2011 TAX TIME Questions

[Yanquetino]

I have now received a 1099-MISC from the Geological Survey, claiming that they will report my "rebate" as income for 2011.
The state government has likewise sent me an "income tax refund statement" for the amount of the tax incentive --even though after the incentive I still paid taxes to the state.
Tax experts: is this normal? We are supposed to report rebates we receive as income? We are supposed to also report a deduction in our state taxes as income?

I'm not really a tax expert, but I know some rebates are taxable while others are not. The laws are complex and varied. If you get a 1099, though, the IRS got one too, and you must count it as income.

Ray

Wow. That's real sweet. So... I already paid income taxes on the money I spent on my solar. Then when I get a rebate for a small percentage of that expense, I have to pay income tax on that portion of money yet again! :evil: What a racket the government has. If a private business tried such double-dipping, the perpetrators would end up in jail. Sigh....

 

[planet4ever]

Wow. That's real sweet. So... I already paid income taxes on the money I spent on my solar. Then when I get a rebate for a small percentage of that expense, I have to pay income tax on that portion of money yet again! :evil: What a racket the government has. If a private business tried such double-dipping, the perpetrators would end up in jail. Sigh....

Sorry, but that's not quite true. Just to make up numbers, let's say you spent $30K on the solar system and you got a $5K rebate. You earned the original $30K and got it (less income tax). On top of that you were given $5K which you might or might not have actually seen, so your total income really is $35K before taxes. Out of that you spent $30K on the solar system, and hopefully got your money's worth. Of course you might think the system is only worth $25K, but that's your problem. The company that installed it claims it is worth $30K, and that is what they were paid.

Ray

 

[Yanquetino]

Sorry, but that's not quite true. Just to make up numbers, let's say you spent $30K on the solar system and you got a $5K rebate. You earned the original $30K and got it (less income tax). On top of that you were given $5K which you might or might not have actually seen, so your total income really is $35K before taxes. Out of that you spent $30K on the solar system, and hopefully got your money's worth. Of course you might think the system is only worth $25K, but that's your problem. The company that installed it claims it is worth $30K, and that is what they were paid.

Ray

I guess I just don't understand how taxes are supposed to work then. So... let's say I spent $30K out of my own pocket for the solar. In reality, I had earned $40K, but after $10K of it went straight to taxes, I ended up with the remaining $30K net. I then use that money to install a solar system, and after it is installed the Geological Survey pays me a rebate of $5K --which I then have to pay taxes on again?!

How about a parallel example. Let's say, instead, that you earn $125 at work. The government takes $25 of it for taxes, and your paycheck shows up in the mail with the remaining $100 net. You then use that money to buy a new cell phone. You submit the $20 rebate form to Verizon that they offered with the phone. You receive that $20 rebate in the mail a couple of weeks later. Does Verizon report that to the government as income that you have to pay taxes on --again?!

If so... I guess I should feel lucky. So far I haven't got a 1099-MISC from Verizon for the cell phone I bought last spring --with a rebate.

 

[ebill3]

I guess I just don't understand how taxes are supposed to work then. So... let's say I spent $30K out of my own pocket for the solar. In reality, I had earned $40K, but after $10K of it went straight to taxes, I ended up with the remaining $30K net. I then use that money to install a solar system, and after it is installed the Geological Survey pays me a rebate of $5K --which I then have to pay taxes on again?!

How about a parallel example. Let's say, instead, that you earn $125 at work. The government takes $25 of it for taxes, and your paycheck shows up in the mail with the remaining $100 net. You then use that money to buy a new cell phone. You submit the $20 rebate form to Verizon that they offered with the phone. You receive that $20 rebate in the mail a couple of weeks later. Does Verizon report that to the government as income that you have to pay taxes on --again?!

If so... I guess I should feel lucky. So far I haven't got a 1099-MISC from Verizon for the cell phone I bought last spring --with a rebate.

BIG difference.

You paid $X for your solar system. The contractor kept it all. The Geological Survey sent you $Y - the contractor did not return some of your money. That money is in addition to what you had. You never paid taxes on the money from the Geological Survey.

You paid $100 for the cell phone, Verizon returned $20 which was yours to start with - not something in addition to what you had.

Bill

 

[Yanquetino]

BIG difference.

You paid $X for your solar system. The contractor kept it all. The Geological Survey sent you $Y - the contractor did not return some of your money. That money is in addition to what you had. You never paid taxes on the money from the Geological Survey.

You paid $100 for the cell phone, Verizon returned $20 which was yours to start with - not something in addition to what you had.

Bill

Ah... well, then I should clarify. I paid $100 for the cell phone to Bullfrog Wireless, not to Verizon. Yet Verizon sent me the rebate. It is like buying a blender from Wal-Mart, but then Oster sends me a rebate. I suppose that what you're saying is that if there is a "middleman" between me and the product, the rebate is not income. If not... it is.

By the way, I don't think the contractor "kept it all." He also had to pay taxes on his income --the $30K I paid him.

Death and taxes.

 

[ebill3]

Oldie, but goody.

Three men checked in at a small hotel and wanted to share a room. Desk clerk said fine. $30.00. Each paid $10.00.
Later, the desk clerk decided he should have only charged $25.00, so he gave the Bell Hop $5.00 to take up to the room.
Bell Hop is a sharp cookie - no way they can split $5.00 three ways. So he pockets $2.00 and gives each man $1.00.
Each man paid $9.00 ($10.00 - $1.00) 3 X $9 = $27.00 and the Bell Hop has $2.00. $27 + $2 = $29, but there were $30 to start with????

Sorry, I know this is a serious thread about taxes, but couldn't resist. :twisted:

Bill

 

[TonyWilliams]

Where's the punch line?

 

[smkettner]

$27 paid, Hotel gets $25 and belhop gets $2. What the H else are you talking about?

 

[Deleted member 3147]

Oldie, but goody.

Three men checked in at a small hotel and wanted to share a room. Desk clerk said fine. $30.00. Each paid $10.00.
Later, the desk clerk decided he should have only charged $25.00, so he gave the Bell Hop $5.00 to take up to the room.
Bell Hop is a sharp cookie - no way they can split $5.00 three ways. So he pockets $2.00 and gives each man $1.00.
Each man paid $9.00 ($10.00 - $1.00) 3 X $9 = $27.00 and the Bell Hop has $2.00. $27 + $2 = $29, but there were $30 to start with????

Sorry, I know this is a serious thread about taxes, but couldn't resist. :twisted:

Bill

The correct equation is $27 minus $2 = $25 which is what the hotel got.

(I have to admit that it took me 10 minutes to find the flaw )

 

[Yanquetino]

BIG difference.

You paid $X for your solar system. The contractor kept it all. The Geological Survey sent you $Y - the contractor did not return some of your money. That money is in addition to what you had. You never paid taxes on the money from the Geological Survey.

You paid $100 for the cell phone, Verizon returned $20 which was yours to start with - not something in addition to what you had.

Bill

In thinking more about what you are stating, this also means that, when I finally buy my LEAF, and deduct the $7,500 fed incentive, as well as a $600 state incentive, on my next tax returns, the year after that I will have to report $8,100 more income. After all, the dealer and Nissan will have "kept" all of my money (just like the solar contractor). The feds and state will not have "returned any of my money" (just like the Utah State Geological Survey). That money will thus be "in addition" to what I had to buy the Leaf (just like I spent on the solar).

It all seems pretty unconcionable to me. You get money back from a government that taxes you, only to have that government tax you again on the money it gave back.

 

[planet4ever]

It all seems pretty unconcionable to me. You get money back from a government that taxes you, only to have that government tax you again on the money it gave back.

Well, when you put it that way, it does sound sort of weird, doesn't it. But that is exactly what happens after you retire and start getting Social Security checks. Depending on the size of your SS checks and what other income you have, the IRS is likely to demand that you pay income tax on part of the SS money. One thing you have to realize is that there isn't just one "corporation" called "government". There are lots of different government agencies, and they are almost like independent corporations. Another aspect is, as I suggested before, that government rebates and incentives are created by laws, and every law has its little quirks. The IRS decides that some of them create income, and others don't.

In thinking more about what you are stating, this also means that, when I finally buy my LEAF, and deduct the $7,500 fed incentive, as well as a $600 state incentive, on my next tax returns, the year after that I will have to report $8,100 more income.

Good examples. for the $7,500, you are not dealing with separate agencies. The IRS gave you the tax credit. So far as I know, a federal income tax credit is never taxable for federal income tax! Now, on the $600 state credit, it could go either way. This is definitely a different agency; in fact a totally different government. Whether it is taxable will depend on what the state law says and how the IRS interprets it. Presumably the state will send you a 1099 if the $600 is taxable.

Ray

 

[nogajim]

It all seems pretty unconcionable to me. You get money back from a government that taxes you, only to have that government tax you again on the money it gave back.

Well, when you put it that way, it does sound sort of weird, doesn't it. But that is exactly what happens after you retire and start getting Social Security checks. Depending on the size of your SS checks and what other income you have, the IRS is likely to demand that you pay income tax on part of the SS money. One thing you have to realize is that there isn't just one "corporation" called "government". There are lots of different government agencies, and they are almost like independent corporations. Another aspect is, as I suggested before, that government rebates and incentives are created by laws, and every law has its little quirks. The IRS decides that some of them create income, and others don't.

In thinking more about what you are stating, this also means that, when I finally buy my LEAF, and deduct the $7,500 fed incentive, as well as a $600 state incentive, on my next tax returns, the year after that I will have to report $8,100 more income.

Good examples. for the $7,500, you are not dealing with separate agencies. The IRS gave you the tax credit. So far as I know, a federal income tax credit is never taxable for federal income tax! Now, on the $600 state credit, it could go either way. This is definitely a different agency; in fact a totally different government. Whether it is taxable will depend on what the state law says and how the IRS interprets it. Presumably the state will send you a 1099 if the $600 is taxable.

Ray

I got a 1099 this year from the state of GA for my last year's tax refund. I presume I will be getting a bigger one next year that includes my GA rebate. I still want the rebate

 

[Yanquetino]

Good examples. for the $7,500, you are not dealing with separate agencies. The IRS gave you the tax credit. So far as I know, a federal income tax credit is never taxable for federal income tax! Now, on the $600 state credit, it could go either way. This is definitely a different agency; in fact a totally different government. Whether it is taxable will depend on what the state law says and how the IRS interprets it. Presumably the state will send you a 1099 if the $600 is taxable.

Yeah, this could be an example of robbing Peter to pay Paul. For example, as I stated way up above, for my 2010 taxes I ended up paying... let's say... $8,000 in Utah state taxes. However, after finally getting Utah to process its solar incentive paperwork and provide the necessary approval "code," I then filed an amended return with that code for the $2,000 tax incentive. Utah then sent me a refund check for that $2,000. Ergo, I ended up paying $6,000 in state taxes for that year. Ouch.

NOW... Utah has sent me a 1099-G, stating that they will report to the IRS that the $2,000 was "income" last year. Wha...? So, when I pay $8,000 in taxes, am reimbursed $2,000 of it, and thus still pay $6,000 in taxes... the difference is considered "income"??? I somehow suspect that, if I'd been able to take that deduction on my first tax return, rather than via an amended return, this would not be the case. What am I missing here?

If this is the way these different agencies work, then in theory the state of Utah could insist that my 30% federal solar incentive last year was "income" --just like the feds are now going to consider the $2,000 Utah solar incentive "income."

Heh. And don't even get me started with Social Security. What a racket. Why should retirees have to pay taxes on money that they already paid taxes on? I mean, if they had simply deposited a portion of their net earnings after taxes into a savings account with every paycheck, they would have had to pay taxes on the interest accrued every year, but when they later started withdrawing the savings to live on in retirement, they would NOT have to pay taxes on the withdrawals. So... why does the government tax them twice on that money? Pssssss. Brings us back to robbing Peter to pay Paul.

 

[thankyouOB]

state taxes are deductible on your federal tax filing
so if you paid and deducted 8k, then got back 2k, you owe taxes on the 2k you got back.
it is simple and standard.
all this outrage about paying taxes astounds me.
do you want schools and roads and prisons and courts and police?
if not, go galt.
but dont complain about having a society that allows you to drive to work without getting kidnapped and held for ransom. you could move to mexico or brazil and see how that works out. or afghanistan or somolia.

and as to the ss tax business, it is a version of means testing without using the name.
you do believe in progressive income tax rates, dont you?

 

[Yanquetino]

all this outrage about paying taxes astounds me.
do you want schools and roads and prisons and courts and police?
if not, go galt.
but dont complain about having a society that allows you to drive to work without getting kidnapped and held for ransom. you could move to mexico or brazil and see how that works out. or afghanistan or somolia.

Whoa...! Where in Hades does this come from? I have never complained about paying taxes. I have complained about the complications, contradictions, and confusion, the loopholes and double-dipping, subsidies for the richest companies in history, i.e., the mess our tax system has become, thanks to all kinds of special interests out in the lobby.

For the record, of course we should all contribute our fair share to pay for schools, road, prisons, courts, police, etc., etc. The stickler, of course, is... "fair share."

I would think that, in a democracy, we are also entitled to free speech to address such issues, rather than just "shuddup." Then we would be living in Afghanistan.

 

[ebill3]

In thinking more about what you are stating, this also means that, when I finally buy my LEAF, and deduct the $7,500 fed incentive, as well as a $600 state incentive, on my next tax returns, the year after that I will have to report $8,100 more income. After all, the dealer and Nissan will have "kept" all of my money (just like the solar contractor). The feds and state will not have "returned any of my money" (just like the Utah State Geological Survey). That money will thus be "in addition" to what I had to buy the Leaf (just like I spent on the solar).

It all seems pretty unconcionable to me. You get money back from a government that taxes you, only to have that government tax you again on the money it gave back.

Well, I can not address the Utah situation, but as far as the Feds are concerned, it is a tax credit, not an incentive or gift from Uncle Sam.

Let's assume you have income and pay federal income tax all year long by means of monthly, or what ever, deductions from your income. At the end of the year you have paid to the Federal Government $10,000, and it turns out (unrealisticly) that your tax obligation is exactly $10,000. You do not owe taxes and there is no tax refund.

BUT, you ave included the necessary tax form to show that you purchased an EV. The Feds say because of that purchase, they are going to reduce your taxes by $7,500 and they send you a check. That is not income, it is a return of taxes you already paid, and therefore not taxable.

In my personal case, it turns out that, without the credit, I owe a bit over $1,000 taxes - round it to exactly $1,000. With the EV credit, I no longer owe $1,000, but Uncle Same owes me $6,500. BUT THAT IS NOT A GIFT - IT IS A RETURN OF TAX MONEY I HAVE ALREADY PAID.

Got it?

Bill

 

[Yanquetino]

Well, I can not address the Utah situation, but as far as the Feds are concerned, it is a tax credit, not an incentive or gift from Uncle Sam.

Let's assume you have income and pay federal income tax all year long by means of monthly, or what ever, deductions from your income. At the end of the year you have paid to the Federal Government $10,000, and it turns out (unrealisticly) that your tax obligation is exactly $10,000. You do not owe taxes and there is no tax refund.

BUT, you ave included the necessary tax form to show that you purchased an EV. The Feds say because of that purchase, they are going to reduce your taxes by $7,500 and they send you a check. That is not income, it is a return of taxes you already paid, and therefore not taxable.

In my personal case, it turns out that, without the credit, I owe a bit over $1,000 taxes - round it to exactly $1,000. With the EV credit, I no longer owe $1,000, but Uncle Same owes me $6,500. BUT THAT IS NOT A GIFT - IT IS A RETURN OF TAX MONEY I HAVE ALREADY PAID.

Got it?

Bill

Right! That is my understanding, too, Bill. And when I get my Leaf, that is exactly what I will claim on my federal taxes.

What I was trying to point out with the comparison is that, since Utah reports its $2,000 state tax credit (for my solar) as "income" to the feds, I am sure glad that the feds don't do likewise and report its 30% federal tax credit as "income" to the states. Can you imagine? Ee-yow!

 

[tjz]

This is nothing new. When filling out your federal form, you deduct the state taxes that were withheld / paid that year, but claim any refund that came back as income the next year. This just increases your "refund".

Well, I can not address the Utah situation, but as far as the Feds are concerned, it is a tax credit, not an incentive or gift from Uncle Sam.

Let's assume you have income and pay federal income tax all year long by means of monthly, or what ever, deductions from your income. At the end of the year you have paid to the Federal Government $10,000, and it turns out (unrealisticly) that your tax obligation is exactly $10,000. You do not owe taxes and there is no tax refund.

BUT, you ave included the necessary tax form to show that you purchased an EV. The Feds say because of that purchase, they are going to reduce your taxes by $7,500 and they send you a check. That is not income, it is a return of taxes you already paid, and therefore not taxable.

In my personal case, it turns out that, without the credit, I owe a bit over $1,000 taxes - round it to exactly $1,000. With the EV credit, I no longer owe $1,000, but Uncle Same owes me $6,500. BUT THAT IS NOT A GIFT - IT IS A RETURN OF TAX MONEY I HAVE ALREADY PAID.

Got it?

Bill

Right! That is my understanding, too, Bill. And when I get my Leaf, that is exactly what I will claim on my federal taxes.

What I was trying to point out with the comparison is that, since Utah reports its $2,000 state tax credit (for my solar) as "income" to the feds, I am sure glad that the feds don't do likewise and report its 30% federal tax credit as "income" to the states. Can you imagine? Ee-yow!

 

[thankyouOB]

My apologies if anyone took offense. I didnt excerpt or quote anyone as i was not targeting any particular comment.

You can go back through this thread and see lots of complaining about taxes, especially double taxation and rebating with one hand and taxing with another.

Mine is a general statement that is directed at all that complaining, including the inability to take both EV and EVSE credit in a year, outrage at paying taxes under the AMT, so-called double taxation, etc.

I see the utility of a discussion of how to make filing for the various credits clearer, but I fall in the category that is best summed up by this quote from Civil War hero and Supreme Court Justice Oliver Wendell Holmes: "Taxes are the price we pay for a civilized society."

 

[SanDust]

Here's the question. I have now received a 1099-MISC from the Geological Survey, claiming that they will report my "rebate" as income for 2011.

The state government has likewise sent me an "income tax refund statement" for the amount of the tax incentive --even though after the incentive I still paid taxes to the state.

Tax experts: is this normal? We are supposed to report rebates we receive as income? We are supposed to also report a deduction in our state taxes as income?

Keep in mind that has nothing to do with electric cars. But to answer your question, yes it's normal. First, forget about the 1099g for the income tax refund. All that means is that in year one you deducted more in state taxes than you ended up owing. For example, say you paid $5000 in state taxes and deducted that amount from your income but ended up only owing $4000. The difference of $1000 shows up as income for federal tax purposes in year two. This just means that for any number of reasons -- bad math, excess estimated tax, investment losses, or solar installation -- you've overwithheld. Since your overheld amount reduces your income for federal tax purposes in the first year, you have to add it back the next year. Completely fair and completely standard.

The way you treat the rebate is more interesting. Say the solar system costs $30,000 and the rebate is $3000. The simplest way is to assign the rebate to the solar installer which then drops the price to you by $3000. You pay $27,000 and take a federal tax credit of $9000.

A second way would be to take a federal tax credit of 30% against the full $30,000. In this case you'd get a federal tax credit of $10,000 but you'd have to declare the $3000 rebate as income. At a 30% federal tax rate that would result in $1000 more in federal tax. So you'd net the same $9000 as you would in case one. I think the IRS has issued a letter ruling that this is its preferred treatment if you don't assign the rebate.

The third way would be to take a federal tax credit of 30% against the cost of the PV system MINUS the $3000 rebate. In this case you'd take only a $9000 federal tax credit but you would not declare the rebate as income. This gives the same result as the first way.

All are fair and yield more or less the same results. One and three yield identical results. Two will yield a slightly different result depending on your tax rate but probably not much different.