How to plan for maximizing tax credit?

[dsvick]

Correct, changing you withholding does not change whether or not you get to take the credit, but it does essentially change when you can take the credit. Don't change your withholding and you get the credit in one lump sum next April. Decrease you withholding, and you get to take the credit now through the end of the year in smaller increases in your net pay.

True, but I'd only recommend doing that if you were 100% certain that you'd be getting the car in that year and that you'd be within the right time frame of the credit to get the full amount (or whatever amount you estimate you'll be getting).

 

[melindav]

True, but I'd only recommend doing that if you were 100% certain that you'd be getting the car in that year and that you'd be within the right time frame of the credit to get the full amount (or whatever amount you estimate you'll be getting).

And there's not a chance of the credit program ending early. The way this year has been going, it would not surprise me to see legislation to end it prior to its projected lifespan.

 

[S3XY]

And there's not a chance of the credit program ending early. The way this year has been going, it would not surprise me to see legislation to end it prior to its projected lifespan.

I wouldn't worry too much. Corporate welfare is probably safe. Sure, the consumer gets the credit but the manufacturer gets the increased sales volume at the full price.

 

[dsvick]

And there's not a chance of the credit program ending early. The way this year has been going, it would not surprise me to see legislation to end it prior to its projected lifespan.

It will be interesting to see if it's included in the budget for 2018...

 

[cpa]

This is absolutely incorrect. You cannot make a lump sum payment at the end of the year without being subject to a 2210 underpayment penalty (2210 is the form used to calculate the underpayment penalty). The government wants their money in roughly even payments throughout the year, either in withholding or 4 equal quarterly estimates.

To avoid the 2210 penalty, you must:
1 - Pay 90% of the total tax due OR 110% of the prior year's tax bill
2 - AND make your payments through withholding or equal quarterly estimates (a payment with your return by Apr 15th is considered a Q4 estimated payment)

Paying nothing during the year and paying it all with the return will owe a penalty. If you aren't paying the penalty, you aren't calculating the 2210 correctly and haven't gotten caught.

My income varies throughout the year, and tends to go up at the end. I've gotten hit with penalties in years when Q4 was better than expected and results in a higher than expected tax bill. Yes, I'm supposed to know in Q1 how much I'm going to owe at the end of the year and pay it in Q1. You can't say "Well, I made a lot in Q4, so I'll pay it in Q4" - you were supposed to know that was coming (even if you can't predict) and pay for the Q4 income in Q1, Q2, Q3, and Q4.


Correct, changing you withholding does not change whether or not you get to take the credit, but it does essentially change when you can take the credit. Don't change your withholding and you get the credit in one lump sum next April. Decrease you withholding, and you get to take the credit now through the end of the year in smaller increases in your net pay.

(1) Actually, self-employed farmers and fishers do not have to pay any estimated taxes during the year if (a) they file their returns and pay their tax on or before February 28(29) each year; or (b) they pay all their taxes with their January 15 estimate and they file by April 15. Farmers and fishers file form 2210F to avoid the penalty.

(2) There is the annualized method for relieving or eliminating the underpayment penalty. This is self-calculated on form 2210. This exception is specifically designed for individuals whose income is not regular or constant throughout the year.

FIFY

 

[Jersey Shore Tom]

It will be interesting to see if it's included in the budget for 2018...

It's not an expenditure, so there's not a budget line item for it. Economically it makes no sense to treat tax credits the way we do, but politically it is a winner.

 

[dsvick]

It's not an expenditure, so there's not a budget line item for it. Economically it makes no sense to treat tax credits the way we do, but politically it is a winner.

I didn't know that - thanks.