During my career with IRS, the number one question I received from friends and family was, "How can I get a bigger refund?", and the number one answer was, "Have more tax withheld from your paycheck!"
All of them, as far as I know. If they had little or no income, they would receive little or no credits, and would therefore have a correspondingly lower penalty, and would not be members of the group being discussed.
To receive the EIC, their income would have to be less than $45,060 ($50,270 married filing jointly) with three or more qualifying children, or lesser amounts with fewer children. The higher the income, the higher the EIC, provided they don't exceed the maximum income.
The amount of EIC is an inverted-U shaped function. It grows, plateaus, then drops slowly to zero.
When you see folks, year after year reporting income corresponding to the very beginning of the plateau region, they are probably playing the system.
I handle my MIL's taxes. Each year we convert some IRA to Roth to pull her taxable income line right at the 15/25 cutoff. Her taxes for the year come out her RMD. One year she owed $50. I was that close. I heard her reference that she'd owed money a few times during the year. So, this past year, I over withheld in November, and she got back $500. I've been her hero since. Go figure.
I think that the individual mandate penalty will be included as an "Other Tax" on Form 1040, meaning it is not reduced by non-refundable credits (similar to self-employment tax, IRA early distribution penalties, etc).
Child tax credit and dependent care credit are non-refundable, as we know.
Agree.
Subject to the confusion that the unused portion of the Child Tax Credit can turn into the Additional Child Tax Credit, which IS refundable.
[Also some states have a Dependent Care Credit which mirrors the federal credit but IS refundable.]Don EA in Upstate NY
Kissing cousin to the comment that still makes me want to slap 'em: "Oh, I didn't pay taxes last year. I got a refund."
Phil Marti Retired revenue officer
I guess that's a reason for withholding - so that people don't notice (or sometimes even understand) how much tax they are paying, or even that they are paying tax at all.
___ Stu
Just a note of caution: the above was emphatically denied by Ken Klukowski (Supreme Court correspondent and attorney) at a recent lecture he gave at a local law school. He answered me saying all civil means of collection will remain open and only incarceration was taken off the table.
He isn't a tax advisor, but was involved with contesting the mandate and sat thru the supreme court sessions. BTW he said the law is in for more appeals, for example because the ruling the penalty is a tax is inconsistent with the rules of how tax laws were supposed to originate from the house. But instead of being struck down, he expects it to prove financially unstable and have to morph into something like the UK/Canadian system.
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