crisis re: the 7500 federal tax credit

[hanahelena]

ok recent upsetting trip to our accountant who said that the 7500 fed tax credit has to be taken against taxes not yet paid.

he said that we did not take enough exemptions during the year and paid in too much of our taxes via our payroll tax which means that we will not be able to use much of our 7500 tax credit. he also said that with this tax credit you can't get a refund. in other words its a "zero sum game" as he kept saying -- the tax credit can only be used to pay down taxes not yet paid.

We thought that the 7500 could be taken against total tax liability, regardless of whether we paid in during the year (we primarily have w-2 income). in other words, we understood (or thought we did) that if our total hypothetical tax liability was 20,000 and we had 5000 in property taxes, 5000 in mortgage interest we could then subtract the 7500 from the remaining 10,000 and even come out with 2500 as a refund regardless of how much of that tax liability we paid via our payroll taxes.

is there an accountant out there who can verify whether our accountant is correct or not? or other people who have visited an accountant? we are at best confused and at worst depressed.

 

[IBELEAF]

I am not sure what your accountant is smoking, but I used Turbo Tax and it's calculating a refund for me.

 

[Boomer23]

I'm not an accountant, but your accountant's explanation sounds ridiculous. Any tax credit is taken against total tax owed and it should never matter how much has been withheld or paid in advance. I know that you want to hear from a tax professional, and you should before believing what I say. But since it's late on a Friday night, I hope that this gives you some encouragement. At the very least, it is worth it to you to consult another accountant.

 

[tjbrinson]

I agree. I had my taxes done recently and was able to claim my $7,500 tax credit. If all your deductions and 7,500 tax credit are greater than your tax liability, then you should get refunded whatever you paid in taxes for 2011.

 

[LakeLeaf]

I think it's time to find a new accountant - this one seems to have this wrong.

 

[marccbr]

I agree with everyone else. Your accountant is smoking something. I finished my taxes last week and I received the full $7500 back plus $2000 more on top of that. Find a new accountant or get turbotax.

 

[GaslessInSeattle]

we are meeting with ours on Monday, we'll tell you what she concludes... she owns an electric car and is very up to date on this!

 

[planet4ever]

he also said that with this tax credit you can't get a refund.

It is true that the tax credit is "non-refundable", but in IRS lingo that means something very different from what your accountant apparently thinks it means. A refundable credit (like the Earned Income Credit, for example) is one that lets you get more back than everything you paid, i.e. end up with a negative income tax. A non-refundable credit lets you get money back for overpayment, but not more than you paid.

Any purported tax accountant who doesn't know this is incompetent, and probably making other mistakes. Definitely, change accountants.

Ray

 

[DaveinOlyWA]

ok recent upsetting trip to our accountant who said that the 7500 fed tax credit has to be taken against taxes not yet paid.

did you not compare your tax liability during purchase/lease decision?

he said that we did not take enough exemptions during the year and paid in too much of our taxes via our payroll tax which means that we will not be able to use much of our 7500 tax credit.

run, run away!! tax withholding and tax liability are two completely unrelated things!! one does not affect the other. ANYONE knows this. you need to reclarify this with your tax man.

he also said that with this tax credit you can't get a refund. in other words its a "zero sum game" as he kept saying -- the tax credit can only be used to pay down taxes not yet paid.

this statement is once again misunderstood. the EV tax credit cannot provide you more than you paid in. iow, if you paid in $5000, you can only get $5,000 back unlike EIC which states that if you paid in $1000 but EIC is worth $1500, you will still get the full $1500. on your last line remove the word "not yet" it does not belong. you bought the car last year.

We thought that the 7500 could be taken against total tax liability, regardless of whether we paid in during the year

you can. i would go to turbotax.com or something and run thru their form real quick. it should take you 15 minutes. it may not be perfect but it will give you an idea of where you stand.

 

[jimcmorr]

<disclaimer> I am not a tax professional. Consult a reputable tax professional before filing your taxes.</disclaimer>

<IMHO>

These folks are all right!

#1 get a new accountant!

#2 The $7500 Federal tax credit is a credit against your total tax liability, not on anything you paid or are going to pay in deductions. e.g. If your total tax liability is $8000 the credit makes your total tax liability $500. If your total tax liability is $7000 the credit makes your total tax liability $0, not minus $500. Your refund will be then be based on what you did pay in already (pay roll deductions or quarterly payments) and the total tax liability (after the tax credit).

</IMHO>

 

[smkettner]

The crisis is wondering how bad this tax person is and what has been done wrong for how many years :|
Is this person an actual CPA?

 

[evnow]

I wonder - why do people use accountants - unless you have special circumstances (high networth, a business etc).

 

[DaveinOlyWA]

The crisis is wondering how bad this tax person is and what has been done wrong for how many years :|
Is this person an actual CPA?

this is typical of the lack of awareness about EVs. when i bought my Leaf last year, my dealer had NO CLUE whatsoever that WA was providing a sales tax waiver FOR ALL THINGS ELECTRIC.

a member here leased to get the full $7500 tax credit applied then went to purchase and had to fight with the state for months before they finally found out that there was no sales tax on the conversion because it was an EV

it goes on and on. despite a separate line item under the tax credit section, people are still clueless.

i would not be surprised at all if the CPA in question just to make conversation asked
"so... what kind of gas mileage you get with your Leaf?"

 

[kennyboy]

I'm getting back every penny I paid last year.

I'm getting the $7,500 plus another $2,000 from my other deductions.

I'm glad I use Tax Act.

It's frightening to think that there are folks out there doing people's taxes who are this uninformed.

 

[charlie1300]

Dump your accountant. He/she has a basic misunderstanding of tax law that calls into question general compentancy to do your taxes. Unless your tax situation is unusually complex (e.g. You have rental income or are self employed) you can use a tax program like turoTax and save yourself a bundle.

Edit: let me change that to complex rental income- turbotax is fine for simple rentals. The basic concept is that if the bulk of your income is on a W-2, plus interest and dividends, your crazy to pay someone else to prepare your taxes. A well regarded tax program is much more reliable.

 

[ebill3]

The crisis is wondering how bad this tax person is and what has been done wrong for how many years :|
Is this person an actual CPA?

this is typical of the lack of awareness about EVs.

I beg to differ. Nothing to do with lack of understanding about EVs. As planet4ever pointed out, the tax person just does not understand tax credits.

Bill

 

[MsHanson]

Your "accountant" needs to go back to school to understand what a non-refundable tax credit is. Do not pay this person a penny.

The $7500 credit is considered non-refundable. It is applied against your total tax liability before tax credits. If your total liability is less than $7500, you can not carry the excess credit to other tax years (as you can with other tax credits, such as a low income housing credit, foreign tax credit, etc.) and that is why is is called non-refundable. The IRS may not have selected the best terminology to mean "use-it or lose-it", but that's the government.

It does not have to anything to do with the amount of prepayments you paid in to the government with withholding, estimated payments, etc.

I am not a CPA but I am an accountant with 20 years experience preparing corporate income tax returns.

 

[Deleted member 3147]

In addition, odds are 99% that your accountant is using tax preparation software (think industrial-grade TurboTax) and if he'd simply plugged all the numbers into the right fields, everything would come out correctly. Sounds like he's too lazy to look for the right screen. As others have said, RUN AWAY!

 

[hanahelena]

hi everyone
thanks a lot for your comments. wondering if gasless in seattle has anything to add now that they saw their accountant with the electric car?

as to those wondering WHY we have an accountant we have w-2 income mainly but also some consultant income, some investments and in addition we're two women married in california which means we have to file multiple different tax forms that gets a bit complicated ( 1st return is married filing jointly for california, then we have to split our community income between us and each file as single for federal and then we have to file two more california state forms as single people for the feds). any.way.

in all fairness to the accountant i may not be explaining it well, so it could be the messenger garbling the message. anyway, thanks again for your help. i guess we will find another accountant. but we're deciding in the meantime if we have to pay him anything for the time he's put in (groan....).

 

[SteveInSeattle]

I am 100% certain that everyone here is correct you are due the tax credit and your accountant is wrong. I have a sufficient knowledge base to assert this fact with reliability.