time student (or any age if permanently disabled).
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Novine
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Re: Curious on tax return for mom and dad..

Post by Novine »

"$3,250 is with daughter claimed as dependent by parents."

Thanks - I missed that eyeballing that table. It's a wonder anyone can slog through all of that info to figure out what they might be eligible to get.
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UpstateNY86
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Re: Curious on tax return for mom and dad..

Post by UpstateNY86 »

Hey guys. Had to bump this, as my parents tax man only gave them refund of 487 instead of 3250. It is that difference of my little sister being a dependant or not. She is 20yo and lives in dorm at UB, and then home the rest of the time. Why could this have happened? I am waiting on a call back..
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BL
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Re: Curious on tax return for mom and dad..

Post by BL »

You need to compare your 1040 to his and see where the difference is.

I am curious: what did he charge for federal, state, etc.?
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neurosphere
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Re: Curious on tax return for mom and dad..

Post by neurosphere »

UpstateNY86 wrote:Hey guys. Had to bump this, as my parents tax man only gave them refund of 487 instead of 3250. It is that difference of my little sister being a dependant or not. She is 20yo and lives in dorm at UB, and then home the rest of the time. Why could this have happened? I am waiting on a call back..
As BL said, no way to know without more details. Either the information in your original post is incorrect, or there is additional information not given. For example, is the total income you provided from the W2? Perhaps there is other income you did not know about and tell us about, e.g. investment income such as dividends or capital gains perhaps? That's the first thing which comes to mind.

It would be difficult for most people to support 3 people on the income listed, especially if your sister is away at college, which presumes some tuition and room/board paid by somebody. So maybe your parents have taxable income from savings or investments. Just a guess though. The 1040 will tell.
mlipps
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Re: Curious on tax return for mom and dad..

Post by mlipps »

neurosphere wrote:
UpstateNY86 wrote:Hey guys. Had to bump this, as my parents tax man only gave them refund of 487 instead of 3250. It is that difference of my little sister being a dependant or not. She is 20yo and lives in dorm at UB, and then home the rest of the time. Why could this have happened? I am waiting on a call back..
As BL said, no way to know without more details. Either the information in your original post is incorrect, or there is additional information not given. For example, is the total income you provided from the W2? Perhaps there is other income you did not know about and tell us about, e.g. investment income such as dividends or capital gains perhaps? That's the first thing which comes to mind.

It would be difficult for most people to support 3 people on the income listed, especially if your sister is away at college, which presumes some tuition and room/board paid by somebody. So maybe your parents have taxable income from savings or investments. Just a guess though. The 1040 will tell.
True, but there's no support test for EIC, so it doesn't matter if the daughter is able to support herself.

OP, I think you're trying to figure out if your sister? still qualifies as a dependent since she lives away at college most of the year. For tax purposes, being away at college is considered the same as living at home, as long as she maintains residency at your parents' home during breaks.
mlipps
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Re: Curious on tax return for mom and dad..

Post by mlipps »

UpstateNY86 wrote:Hey guys. Had to bump this, as my parents tax man only gave them refund of 487 instead of 3250. It is that difference of my little sister being a dependant or not. She is 20yo and lives in dorm at UB, and then home the rest of the time. Why could this have happened? I am waiting on a call back..
If everything else is identical between the two, yes, $487 is the EIC amount for two people w/no dependents at that income level while $3250 is the EIC for married filing jointly w/one dependent. So it sounds like the tax preparer did not claim your sister, at least for EIC purposes.
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BL
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Re: Curious on tax return for mom and dad..

Post by BL »

There are boxes to check and questions to answer on the EIC form, so if they said, for instance, that the child lived with them 3 months, that might disqualify the child. See:
http://www.irs.gov/pub/irs-pdf/f1040sei.pdf

This defines a Qualifying Child for EIC purposes.
pshonore
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Re: Curious on tax return for mom and dad..

Post by pshonore »

BL wrote:There are boxes to check and questions to answer on the EIC form, so if they said, for instance, that the child lived with them 3 months, that might disqualify the child. See:
http://www.irs.gov/pub/irs-pdf/f1040sei.pdf

This defines a Qualifying Child for EIC purposes.
A qualifying child for EIC is not different than a QC for dependency purposes and the residency requirement is at least 6 months for both. In addition there are a number of additional questions that preparers are required to ask and document. ie, Who else lives in the home, did you receive public assistance, food stamps, have you ever been denied EIC for deficiency purposes etc. etc. Failure to ask the questions and document the responses can result in some substantial penalties. Returns with EIC are reviewed in great detail by the IRS.

If the preparer did not file requesting EIC with a qualifying child, you can still file an amended return (assuming they qualify). Look on the return and see if a qualifying child was claimed in the exemptions area on the first page.
Topic Author
UpstateNY86
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Re: Curious on tax return for mom and dad..

Post by UpstateNY86 »

Accountant called me back apologizing. Blamed software, has to file amended return. YIKES.
mlipps
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Re: Curious on tax return for mom and dad..

Post by mlipps »

UpstateNY86 wrote:Accountant called me back apologizing. Blamed software, has to file amended return. YIKES.
Your parents should consider a free VITA site next year. They would be better versed in tax laws and credits for low income families than the average accountant.
pshonore
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Re: Curious on tax return for mom and dad..

Post by pshonore »

mlipps wrote:
UpstateNY86 wrote:Accountant called me back apologizing. Blamed software, has to file amended return. YIKES.
Your parents should consider a free VITA site next year. They would be better versed in tax laws and credits for low income families than the average accountant.
VITA sites are getting better but they've got a long way to go, epecially with more complicated returns. 50% accuracy rate is pretty bad.
http://www.procedurallytaxing.com/tigta ... ta-errors/
tomd37
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Re: Curious on tax return for mom and dad..

Post by tomd37 »

Should also consider the free AARP Foundation Tax-Aide program (right Jim?) for getting their returns prepared. They have more experienced and higher qualified people than many VITA sites.
Tom D.
mlipps
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Re: Curious on tax return for mom and dad..

Post by mlipps »

pshonore wrote:
mlipps wrote:
UpstateNY86 wrote:Accountant called me back apologizing. Blamed software, has to file amended return. YIKES.
Your parents should consider a free VITA site next year. They would be better versed in tax laws and credits for low income families than the average accountant.
VITA sites are getting better but they've got a long way to go, epecially with more complicated returns. 50% accuracy rate is pretty bad.
http://www.procedurallytaxing.com/tigta ... ta-errors/
I'm sure it depends a lot on the site & also the level of experience of the particular volunteer. In my experience, the prior year returns I see from the "professional" preparers aren't doing any better. And, as the report says, this is hardly a representative sample of VITA sites as a whole.
Novine
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Re: Curious on tax return for mom and dad..

Post by Novine »

"VITA sites are getting better but they've got a long way to go, epecially with more complicated returns. 50% accuracy rate is pretty bad."

Compared to what? Is it documented that accountants have a better rate of performance when it comes to tax returns?
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