If an individual earned $16,270 in gross income as an employee as stated on a W-2 which was there only form of income...(not earned interest as specified by a
1099-INT or 1099-DIV)...is there a way to estimate a refund before going through the e-file process?Also, what tax advantages would there be for such a person who pays rent and not a mortgage and doesn't really own much of anything?
stated on a W-2 which was there only form of income...(not earned interest as specified by a 1099-INT or 1099-DIV)...is there a way to estimate a refund before going through the e-file process?
rent and not a mortgage and doesn't really own much of anything?
Yes. One simple approach is to go to an office of the national tax prep chain that is advertising free 1040-EZ preparation, you (i.e. the taxpayer) should be able to just walk in and get a live person to answer the question.
You do not have to efile a return to fill one out on paper or using software; conversely, by the time you are ready to efile, you will know exactly the refund or balance due to expect, it won't be an estimate.
Your specific question leaves out too many details, such as age and marital status of the individual, whether they are a dependent, and so on. Whether and how much of a refund in the end will depend also on how much tax was withheld during the year (federal, and state if applicable).
Given the meager facts you provide, I don't think this person has many "tax advantages" for 2012 other than paying the lowest rate on very little taxable income (after deduction and exemption subtractions). I haven't checked, but I think the income is too high for earned income credit for someone with no qualifying children.
Some states have renters' credits (e.g. California) but that will not help if there is no state tax liability in the first place.
Finally, if such a taxpayer has no other visible means of support, there might be a preparer "due diligence" question as to how someone paid rent and other necessities on such a meager take-home income (after Soc. Sec, Medicare, and withholding deductions from the paycheck).
EITC phaseout for a single/no kids ends at $13,980 AGI. So he might still get a bit of that.
EIC is based on the greater of AGI or earned income, and his earned income per W-2 is too high, so no EIC regardless of AGI if single. If MFJ, the limit is $19,190, so maybe, but then there'd be an even stronger need of due diligence on the amount of income vs. annual living expenses for two people.
Mark
EIC is based on both earned income and AGI.
The amount of credit is an inverted-U shaped function. So on the low side of the Inverted-U, EIC is based on the lower of AGI/earned income, and on the higher side of the inverted -U, as you said, EIC is based on the greater of AGI or earned income.
Stated differently, calculate EIC based on i) AGI and ii) earned income, and then use the one that produces the lower EIC.
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You are correct; what I meant to say was that the EIC *phaseout* was based on the greater of AGI/earned income, which is the higher (rightmost) side of the inverted U, as you point out. That was the context of the discussion, but it's good to fit it into the bigger picture.
I used to teach this stuff and still had to re-study it every year; a little rusty now, don't deal with it very often. However I find Pub 17 "Table 35-1. Earned Income Credit in a Nutshell" to still be one of the best quick references available.
Generally I find it hard to find an actual plot of the EIC curve that's current, but here's one that appears up to date for 2012: (scroll down to mid page, PDF link also available)
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