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Alabama Reverses Itself on Taxes
MONTGOMERY, Ala. (AP) — Alabama residents will have to pay state taxes on their federal rebate checks after all.
Richard Henninger, director of the tax division of Alabama's Revenue Department, said Thursday that he misunderstood how the Internal Revenue Service planned to treat the rebate when he commented June 6. Henninger said at the time that the rebate would not be taxable income.
On Thursday, Henninger said that he has since learned from the IRS that the rebate will be treated differently than he initially assumed.
Under the tax cut plan signed by President Bush, married couples can qualify for rebates up to $600, single parents are eligible for up to $500 and individuals can get up to $300.
Earlier this month, the Federation of Tax Administrators listed Alabama as one of nine states with laws that make the rebate subject to state tax.
Three words on taxes,Don't Pay Them!
Pure B.S. - if the federal tax rate had been lower last year, folks would not have paid state taxes on their kept income. What a bunch of bloodsuckers.
You are right! Taxing taxes! Wacky! Why don't they just call it a REFUND!
So much for the "conservative southland" that all the south-rons like to brag about. You guys elect Dummycrats at the local level and look what you get!
The reason this is only an issue in a handful of states has to do with how those states deal with their own income tax rules. In Alabama, as well as the others, state taxpayers can take an itemized deduction for the federal taxes that they paid. Because this is a refund of over-charged taxes, this means that the deduction taken on the state return has to be adjusted for the amount of the refund.
To illustrate slightly differently... let's say you mis-calculated your expected tax liabilty to the feds, and wind up having $6,600 withweld when you really only wound up owing $600. So you fill out your 1040, and file for the refund of the overpaid $600. On your state tax form, you're allowed a deduction for federal taxes paid. Do you put down $6,600? No, of course not, you put down $6000. Should you then complain that the state is unfairly taxing you on your $600 federal refund?
The only reason this is an issue is that the states in question are actually doing the "right thing" in the first place by allowing their taxpayers to deduct federal income taxes from their state liability, preventing having to pay state taxes on federal taxes. It's the other 30+ states with income taxes that don't have this problem that are the ones doing things unfairly in the first place.
if the federal tax rate had been lower last year, folks would not have paid state taxes on their kept income
Incorrect, see my #6.
Taxing taxes!
See #6 -- this is an issue precicely because the state does not tax federal taxes.
The money was taxed by the state when it was first earned. This is double taxation and I'd be down at the state house talking to my legislators if I were from Alabama!
Thanks for making that clear.
I never thought of this from the other direction. I've always lived in states that did not let you deduct Federal taxes.
How do they deal with the circular reference of being allowed to deduct your states taxes on your federal return and deducting your federal taxes off of your state return?
Or, do they just do it based on withholdings then make up for it the next year when rebates come in?
The money was taxed by the state when it was first earned.
No, it wasn't. See #6.
Sorry! It would have been in Kansas. I thought all the money grubbers were alike!
I wish I knew... I live in Maryland, which doesn't have the deduction either. The easiest way would be to use the rpevious year's federal taxes paid, but that's not entirely consistent with the whole idea of the "tax year"...
Anyone from one of these states care to chime in on how this mechanism works?
I was thinking the exact same thing. But I am glad you said it. lol
You are right. I live in AL and we can deduct Federal taxes. This money is just like a Federal refund from the previous year. Money you deducted as taxes that really came back to you as income. Should be taxable.
Thanks for the correction, this action makes more sense in light of that.
S'alright... the only reason I know about this at all was from trying to understand a similar (but opposite) case in Illinois last year, where residents were given propety tax rebates that were then subject to fderal tax because of the previous deductions taken for the property tax.
Utah has determined that the refund checks are not taxable. Go figure.
YOu a dead on in your explanation. As an Alabama resident I am allowed to take any Federal Income Tax I pay as a deduction on my state return, BUT I have to then claim any refund of those taxes as income. Ie since this is a Tax rebate it is considered a refund under this law and taxable in Alabama.
We actually make out better in the long run as our deduction is always more than what we have to pay back in.
I stand corrected. And darnit, that hardly ever happens!:)
We actually make out better in the long run
I agree. Here in the People's Republic of Maryland, we have to pay state taxes on the money we pay to the federal government for federal taxes... :(
Isn't it just like a bureaucrat? These folks are puke and live in puke and search out puke every day of their pukish, bureaucratic lives.
You are correct.
In America a person supposedly has the right to a trial by a jury of their peers. But what good is such a right when the people posting above are examples of your peers? This is why it is an exercise in futility to fight the "income tax," because you cannot possibly win when these are your peers.
I am getting a little tired of these corrupt Federal and State criminals, as they are now confiscating about 40 + percent of our income. Everything is taxed. If it was not for all this tax, many of the working moms that wanted to, could return home to the kids. There are literally millions of moms out there that are just paying the taxes with their wages.
You're not kidding. Heads deep in the sand.
Thanks, but pardon me for not smiling even when I've heard that someone has agreed.
"So much for the "conservative southland" that all the south-rons like to brag about. You guys elect Dummycrats at the local level and look what you get!" .....and on your profile page you state that you moved from Long Island, NY to Miami, Fla. LOL.
The practice of states allowing residents to deduct their federal income tax payment on their state income tax form, when they itemize, is called Federal Deductablilty. The Iowa General Assembly met in Special Session this week to approve an exemption for Federal Tax Rebates. Iowa's residents will not have to pay taxes on this rebate, eventhough we have Federal Deductability.
thanks. that's what i was thinking.
So much for the "conservative southland" that all the south-rons like to brag about. You guys elect Dummycrats at the local level and look what you get!
They are a helluva lot more conservative than your Yankee friends in NY and your neigbors in South Florida. On the other hand, didn't the residents of Alabama already pay state income tax on the income that is being returned in the rebate check? Double taxation?
Never mind on the double taxation. Thanks Kev.
The reason this is only an issue in a handful of states has to do with how those states deal with their own income tax rules. In Alabama, as well as the others, state taxpayers can take an itemized deduction for the federal taxes that they paid.
I was thinking the rebate was for taxes we have paid or will pay in 2001. But since everyone is saying for 2000, the rebate is that much sweeter. We are getting money back on taxes paid when the Clintoon was President. Doesn't completely take away the sting from the retroactive tax increase in '93, but it certainly helps.
It is not Income, you hoser it is a refund of taxes already paid. Alabama sucks.
I just posted this to the other thread.
Just checked the Alabama form for 1999 and 2000.
On the 1999 form (and earlier) you could write off what you paid in federal taxes but you had to pay taxes on any return you received for the same year.
On the 2000 form you CANNOT write off what you paid in federal income taxes for that year. The box is now for any amount you paid for a year previous to 2000. You still had to pay taxes on any return you receive in calendar year 2000.
Going forward you cannot write off what you pay in federal income taxes but you also do not have to pay taxes on any federal refund.
Based off of this I should NOT have to pay taxes on the rebate I receive this year (2001) for monies paid this year (2001). If I do then they will be ripping me off.
My wife went through this with the Department of Revenue in February. I suggest all of you Alabama freepers go back and look closely at the wording on your 2000 form. The law changed this year and as far as I know it was not widely published. I certainly wasn't expecting it and it cost me almost $500.
But since everyone is saying for 2000
Who is saying it is for 2000? I have not seen this anywhere, but if true then yes it is taxable under Alabama law.
I am 99% certain that the rebate is for 2001 monies which makes it not taxable under current Alabama law.
"So much for the "conservative southland" that all the south-rons like to brag about."
South-rons? If you are going to try and insult us Southerners, at least try to do it with something that makes sense.
You are right about the South Clemenza. We Texans can only wish to live in the tyranny and socialism that you enlightened Northerners enjoy. Gee, I sure wish we had a State Income Tax..and I wish they would take my Concealed Handgun License from me....and I sure wish we had some of those brave and smart Northern Senators representing us. Wake up dude! DemocRATS are not biased towards the North or the South when it comes to ruining peoples lives.
This is a REPUBLICAN state right?
It is not Income, you hoser it is a refund of taxes already paid. Alabama sucks.
So does Texas for that matter.
It was my understanding that it was for 2001 taxes, but the explanations for paying state tax on the rebate indicates it had to be for 2000. Since we have not filed our 2001 returns (Due 4-15-2002), we have not yet deducted the federal tax. So unless Alabama tax law has changed, the rebate should not be considered income. Ergo, it will not be a deduction either. So, if I'm thinking correctly, we will pay more in Alabama tax because taxable income will be higher since the federal tax deduction will be less. Keep in mind that I'm not a tax expert, but I did sleep at the Holiday Inn Express last night.
This ruling could be the basis for the emergence of a Republican gubernatorial candidate for 2002 to challenge Democrat Governor Singlemann. Though Singlemann is not part of the decision on the tax-on-tax, he has not spoken out against it and is presumably impressed with the idea -- to get more money into his coffers. In 1997, Governor Gilmore won in VA on a pledge to stop certain auto taxes. I don't know if those taxes were actually halted, however. And we know that Gilmore was far more moderate than conservative as governor. But a shrewd Republican who wants to run for AL governor but can't get momentum started might use this one issue now to attract attention to his candidacy. I have no idea who such a candidate might be. Do any in AL know? (By the way, don't be too hard on AL; it has an all Republican state Supreme Court now.)
UNholy *&#^@!!! Taxes on TAXES??? We already PAID this!!! and IT was taxed THEN!!!!
*&^&^#$@#. thieving CROOKS!!!
oops...knee-jerk. I'm sorry!
Eliminate the:
income tax (personal and corporate)
the IRS
withholding
cap gains
payroll tax
estate tax
Look here or here.
Find out how a national sales tax would work.
Yes we elect a lot of Dummycrats to local positions. That is why we locally have 9% sales tax plus incime tax. We also have a nuclear plant that construction was stopped about 15 years ago because "we don't need the power". Now many companies are dismissing employees because of the jobs being sent to central America , Mexico and the far East.
See why I didn't smile?
Rise up, Alabama taxpayers...call your local (state, not federal!) senator and/or representative and tell them THIS IS UNACCEPTABLE!
Believe me, most of these people live in your hometowns or VERY VERY close. If the legislature hears from ENOUGH people, they will work somehow to cease this confiscation of YOUR HARD EARNED MONEY.
rd
It was my understanding that it was for 2001 taxes, but the explanations for paying state tax on the rebate indicates it had to be for 2000. Since we have not filed our 2001 returns (Due 4-15-2002), we have not yet deducted the federal tax. So unless Alabama tax law has changed, the rebate should not be considered income. Ergo, it will not be a deduction either.
Errrr, no.
It *is* from the 2001 tax payments, and even being "for 2001" you'd still have to pay taxes on it.
Look at it this way...
Let's say you make $60,000 a year (or I should say, "will have made $60,000 by the end of 2001"). Let's say that the feds would have taken $20,000 in taxes. But instead they're lowering your tax rates a bit and mailing you a $600 rebate and keeping $19,400. Let's further say that your state tax rate is 5%.
If the new federal tax rate had been enacted on Jan 1, then they would have taken $19,400 of your income, left you with $40,600, and your state would have taxed you 5% of that, or $2,030.
But instead the feds took a while to enact the tax bill, then made it retroactive to Jan 1. As a result you've already overpaid $600 in federal withholding, and without the rebate you'd have ended up paying a full $20,000 to the feds. So by the end of 2001, your tax paperwork will look like this: $60,000 income, $20,000 fed taxes paid, $600 tax rebate paid to you. Your state tax form would show: $60,600 income ($60,000 gross pay, plus the $600 rebate), minus the $20,000 taxes paid, equals $20,600 taxable income, and 5% of that is $2,030.
So in the end you pay the exact same state tax.
Yes, Alabama is charging you "income" tax on the $600 rebate, but this is exactly balanced by the fact that your "federal taxes withheld" figure on your W-2 form is going to include that $600 as well (which only makes sense, because it *has* been withheld from your paycheck), and you can deduct that.
In fact, if Alabama *didn't* tax you on the $600, you'd be getting it totally tax free -- untaxed when it was withheld from your paycheck originally, then still untaxed when you got it in the mail.
Alabama sucks. So does Texas for that matter.
Umm, why does "Texas suck"?
Texas has no state income tax, and therefore the $600 rebate checks will not be taxed in any way.
Paying taxes on taxes. Insanity.
Except that the $600 is *not* taxes. You can determine this by noting that it's ending up in your pocket, instead of in Washington.
Utah has determined that the refund checks are not taxable. Go figure.
That makes sense if Utah is one of the states that do not allow you to deduct federal tax payments on your state income tax. Is that the case?
If Utah *does* deduct federal taxes, then it doesn't make sense.
Iowa is doing what Alabama should be doing, But they need the money. "They" always need the money.
Any chance this will hurt Gov. Don Siegelman (D) in 2002?
Ok, that makes sense. I forgot that the rebate will not be deducted from the federal taxes paid shown on W-4; therefore, it would have to be considered as income. For the poster who asked about Alabama's Bill Clintoon Clone, I think that proration of the education budget will hurt DS more than the taxation. Tax law was law when DS was elected. DS ran on the lottery for education, and he was unsuccessful in getting it passed by the electorate.
In 1997, Governor Gilmore won in VA on a pledge to stop certain auto taxes. I don't know if those taxes were actually halted, however. And we know that Gilmore was far more moderate than conservative as governor.
The Virginia personal property tax (commonly called the "car tax," but it also covers boats, and certain other items) was not eliminated. It is one of the primary revenue sources for local (city or county) governments. What is happening is that they state, from sales tax and income tax revenues, is paying the local governemnts a rebate instead of the car tax that they would have received. The amount of the rebate is being phased in over a few years.
From the standpoint of the individual taxpayer, the car tax on vehicles under $20,000 (I think, could be $25k)is being phased out. This plan has, however, created a new "expense" for the state government. As the economy is slowing, state revenues are less than expected. This year, there was a huge fight between the state senate and state house. The Senate wanted to slow the phase out and spend the money. The state House and Gilmore held firm.
I expect that this will be a big issue in the governor's race this fall. The Democrat has promised to eliminate the car tax, but will not provide a timeline. The GOP candidate will promise to continue on the present schedule.
Paying taxes on taxes. Insanity.
Nothing new there, U.S.taxpayers have always done that on a regular basis and the "beat goes on".
While your congressmen and government bureaucracies continue to lie, cheat and steal this country blind.
Read the Thompson Report on the pillaging of the taxpayer's Treasury.
Now there's an obscenity of obscenities and there ain't a damned thing you or I or anyone else can do about it.
Talk about insanity, sheesh!!
Tell them to keep the 'rebate' or better yet the return of stolen property, and we will stop voluntarily complying with the bogus control-scheme via taxation of the Federal Mafia...
There is NO such income tax that is fair, moral or honestly applied. Period. Income Tax=slavery.
I agree. All the while, the mechanisms and infrastructure that the Federal Mafia steals our money to buy - to ultimately use against us - should more than instigate a revolt. The Boston tea party should be a firefly lost in the sun when this beast is turned on its head...
Excuse me but I think the handout is only for $300 per citizen. p>Yeah, I guess this aint to bad. One whole trip to the store for most working families. We should be very thankful for our handout, huh?
At the end of your life, if you have worked 60 years and payed 20% tax on what you earned, you will have spent 12 years of your life working for the government.
Excuse me but I think the handout is only for $300 per citizen. p>Yeah, I guess this aint to bad. One whole trip to the store for most working families. We should be very thankful for our handout, huh?
It's not a "handout", it's *MY* money (withheld from *my* personal paycheck), and I'm glad the government is shipping it back to me instead of wasting it.
It's a great first step, let's hope there are many more.
You count actual state taxes withheld for the year 2001 on your federal Schedule A for tax year 2001. If you get a refund of any of this amount during the year 2002, you put this on your federal 1040 as additional income for the year 2002. This gives you a dollar amount to use for tax year 2001 on both your federal and state tax returns, but still allows the federal government to tax you for any income that was actually not taxed by your state in the previous year.
In a way, this is a good thing for the taxpayer since it allows someone to delay paying part of their federal tax bill for a full year if their state over-withholds.
Believe me, I am still confused about the implications of this refund, but that is how state tax refunds are applied to federal taxes in order to avoid the logical loop you were referring to.
Now that's taken care of, can anybody help me with the matter of a taxpayer who has their refund check taken for a past due student loan? Will the injured (innocent) spouse have their refund taken too? In most years you can decrease your withholding throughout the year so there won't be any refund for your creditors to take from you. With this mid-year refund, you don't have this choice, and I presume that at the end of the year you get no credit for having paid these monies directly to the IRS (and not a student loan company). This is almost enough to get me wondering if "Big Finance" and "Big Child Support Collection" had anything to do with this refund business.
Yes, but the government loves and provides for us. The least we can do is give a giant chunk of our lives to our protectors, after all they are our salvation, cradle to grave... < /sarcasm >
Now be the good little sheeple and pay up...
I am from Alibami, and it does suck! I have been to Texas and it is a nice state, except maybe Houston. We have a Cinton clone as governor, his wiffie is an ACLU bitch-dog. The Guvnor has never had any real jobs, like Blubber. He has stolen and cheated in every office he has held here in Alabama. We have a lot of voters here that are not intelligent enough to vote, that is why the demoncraps control the state house and most local offices. Thankfully a lot of our lower intellegent FOLKS forgot to vote and Mr. Bush carried the state.
All the while, the mechanisms and infrastructure that the Federal Mafia steals our money...
Look back at history and you will find that our (assuming you mean the American people) money has already been stolen. It's no longer a matter of "steals". Rather, it's a matter of "has stolen."
Are you in any way accountable for the activities of the Federal Reserve System (FRS), aside from its supposed activities based on your usage of its product? Is there anything on the FRS's product that plainly states that you personally own anything by possessing it or using it?
Think again about that "steals" thing. The correct observation is "has stolen." This government has stolen the money of the American people.
Alright, fine, you're talking about the FRN; specifically, the Federal Reserve NOTE.
A 'Note' is a debt. It is NOT an asset! The government allowed us to be bankrupted and taken over by the world's elite communists / European Robber Barrons, via fiat money, who THEN replaced an asset, ie; a real US Dollar - and made it WORTHLESS, all the while NOW bankrupting the American SHEEPLE!!
How about the sick inflation whereby they have stolen 97% of a 1913 US Dollar - it's worth 3 cents today - whatever they're worth...
CS!
How do they deal with the circular reference of being allowed to deduct your states taxes on your federal return and deducting your federal taxes off of your state return?
It gets a little wierd. In 1999 I sold some stock and got clobbered, but since I actually paid the taxes in 2000 I could claim it as a deduction resulting in a large refund.
didn't the residents of Alabama already pay state income tax on the income that is being returned in the rebate check?
No because state taxes are deductable on the federal return.
This is a REPUBLICAN state right?
We went for W bigtime, but we have a clymer gov who supported algore. That election was kind of a double edged sword because our choices were between an incumbent pub idiot and a (smart) dim crook. If we could get a pub with some smarts to run (and actually get him through the nomination process) he would probably win hands down. During my lifetime we've had two pub governors, and both were (reasonably honest) idiots.
I have no idea who such a candidate might be.
The only person I can think of is the Attorney General, Bill Pryor. Our Lt. Gov, Steve Windom appears to be another of those pub idiots we seem to be so fond of.
Any chance this will hurt Gov. Don Siegelman (D) in 2002?
It would be nice, but not likely. He's much more likely to suffer from the school budget proration going on right now.
See my previous post. The law changed in Alabama, they do NOT allow you to write off federal income taxes paid starting in tax year 2000 (this past tax year) although you do have to claim as income any tax refund received in tax year 2000 (which would have been from tax year 1999 or earlier). Starting in tax year 2001 you do not have to claim tax refunds. So assuming the tax rebate and rate cut are for tax year 2001 then it is NOT taxable under current Alabama law.
More than likely you will pay more tax to the state this year (and all subsequent years), but it will have nothing to do with the rebate or rate cuts. It will be because your taxable income will be more since they are not allowing you to write of federal taxes paid.
The only numbers you can use for this year (tax year 2001, which will be the forms you fill out next year) are gross income and state allowed deductions (which do NOT include federal taxes paid).
Siegelman is out. The only reason he won is that many conservative voters did not like Fob James and stayed home. It was obvious that the conservatives turned out to defeat his state lottery and will turn out to defeat him if the Republicans will run Steve Windom, Bob Riley, Jeff Sessions, or any other conservative that has a lick of sense. I have seen Roy Moore pop up in some polls and I think he could win also, but I would prefer he stay on the State Supreme Court.
I am not so sure Singleman is that beatable. Southern Democrat governors tend to be routinely reelected: George C. Wallace, bILLclinton, Edwin Washington Edwards, Zell Miller, Robert Graham, Jim Hunt, Paul Patton, Lawton Chiles, Ned McWherter. The list is pretty long. Now name the southern Democrats who have been defeated: Ann Richards, and I can't think of anybody else just now.
I repeat, if the Republicans run anyone decent Siegelman is out. The Republican candidate must be conservative and have some name recognition. The conservatives in this state will turn out for a decent candidate while the liberals will be ticked at Siegelman for not delivering the lottery and for proration hitting the school systems.
I think some of the blame has to go to our state legislative branches. Think how many of them are old yellow dog democrats who have been in there since before I was born. And we also have party switchers like Enfinger. Our system is so backwards, no one can figure out how the state is supposed to operate.
Amy
(Me thinks it may be time for a new state constitution;)
It's not a "handout", it's *MY* money (withheld from *my* personal paycheck), and I'm glad the government is shipping it back to me instead of wasting it.
I am so glad you are thrilled with this big government shipping a small percentage of *you're* cash back to you.
This huge income tax and other massive big government tax confiscation just does not compute with you, does it?
So tell me Dan, since you're so glad about the government shipping a small tidbit of you're money back to you, why don't you send them a small bonus to show you're appreciation? :o
I agree.
The beat not only goes on, its getting louder for families and the working man. Supporting this madness with our own money needs to end soon.
Me thinks it may be time for a new state constitution
While I agree the state Constitution is a mess I do not agree with the plan that Siegelman has proposed. Let's elect true conservatives to positions of authority all over the state and then look at what needs to be changed.
I contacted the State Department of Revenue and the rebate is NOT subject to state taxes.
Per my previous explanation that should be correct of course it probably depends on who you talk to at the Department of Revenue because it seems that less than a 1000 people in the state realize that the law changed on deductions last year.
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