Stupid Prius Owner needs help!!

Trust me, you aren't stupid, you just aren't a tax accountant.

You can think of it like this:

AMT is a "floor" - it's the minimum amount that you have to pay, regardless of any credits or deductions which may take you below it.

The only way to figure out your AMT is to actually go through all the steps and figure it out. check out http://www.irs.gov/businesses/small/articl...=150703,00.html, it spells out the specifics for AMT a little better.

 

<div class='quotetop'>QUOTE(Cheap! @ Oct 31 2006, 10:49 AM) [snapback]341239[/snapback]</div>

I didn't think you got the 3200 back, but you got a 3200 deduction off of your income... Warning, I only do what turbo tax tells me to, and I usually strive to owe just a bit. I was an '05'er, also, I thought it was 2500 then, but they say the memory is the first thing to go, and I forget what the second one is.

 

<div class='quotetop'>QUOTE(Beryl Octet @ Oct 31 2006, 11:59 AM) [snapback]341247[/snapback]</div>

No, it is a full tax credit for 2006. That means that he'll get the full amount (3150, i believe) taken off his taxes, and most likely refunded to him.

In 2005, it was only a deduction, which is where your confusion comes in.

 

<div class='quotetop'>QUOTE(Beryl Octet @ Oct 31 2006, 10:59 AM) [snapback]341247[/snapback]</div>

The 2006 'benefit' is a tax CREDIT, not a tax DEDUCTION.

If the OP does not have income high enough where AMT kicks in, if he figures out his taxes and, for example, they are $5000, and the only other 'credit' he has is the amount of federal tax that was withheld (for example, $4000), then when he calculates the 'bottom line', it will be $5000 - $4000 credit for tax withheld - $3150 credit for the Prius purchase, so he has an 'overpayment' of $2150, which he may choose to receive as a refund, or to apply to his next year's tax.

I'm NOT a tax accountant, so I don't know anything about AMT. I took an early retirement, and this is the first year that I've worked full time, so I'll have to figure out the AMT thing when I file for 2006, most likely! So I MIGHT get some refund because of the 2006 Prius tax credit, and I might not get any. I'm not spending any anticipated tax refund yet!

 

Like others have said, you're not stupid - our tax codes are ridiculously complex and bewildering. People who make a living doing taxes don't understand them. The IRS doesn't either.

If I were you I wouldn't change your paycheck deduction, but you could if you're confident the AMT won't affect you. That way you'd have the money sooner rather than later. If I understand it correctly (big IF), you'll have to itemize this year rather than take the standard deduction. The $3150 is deducted from the amount of tax you have to pay - if you usually get $45 back, you'd get $3195 this year. If you were going to owe $4000, you'd only have to pay $850 instead. Assuming, of course, you bought before Sept. 30.

 

I'd say skip past the assistant your doing right now and go straight to the Form 2651 (you'll also have to fill out a 1040 to input into it).

If you select yes on the first page, it says you need to fill out the AMT form (doesn't mean you can't take the credit, you just have to figure out what your minimum is). otherwise, it asks for more information from the 1040.

Also keep in mind that these forms are all from 2005, so things may/probably will be a little bit different. These can probably be used as good estimators of what you'll owe, however when the time comes doing it all proper with your tax software (or person) of choice.

The key is simply the minimum. if you pay 5k in taxes and claim the credit (3150, NOT 3200), you'll either get the full amount back, 3150, or the maximum amount that doesn't put you below AMT. so if your AMT is 4k, you'll only get a refund for 1k.

Also, OP = original poster (ie you!)

 

The most important distinction, IMO, is that it's a credit, not a deduction (i know, deduction seems to make sense, because it's being deducted from what you owe, but all the same...). A deduction means you're taxed on less money. a credit means you get some of the taxes back. So a credit puts more money in your pocket than a deduction.

And yes, the IRS will cut you a refund check for the hybrid credit, if all your taxes have already been paid in full through automatic payroll deductions.

 

If you want more reassurance than you can get by doing your taxes yourself (especially if you are thrown into AMT) then perhaps a tax accountant might be a good investment...both to feel more assured that you are getting the whole refund you are entitled to and also the peace of mind of not having to spend many nights laboring over IRS law. Then there's your state...

 

The more I think about it, I don't think you will need to itemize deductions. So never mind that part of what I wrote.

If you think the Fed is bad, you should see the NC state income tax form. I swear there are several places on the form where you just generate a random number. I'm getting a headache just thinking about it.

 

<div class='quotetop'>QUOTE(eagle33199 @ Oct 31 2006, 11:01 AM) [snapback]341250[/snapback]</div>

That's a much better deal, then. Sorry for muddying the waters. Now I understand why I see so many 06's.

 

The more i think about it, the more i think Tom Clancy had it right in Executive Orders - get rid of all the damn politicians, get some genuinely intelligent people in there to overhaul and trim down the entire government, the tax code, etc. Of course, getting rid of the politicians is the problem - rather than the way it happens in the book, I'd prefer to just put up a 100 foot high electric fence around Washington and let them sit in there grandstanding all they want - we can govern from elsewhere :lol:

note: this is not politically motivated or directed against any particular party or group. it's just a general commentary on the state of bureaucracy that led to the tax system we have.

 

you guys, i don't think this credit drops tax liability below zero. this means you have to owe in $3150 or however much for the year to begin with in order to receive the full benefit.

the credit works by reducing the total tax owed (before payments pulled out of your paycheck) on your tax return. so say your yearly tax is $4000, and you pay in $4100 throughout the year from your paycheck. without the tax credit, you'd get $100 back because that's how much you overpaid. the tax credit reduces your yearly tax from $4000 to $850, and then you've overpaid your tax liability by $3250 instead of $100.

does this make sense?

<div class='quotetop'>QUOTE(CMonster @ Oct 31 2006, 11:43 AM) [snapback]341284[/snapback]</div>

ick, me too. then i have to file a wi form after that to maintain residency

 

<div class='quotetop'>QUOTE(Cheap! @ Oct 31 2006, 09:28 AM) [snapback]341273[/snapback]</div>

Reading these questions and the confusion they represent once again brings up that warm fuzzy feeling thinking about my CPA tax accountant. :wub:

Not only does he save us MUCH more money than he charges, the peace of mind of not having to worry about “AMT, OWED TAX, TAX LIABILITY†or even if “OP†will somehow trip me up tax wise . . . I would gladly pay him twice what he charges!

If I have a question, such as if I would benefit from the Prius tax credit, all I have to do is call him on the phone, he pushes a couple of buttons on his computer to pull up my records, then a few more buttons to input the info, then he gives me the answer . . . NO ADDITIONAL CHARGE!

I highly recommend that anyone who has taxes more complicated than the very minimum EZ form stuff get themselves a tax CPA . . . and I am not talking an H&R Blockish “our-part-timers-will-fill-in-the-spaces-on-your-tax-forms-for-a-price-and-not-know-who-you-are-tomorrow†type outfit, but an actual CPA Tax Accountant!

There is more to life than worrying about taxes.

Second clue you need a tax CPA: Asking for tax advice on PriusChat!