Is this right? - Taxes and the Make Work Pay credit and other conumdrums

[anime-chicka]

Okay, I feel silly asking for help, but I know that there have been some awesome answers in the past, so here goes.

I worked on my taxes last night in TurboTax and discovered that we're getting more back this year than we did last year, about $200 more. I didn't thinkthis was right so I ran the numbers in the H&R Block program and got the same result (with about a $7 discrepancy between the two programs as far as the refund amount is concerned).

What's interesting is that we got a Make Work Pay credit which I don't think is right since we were getting more in our take home pay because less was being taken out. Should we be getting this credit?

I'm agonizing over submitting this because all sorts of warnings are going off. Hubby did point out that we are also getting more back because he didn't sell any stock in the past year, so we aren't taking a hit with that, but still..

I also just found out that we could deduct the cost of our registration for the cars. I'm just wondering if that inculdes the taxes I paid as well as the fee for my car when I had to title it, but if I can I will.

[jalex]

Here is the way I understand the making work pay credit. The tables that calculate your tax withholding were adjusted, so that less money was taken out of your check every month. This reduced the amount of tax you paid throughout the year.

Now, come tax time, the tax tables themselves were not adjusted. So you owe the same amount of tax you would have without the credit. However, due to the changes above, you have paid less money in than you usually would. This would normally create a situation where you would owe more taxes, since you paid in less.

Therefore, in order for the credit to work, you have to add the amount that you are supposed to get ($400/$800) to the amount of taxes you paid in. This cancels out the lower amount you paid in due to the withholding changes. This is what the H&R block program does. If you look at your taxes paid in from your W2, and then the final number in H&R block, it will be $400 or $800 higher, depending on your filing status.

Very confusing to think about, but once you see how it works, not too bad.

[JoeBankrupt33]

The short answer is yes, you get the credit based on your income. The money you got throughout the year wasn't a refund, it was just different withholding.

[anime-chicka]

You're right, it is confusing. I'm not used to seeing such a big refund, so I'm in that 'huh?' and 'omg, wtf did I do to screw this up now?!' mode; and trust me, that happens a lot more than I care to admit.

At least I know I'm not the only one who discovered this. A few friends are getting the same results so, I'm not feeling so lost anymore.