This Can't Be Right...

[KEG123]

So, I made approximately 9-10,000 last year (only worked beginning in May) and so I go enter all my information in my tax worksheet, including my deductions and it says I only made 4,000 and some change gross. Now, I do have two children, so I qualify for the EIC. BUT it looks like I'd only get 1,500 back, total, for both kids combined. BUT I just got some paperwork in the mail saying if I make under 40,000 as single, head of household (which I am) with 2 children, I could get 5,000 back.

SO tell me this, WHY am I getting less back for making less money? I mean, heck, in 2009 I made around 8,000 ( at a retail job) only had one kid then and I got like 4,000 back in 2010.

Is that right?!

And so, in theory I could go back and say I had 0 expenses and that I made 9000 and I'd get more? This makes no sense to me!

[KEG123]

Anyone have input on this? Just curious if this seems right to you? I mean, it has to be because when I take out all my deductions, it says I get a higher refund. But, it still doesn't make sense why.

[TomCopeland]

Refund

I can't answer your question for sure, but here are some thoughts. As a self-employed person you are paying twice as much in social security taxes as someone who works for another. When you work for someone else, they are withholding taxes, but when you are self-employed, you have to pay in yourself. Don't look at how much you got back, rather look at how much tax your paid. Also, the EIC can go down if you make less money. That sounds crazy, and it is, but it can work that way in some situations.

[KEG123]

That is horrible. I mean, I worked 5 times as hard and 5 times as many hours by doing daycare, yet will get 1/4 of the amount in taxes back. And obviously a profit of 4-5,000 is nothing!

[TomCopeland]

Refund

No. Don't compare refunds. Compare how much total tax you paid and subtract that from your income. This is the best comparison.

[KEG123]

Its hard to do that!