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does this pass reasonability test?

hello all,

in going over the family finances, came across what at 1st glance looks like an anomaly, but perhaps it's not.

a fulltime student, total income 2008 of $16,000 paid federal taxes $220.00

student paid $15,000 out of savings for university terms and had no other income.

taxcut online calculated return of federal taxes at $560.00 (refund)

how can that be?

there is only a $2000.00 credit allowed for the university costs (no hope credit, lifetime learning credit allowed) and no other deductions other than standard deduction allowed was taken to offset income calculation. student did not get economic stimulus payment in 2008 so is the $560 including a $300 for that purpose?

Reply to
jake
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snipped-for-privacy@dot.dz (jake) posted:

Yes, anyone who did not receive the stimulus payment associated with

2007 returns, and files for 2008 is qualified to receive it.

Bill

Reply to
Bill

No it doesn't sound right. $16000 of earnings less $4000 tuition deduction is an AGI of $12000. Less the std deduction & pers. exemption for a single person, you get taxable income of $3050. The tax on that is $308. The RRC will be $308 leaving no tax liabiity. The refund would be the tax withheld of $220.

I have no idea why you would state "only a $2000 credit allowed for university costs. I assume you meant to say "deduction" as you said there was no education credit. The maximum deduction is $4000 not $2000.

So.. something else is going on.

Reply to
Alan

thank you for the reply but if you noticed, I was *really* more concerned over the unusual refund amount which does not appear to match the taxes paid - ie. how can one get more back than what was paid.

========================================= MODERATOR'S COMMENT: This Rebate Credit is known as a refundable credit. That allows you get get back more than was withheld.

Reply to
jake

OP said Hope and Lifetime Learning credits are not available.

If LLC is not available, this might be due to high AGI.

High AGI taxpayers could be limited to 2000 instead of 4000.

Reply to
Arthur Kamlet

allow me to explain. when I completed taxcut online, it took the tuition amount 15,000 and tells me that only 2,000 qualifies or that is how I understood it.

the taxcut summary reports as follows income 16000 adjustments 0 gross income 16000 deductions 5500 (I did not enter any itemized deductions, only form 1098-T) exemptions 3500 taxable income 7000 tax 700 (it reports this on line 28, tax including alternative min tax) on line 31 it shows education credits 700 on line 42 recovery rebate credit 300, so it adds up 220+300R0 (not 560, sorry) tuition and fees deduction, form 8917 shows 0 hope credit before limitations, form 8863 shows 0 lifetime learning credit before limitations, form 8863 shows 2000 limited education credits, form 8863 shows 700

Reply to
jake

Read the original post for amount of income.

Reply to
Alan

You said no education credits in your post. Taxcut shows $700. This is the limited Lifetime Learning Credit. It is limited because it can not exceed the tax liability.

All that being said, this what you should have.

  1. The std deduction is 5450 not 5500.
  2. The taxable income would be 7050.
  3. Tax would be 708.
  4. Lifetime Learning Credit is 8.
  5. Tax is zero.
  6. Withheld tax is 220
  7. RRC is 0 based on qualified income of at least 00.
  8. Refund should be 0 (220 + 300).
Reply to
Alan

Is the entire $16000 income that you reported as wages, and so $16000 appears on line 7 of Taxcut's Form 1040?

Reply to
honda.lioness

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