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Vanity Tax Question
Self | April 17, 2012 | Self

Posted on 04/17/2012 2:05:34 PM PDT by library user

I know I shouldn't have waited til the last minute, but wanted to ask tax-savvy FReepers two questions:

1) What are the odds that the figure on line 54 (Total Credits) of your 1040 is going to be the exact same number as that on line 62 (Federal Income Tax Withheld)?
Wouldn't that be one heck of a coincidence, if true? Should I start playing the lottery?
2) Also, my accountant told me to put $510 in a ROTH IRA to get a higher refund. Although I can't find a line item on the 1040 where making such a contribution would affect the refund.
Any suggestions on this? Thanks so much for any insight.

PS: I'm having a hard time getting my accountant to answer these questions. I think he's overloaded by last-minute filers and hasn't responded to my email.


TOPICS: Chit/Chat
KEYWORDS: taxes

1 posted on 04/17/2012 2:05:45 PM PDT by library user
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To: library user

There’s a vanity tax?


2 posted on 04/17/2012 2:09:18 PM PDT by cripplecreek (What does it profit a man if he gains the whole world but loses his soul?)
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To: library user

I don’t think the Roth IRA saves you tax up front. I know the older type does, however.


3 posted on 04/17/2012 2:10:38 PM PDT by bamagirl1944 (That's short for Alabama, not Obama)
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To: cripplecreek

There probably should be for me. I have posted several vanities since 2008.


4 posted on 04/17/2012 2:10:58 PM PDT by library user
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To: bamagirl1944

The weird thing was accountant told me to put $510 in a ROTH IRA to get a bigger refund, but then said I can withdraw the money a few days later with no penalty, if I want to. Bizarre.


5 posted on 04/17/2012 2:12:23 PM PDT by library user
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To: bamagirl1944

Correct. Where the ROTH saves you money is in any growth in it is tax-free.

As to the withholding being the same as credits: ?? this is strange. Can you double-check the federal income tax withheld against your form W2,and any 1099s that might have withholding or any quarterlies you paid?


6 posted on 04/17/2012 2:13:15 PM PDT by NEMDF
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To: library user

I think its line 50....there are income limits, but I assume your accountant knows where you stand with those.


7 posted on 04/17/2012 2:13:15 PM PDT by lacrew (Mr. Soetoro, we regret to inform you that your race card is over the credit limit.)
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To: cripplecreek
There’s a vanity tax

You are kidding right? What line on my tax form do I enter that into? I can't believe. They tax everything now. Hope you can get back to me quick, I was just about to put my tax form in the mail.

8 posted on 04/17/2012 2:17:36 PM PDT by gunsequalfreedom (Conservative is not a label of convenience. It is a guide to your actions.)
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To: library user

Is this your ACCOUNTANT (CPA) or TAX PREPARER?

If it is your accountant, I’d recommend you get a new one—he is clearly wrong.

Traditional IRA—tax deferred (you get the write-off up front), and pay taxes upon withdrawal (retirement age).

ROTH IRA—contribute to it with after-tax dollars (no write-off), accrues tax-free and no taxes upon withdrawal (retirement age).

I looked into cashing out a Roth IRA early, and I would have a 10% penalty for doing it. You may be able to cash it out during the same tax year with no penalty—but it is definitely not a write-off.


9 posted on 04/17/2012 2:24:49 PM PDT by davandbar
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To: davandbar
I would have a 10% penalty for doing it.

Isn't the 10% penalty only on the interest? Mine hasn't made any interest. Therefore, I don't think there's any penalty, if you are only withdrawing the amount you funded it with.

10 posted on 04/17/2012 2:39:46 PM PDT by library user
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To: library user

Vanities are not taxed currently, but after ObamaCare kicks in full in 2014, who knows?


11 posted on 04/17/2012 2:43:01 PM PDT by rightly_dividing (Newt 2012)
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To: library user

Although a Roth does not lower your taxable income it does qualify for credit

http://www.irs.gov/newsroom/article/0,,id=107686,00.html

However, it needs to be done today.


12 posted on 04/17/2012 2:50:19 PM PDT by Raycpa
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To: davandbar
If it is your accountant, I’d recommend you get a new one—he is clearly wrong.

Not necessarily, check my post above.

13 posted on 04/17/2012 2:52:10 PM PDT by Raycpa
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To: library user
1) What are the odds that the figure on line 54 (Total Credits) of your 1040 is going to be the exact same number as that on line 62 (Federal Income Tax Withheld)? Wouldn't that be one heck of a coincidence, if true? Should I start playing the lottery?

"Total credits" means everything you have already paid toward this year's taxes. It will always be the same as your withholdings unless you also made estimated payments.

14 posted on 04/17/2012 2:54:46 PM PDT by Lurking Libertarian (Non sub homine, sed sub Deo et lege)
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To: library user
Vanity tax? Tax a person at a rate based on how smart they think they are. It would be fair because the smarter you are the more money you should be able to make. Obama and friends would up around 90%
15 posted on 04/17/2012 2:58:16 PM PDT by ThomasThomas ("Well, here's another nice mess you've gotten me into!")
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To: library user

Unless you are a farmer or fisherman or subject to look-back tax or railroad pension exclusion.


16 posted on 04/17/2012 2:58:36 PM PDT by P.O.E. (Pray for America)
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To: library user

I hope you’re not paying that guy.


17 posted on 04/17/2012 3:04:56 PM PDT by Jedidah (So we have a choice: Ken & Barbie or C3PO & the Wookie. Is this really the best we can do?)
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To: gunsequalfreedom

Fortunately, I don’t have to worry about the vanity tax.

I am the most humble person I know.


18 posted on 04/17/2012 3:09:49 PM PDT by Skepolitic
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To: library user

Yes, that is correct.

So, I guess you can make principal withdrawals immediately after you set up the account, and take the credit on your return. Is that credit new—I’ve never heard of it?

I stand (some what) corrected!


19 posted on 04/17/2012 3:19:41 PM PDT by davandbar
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To: library user

Many tax credits are limited to the amount of tax.

I suspect you file 1040A. Depending upon both taxable income on line 27 and tax on line 28, a credit for a Roth IRA can be taken on line 32. A single filer gets a 50% credit if line 27 income is less than $17000. The credit percentages phase out to zero at $28250 of taxable income. In all cases the credit cannot exceed the tax on line 28 of 1040A. See Form 8880 for details.


20 posted on 04/17/2012 3:30:48 PM PDT by Skepolitic
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To: library user
The weird thing was accountant told me to put $510 in a ROTH IRA to get a bigger refund, but then said I can withdraw the money a few days later with no penalty, if I want to. Bizarre.

You have got to be kidding. Contributions to a Roth IRA are not tax deductible. The money can be withdrawn without tax due if certain requirements have been met... I don't think "claiming an illegal deduction and waiting a few days" is one of them.

How many returns prepared by this so-called "accountant" have been audited?

21 posted on 04/17/2012 3:53:46 PM PDT by ken in texas
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To: ken in texas

You have got to be kidding. Contributions to a Roth IRA are not tax deductible. The money can be withdrawn without tax due if certain requirements have been met... I don’t think “claiming an illegal deduction and waiting a few days” is one of them.

How many returns prepared by this so-called “accountant” have been audited?


There is a tax credit for contribution to a retirment plan ifyou meet certain qualifications.


22 posted on 04/17/2012 3:56:29 PM PDT by PeterPrinciple (Lord, save me from some conservatives, they don't understand history any better than liberals.)
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To: library user

Um...what’s his email address. I got a couple of questions, too.


23 posted on 04/17/2012 3:58:16 PM PDT by Krankor
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To: PeterPrinciple
There is a tax credit for contribution to a retirment plan ifyou meet certain qualifications.

Maybe. He didn't say anything about a credit, only used "Roth IRA" and "higher refund" together. Unless he's incorporated or something like that those "certain qualifications" probably don't apply to the rest of us.

24 posted on 04/17/2012 4:17:43 PM PDT by ken in texas
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To: ken in texas
According to my financial advisor, you can make an IRA payment in this year to affect last year's income,before the tax filing deadline. I don't know how you designate a deposit made in 2012 for 2011.

We found this out after filing our taxes and played with the numbers. If I added $1000 to the IRA line, our refund went up by $250. It was proportional, for every $1000 invested our refund would go up by $250.

We decided it wasn't worth the hassle and filing an amended return over.

25 posted on 04/17/2012 4:44:42 PM PDT by Dianna
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To: Dianna
According to my financial advisor, you can make an IRA payment in this year to affect last year's income,before the tax filing deadline.

Yes, that is true for a Traditional IRA, and has been true for many years. However, the poster specifically mentioned a Roth IRA. Those IRAs have different rules.

26 posted on 04/17/2012 7:35:41 PM PDT by ken in texas
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To: Skepolitic

with my wife it should be a vanity tax deduction


27 posted on 04/17/2012 8:07:26 PM PDT by gunsequalfreedom (Conservative is not a label of convenience. It is a guide to your actions.)
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