Tax credit question!

[astrn]

Hi guys,

I have a question regarding tax credit.

I am working fulltime on 2 jobs right now and I requested my taxes are going to be deducted on every paycheck.
The question is if I refill my tax info to be exempted from tax deductions from my paycheck for the remaining of the year can I use that tax credit to deduct those unpaid taxes during tax payment?

by that way I can save around 10k until at the end of the year.

Will that be a smart move todo?

 

[Saghost]

If I'm understanding you right, I think you can.

The tax credit is based on your total tax liability, it doesn't matter for that whether you paid a bunch of money in and get it back as a big check at tax time or if you change the withholding and get it in little bits in all the paychecks before tax time.

Of course, if you change the withholding you run the risk of misestimating your liability and having a substantial bill at tax time, but that's all your choice.

 

[arcanexvi]

Should be fine as long as you math it out close enough that you're not way off and take penalties.

 

[astrn]

Thanks guys. That will probably save me at least 5k - 7k since IRS wont send me a check from excess credit that I wont be using. Will be the most smartest choice. Probably it will cover almost my taxes until the end of this year. I will calculate it much more precisely.

 

[Runt8]

I plan on doing the same thing as soon as I have a delivery date to ensure that I’m actually getting the car in 2018 and qualifying for the full credit.

 

[Saghost]

Thanks guys. That will probably save me at least 5k - 7k since IRS wont send me a check from excess credit that I wont be using. Will be the most smartest choice. Probably it will cover almost my taxes until the end of this year. I will calculate it much more precisely.

Huh? This post confuses me, because the IRS most certainly will send a check for the tax credit that you're owed that you've paid, and if you can't use the full credit, changing your withholding won't change your inability to use it.

 

[Runt8]

Huh? This post confuses me, because the IRS most certainly will send a check for the tax credit that you're owed that you've paid, and if you can't use the full credit, changing your withholding won't change your inability to use it.

Yeah, I was wondering about that too. Op, the only thing updating your withholdings does is get you your money sooner. If you are unable to take advantage of the credit then you will end up with a large tax bill when you file (plus penalties if you didn’t pay close to what you owe).

 

[joshk6656]

You don't need to use the entire credit in one year, I believe you can spread it across 10 years (it may even be 20) if you do not have enough liability.

 

[siucity]

You don't need to use the entire credit in one year, I believe you can spread it across 10 years (it may even be 20) if you do not have enough liability.

Not true.

 

[joshk6656]

Not true.

I guess my tax guy is wrong then. Worst case scenario, at tax time if I do not have enough liability, I can just convert some of my 401k to roth to make up the difference, right?

 

[siucity]

I guess my tax guy is wrong then. Worst case scenario, at tax time if I do not have enough liability, I can just convert some of my 401k to roth to make up the difference, right?

You might want a new tax guy.

Yes, that's a great way to increase your tax liability for the year.

 

[Saghost]

You don't need to use the entire credit in one year, I believe you can spread it across 10 years (it may even be 20) if you do not have enough liability.

Your tax guy was probably thinking of solar and other green energy credits which mostly do roll over year to year. As noted above, the EV credit is a one shot deal - either you get it all, or you don't.

 

[deonb]

I guess my tax guy is wrong then. Worst case scenario, at tax time if I do not have enough liability, I can just convert some of my 401k to roth to make up the difference, right?

I thought this didn't work? The tax credit is taken (and zero'd) on the form before the IRA conversion takes place.

 

[astrn]

I read it somewhere either in this forum or official tesla forum something like that.


“Tax credit means IRS wont be going to send you any check but only deduct from what you owe them. Unused portion of the credit -if any left- cannot be transferred to the next year”


So basically you wont get any cash back. If you paying your taxes in advance from each of your paycheck, technically you dont own any tax to IRS from those so there is no point for IRS to use that one time only non transferrable 7500 tax credit which is going to be wasted. Only smart way todo is refilling your W2 and exempt yourself from taxes until you hit the 7500. By that way you will owe 7500 to IRS which you can deduct if from your tax credit.


Well I am not tax guy or accountant and I am not giving you any advice and do it on your own risk but techincally you should be able todo that. I am planning todo so.

 

[Saghost]

I read it somewhere either in this forum or official tesla forum something like that.


“Tax credit means IRS wont be going to send you any check but only deduct from what you owe them. Unused portion of the credit -if any left- cannot be transferred to the next year”


So basically you wont get any cash back. If you paying your taxes in advance from each of your paycheck, technically you dont own any tax to IRS from those so there is no point for IRS to use that one time only non transferrable 7500 tax credit which is going to be wasted. Only smart way todo is refilling your W2 and exempt yourself from taxes until you hit the 7500. By that way you will owe 7500 to IRS which you can deduct if from your tax credit.


Well I am not tax guy or accountant and I am not giving you any advice and do it on your own risk but techincally you should be able todo that. I am planning todo so.

The statement is mostly true. It's all about your tax liability. If after everything else, you should have paid some taxes, you won't pay up to $7500 of them. It doesn't matter whether you've given them money ahead of time (taxes withheld) or not for this - just what you owe. If money was withheld, it can and will be sent back as a tax refund check - limited to the total withheld. They won't give you someone else's money to make up the difference if they weren't going to take $7500 in the first place.

 

[tivoboy]

You don't need to use the entire credit in one year, I believe you can spread it across 10 years (it may even be 20) if you do not have enough liability.

From a normal standpoint no. It can’t be spread past the one year on which the vehicle is purchased. From talking with my CPA as a business owner there IS a path to book the credit and carry it forward assuming one is depreciating the vehicle annually. It’s not a typical option so the scenario may not apply to many taxpayers.

 

[MikeATL]

That will probably save me at least 5k - 7k since IRS wont send me a check from excess credit that I wont be using

Your tax bill calculation has nothing to do with how much estimated taxes you’ve had withheld. When your taxes are calculated, as long as you owe at least 7500 in federal taxes, you can take the 7500 credit. If your tax bill was less than 7500, then you can take a credit for the amount you owed and your tax bill is zero (and the rest of the credit is lost.) Any estimated taxes you had withheld over your tax obligation you would get refunded like any other year.

 

[Runt8]

Your tax bill calculation has nothing to do with how much estimated taxes you’ve had withheld. When your taxes are calculated, as long as you owe at least 7500 in federal taxes, you can take the 7500 credit. If your tax bill was less than 7500, then you can take a credit for the amount you owed and your tax bill is zero (and the rest of the credit is lost.) Any estimated taxes you had withheld over your tax obligation you would get refunded like any other year.

And of course “owe” meaning “liability” as opposed to any unpaid taxes when you file.

 

[CTinCA]

I read it somewhere either in this forum or official tesla forum something like that.


“Tax credit means IRS wont be going to send you any check but only deduct from what you owe them. Unused portion of the credit -if any left- cannot be transferred to the next year”


So basically you wont get any cash back. If you paying your taxes in advance from each of your paycheck, technically you dont own any tax to IRS from those so there is no point for IRS to use that one time only non transferrable 7500 tax credit which is going to be wasted. Only smart way todo is refilling your W2 and exempt yourself from taxes until you hit the 7500. By that way you will owe 7500 to IRS which you can deduct if from your tax credit.


Well I am not tax guy or accountant and I am not giving you any advice and do it on your own risk but techincally you should be able todo that. I am planning todo so.

The same info and advice I received from my tax guy... I have four months to adjust withholdings etc to owe at least 7500 for 2018 taxes...

 

[MikeATL]

The same info and advice I received from my tax guy... I have four months to adjust withholdings etc to owe at least 7500 for 2018 taxes...

Fire your tax guy right now!!!! ... he’s an idiot.

Guys... this is not hard. The calculation of your taxes has NOTHING to do with your withholding. You can have way too much taken out of your paycheck or way too little.... but these prepayments are not going to change what tax you owe each year. It only impacts WHEN you give up the money. Your taxes will be calculated by your income from all sources minus all your deductions to get your adjusted income which determines your taxes. Then you can subtract credits from that tax amount. As long as the tax obligation was at least 7500, you can take the 7500 credit.

Whether you withheld more or less than you were obligated to pay will determine if you get money back in April or need to make up a shortfall, but that isn’t how much you “owe” for taxes for that tax year.