Double Taxation

What..??? Two days in a row of blogging? Both Political?

This one is not very political, just part of the frustrating reality in paying taxes. I have friends and family whom are CPA's so maybe they can correct my thinking on this one particular issue, but probably not temper my frustration.

(Don't worry we have some pics of Lakyn messy eating meatballs, and where she broke into the food pantry and got out her Cheerios and fed Gidget. Lindsey will post the pics real soon.)


FORM 1099-G


This may be true in many states but not all. Here in MI I get FORM 1099-G every year and my blood pressure rises. Here is what it says:

Box 2. Shows refunds of MI income tax you received, or offsets made against the refund, before deduction of use tax paid. It continues on... but I will stop there.

How is a refund I got when filing my taxes, make me liable for taxes to be paid on the refund the following year? I file my State and Federal Taxes. Lawfully following tax code. In the end I OVERPAID taxes. So I got a refund for the overpayment in 2006 via a refund check in 2007. The 1099-G makes sure that I have to report this income for 2007 for tax purposes... WHAT???

So, let’s say I had a taxable income after all adjustments and deductions is $25,000 in 2006. It shows that my State Tax liability is $2000. Well $2300 was withheld and sent to MI on my behalf. There comes $300 refund. WHY WHY WHY should this $300 be treated like income for 2007. By lawfully doing my taxes I got back what I overpaid following their rules, now I get to pay taxes on that portion of money again in the following tax year!!? That is hooooey in my book, and Double Taxation.

Maybe one of the CPA's on here will provide reasoning, but my point is that if you follow $1 through the system from the time you spend it, it is probably taxed at least 4-5 times before it makes it back into someone’s hard earned paycheck. In fact, I bet less than 50 cents of that dollar doesn't get taken up in taxes (sales, corporate, income, state, city, property, hotel, international, DMV, licensing, gas/epa, tobacco, incise, excise, luxury, whatever.) Then to have it taxed again after it is returned to you if you overpay taxes... frustration!

The other part is that MI state witholdings have a minimum rate it witholds that you only get back through filing your taxes. IE: this years W-4 with Lakyn (increased deductions) and my low income made my Federal witholdings very low, but my State witholdings were the same. So while I would rather pay a little bit every year at tax time rather than get a "refund," where Uncle Sam holds my money interest free for me all year. However with MI, I always get a refund check back that I have to pay taxes on again the following year.

I am not on the government’s payroll. So don’t send me a 1099 each year like you gave me something I need to pay taxes on... again.