How do poor people get these ridiculously high tax refund checks?

Question

How do poor people get such large refunds? The word 'refund' to me means that you had to pay the money first and then get the money back at a later time. Some of these people are unemployed/get paid low wages/have zillions of kids... etc and get big refunds. I know they don't pay enough in to get $5,000 back. What is going on with that?

Answer 1

You have to have kids to do it.

The "additional child tax credit" and the "earned income credit" are both refundable credits. That means that you can get money back that you've never paid in.

The IRS is fully aware of it, and Congress did it on purpose.

I once gave a 20-year-old girl with twins a $6600 refund no one was expecting. She qualified for both credits and had filled out her W-4 as "single-one" rather than "head of household-3".

I told her to fill out another W-4 and giver herself a $400/month raise.

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By the way, if you don't mind a little politics, this is the biggest joke of the new century. While democrats are screeming "tax cuts for the rich", the real tax benefits of this century have been overwhelmingly for the poor and middle class, and they're laughing all the way to the bank.

Bush raised the child tax credit from $400 per child to $1000 per child, and the additional child tax credit is attached to insure you get it all.

There was also the "Military Family Tax Relief Act" of 2003, and active duty people are getting even more. It's a well-kept secret that we enjoy these two refundable credits the most because of the mechanics of serving in a tax-free hazard zone overseas.

Answer 2

An unemployed person has no earned income. If the unemployed person gets enough benefits, he will owe income taxes and not be eligible for any refundable credits.

A low income person does not need multiple dependency exemptions to reduce their taxable income to zero. A married couple with two children under age 17 can earn over $35,000 and owe zero tax.

Working taxpayers who earn at a level where they owe little or no tax, and who have qualifying children that live with them, may get refundable credits. The maximum refundable credit is $1,000 per child plus approximately $2,700 Earned Income Credit for one child, or $4,500 for two or more children.

This amounts to a government subsidy for the care of the children to a maximum of $300 per month per child, less if there is more than one child.

This program has been in effect since 1975 and was established to encourage families with children to work.

The EIC was originally a refund of the Social Security and Medicare taxes paid, but that original interpretation has been pretty much lost.

Answer 3

What they are receiving is the earned income credit.

The way that Congress wrote the law, the earned income credit can be more than the amount of a person's taxes. When it is, their refund is larger than the amount that they paid. To prevent confusion, it should probably just be called an "earned income credit payment", rather than a "credit", but the federal government is not very logical.

Answer 4

If they qualify for earned income crredit or the additional child tax credit, they can get money back that they didn't pay in. In both cases though, they'd have to have earned income, not just have been unemployed for the year.

Answer 5

most of the have kids and for the EIC (earned income credit) you get so much for each kid which is why most states only allow u to claim up to so many kids no matter how many u have!

Answer 6

They're getting a piece of your refund.

Answer 7

Seems to me you consider yourself high up there and stuck up to be worried about what the 'poor people' get. Maybe you need to humble yourself and be thankful your not in that category so stuck up snotty people like you cant criticize.