Utah Clean Fuel Non-refundable Tax Credits- How do you "redeem" them?

[kirkbenge]

I am trying to understand "non-refundable" Utah tax credits. Nonrefundable credits can bring your tax liability to zero, but cannot result in a refund. Is that right? How does that work?
If I bought a CNG car this year, and claimed the tax credit, it would not entitle me to a refund of the tax I have already paid, is that right? So if I have already paid, let's say, $2,000 dollars in Utah taxes, and then I file my return and include my $3,000 tax credit, I would still only be refunded the money i would normally have been entitled to without the credit?? I cannot use the "credits" to pay my taxes and get all my money back? Is that right?
So is the only way to "USE" these credits to reduce or stop your state withholdings until you have no credits remaining, and then start paying your taxes again. Am I understanding this correctly?

Anybody have any insights? Am I completely wrong?

KIRK

[Luke]

Re: Utah Clean Fuel Non-refundable Tax Credits- How do you "redeem" them?

I would check with an accountant for professional advice on your tax situation. The tax credit is the the lower of $3000 or 1/2 of the difference in price between the CNG-fueled vehicle and a comparable gasoline-fueled vehicle; for most the eligible credit ends up being between $1500 and $2500. Sellers in Utah are notorious for telling people they will get a $3000 credit; the abuse of the credit is a potential reason why HB106, a bill to stop the used vehicle credit and reduce the new vehicle credit, is gaining strength.

A non-refundable credit can be used to reduce your tax liability and may result in a refund if your withholding amount was too high. You can reduce your tax withholding since a refund is expected, but want to be careful since you may be required to reduce your federal withholding as well; claiming more than 10 deductions or tax-exempt usually requires additional documentation and may raise audit flags.

You can use credits to pay your tax liability.

Suppose your employer withholding was $2000, your tax liability is $1500, and you want to use a $2500 non-refundable credit to reduce your tax liability; your tax liability would be $0 [the minimum of ($1500-$2500)=-$1000 and $0]; your refund check would be $2000.

Now suppose your employer withholding was $2000, your tax liability is $1500, and you want to use a $2500 refundable credit to reduce your tax liability; your tax liability would be $0 [the minimum of ($1500-$2500)=-$1000 and $0]; your refund check would be $3000 [$2000 refund from withholding in excess of tax liability plus $1000 from the refundable credit].

Hope this helps.

[kirkbenge]

Re: Utah Clean Fuel Non-refundable Tax Credits- How do you "redeem" them?

I didn't mean to imply that I didn't understand that the tax credit is the the lower of $3000 or 1/2 of the difference. I was just using the 3000 as an example.
The fact is that I already filed my taxes this year. I had done all the necessary paperwork (TC-40V, signed and stamped) etc. My employer withholding was $1627, my tax liability was $1170, I have a $2700 non-refundable credit (based on 50% of the incremental cost of CNG for my vehicle); I read all the instructions and followed them carefully, (it's not very complicated) and according to the tax forms, my tax liability was $0 ($1100-$2700) and my indicated return was $1627.

The reason I brought this up is because I just got a letter today from the State Tax Commission stating "NOTICE OF CHANGE TO RETURN". It simply said my tax due was $1170, my credits were $1627, and my refund amount had been changed from $1627 to $457. It then stated "Total refund may not include all payments made. No further action is necessary on your part to receive this refund. Please allow 30 days for the refund to reach you." That's it. Nothing else, not even contact info.
So I was a bit surprised and thought that maybe I had misinterpreted the tax laws regarding non-refundable credits. I will certainly be contacting them regarding the issue to see where the mistake lies. I wondered if anyone else had had this type of thing happen to them.

Thanks for your help.

KIRK

[Highmarker]

Re: Utah Clean Fuel Non-refundable Tax Credits- How do you "redeem" them?

Kirk,

You can "roll over" your non-refundable tax credit for up to five years. For example, my tax for Utah in 2007 was $2000. My non-refundable tax credit from my '01 Cavalier CNG was $2,965. I am using $2000 of that to take my total tax to $0, and I am "rolling over" the $965 to next year.

[kirkbenge]

Re: Utah Clean Fuel Non-refundable Tax Credits- How do you "redeem" them?

Well, I talked to the Tax Commission and they apologized for their error. It seems the person who processed my return ignored the fact that I had a TC-40s form attached. He also "must have accidentally skipped" line 17 on the TC-40 where the tax credits are entered, and so he changed the amount of my return to match his math.
Anyway, it really threw me for a loop when they completely ignored my credits and sent me that notice. I thought I had somehow misinterpreted the tax law, so that first post in this thread is sort of confused and rambling. I was trying to figure out how overpaying your taxes and utilizing a non-refundable credit could possibly result in a non-refund.

KIRK

[bakaroma]

witholding state and federal

According to our payroll department state and federal can be adjusted independent of each other. For example I am not adjusting my federal withholding this year, but will claim an exemption to any witholding the rest of the year for sate taxes as the tables have my witholding at slightly over $300. Thus I will have a $2,700 tax liability almost for sure based on my taxes this year. So, I will apply my rebate next year in a large lump, but my federal taxes should come out about the same.

[Highmarker]

Re: witholding state and federal

According to our payroll department state and federal can be adjusted independent of each other. For example I am not adjusting my federal withholding this year, but will claim an exemption to any witholding the rest of the year for sate taxes as the tables have my witholding at slightly over $300. Thus I will have a $2,700 tax liability almost for sure based on my taxes this year. So, I will apply my rebate next year in a large lump, but my federal taxes should come out about the same.

bakaroma,

That is what I did last year. In July of 2007 after buying my CNG car, I went to payroll department and asked how many dependents I would need to claim to have $0 withholding from the Utah. She said 30. So I claimed 30 dependents in Utah but kept the 4 dependents for the Federal withholding.

[ch4]

Re: witholding state and federal

bakaroma,

That is what I did last year. In July of 2007 after buying my CNG car, I went to payroll department and asked how many dependents I would need to claim to have $0 withholding from the Utah. She said 30. So I claimed 30 dependents in Utah but kept the 4 dependents for the Federal withholding.

That's hilarious. Can't wait to see what the Census taker will have.
Of course, for Utah, that's prob. the avg. family size.

As always, speaking to a prof. tax adviser is prudent. But, I think that all of your payroll withholding is part of whatever the IRS calls it, a refundable credit, and as such, you should get all of it back. So, from my research, you can subtract, up-to, all of your withholding.

I think that the UT payroll tax is also a refundable credit, but Highmarker may have done better research then I.

For the state, in UT, you can spilt the credit up to 5 years

http://72.14.253.104/search?q=cache:l5AfzxWnDxIJ:www.tax.utah.gov/forms/current/tc-40v.pdf+Utah+Division+of+Air+Quality+tax+credit&hl=en&gl=us&ct=clnk&cd=1

"If the credit claimed exceeds the tax liability for a taxable year, the
credit that exceeds the liability may be carried forward for up to five taxable years."

With AMT, if you have many deductions (I do not), then it gets complicated.

Of course, alot of folks on this list must be self-employed because the numbers I've see for the payroll deductions have been small - some smaller than the CNG credits, so they did not get the max credit.

ch4