What to Know About Tax Refunds
When it comes to tax season, most people are either anticipating a sizeable tax refund or dreading the fact that they may owe money to the government. If you fall into the former category, it’s important to know everything you can about tax refunds so that you can maximize your return and avoid any issues.
In this article, we’ll cover everything you need to know about tax refunds, including how they’re calculated, common mistakes to avoid, and what to do if you haven’t received your refund.
How Are Tax Refunds Calculated?
Before diving into the specifics of tax refunds, it’s important to understand how they’re calculated in the first place. Essentially, a tax refund is the difference between the amount of taxes you owe and the amount that you’ve paid throughout the year.
For example, if you owe $5,000 in taxes but you’ve already paid $6,000, then you would receive a tax refund of $1,000. On the other hand, if you owe $5,000 but you’ve only paid $4,000, then you would owe the government an additional $1,000.
The amount of your tax refund is determined by a few factors, including your income level, filing status, and any deductions and credits that you qualify for. In general, the more money you make, the higher your tax bill will be, which means you’ll have a smaller refund (or may owe money).
Similarly, if you’re married and filing jointly, you may be eligible for more deductions and credits than if you’re single. This can increase the size of your tax refund, so it’s important to understand how your filing status can affect your return.
What Are Some Common Mistakes to Avoid When Filing for a Tax Refund?
While tax refunds can be a welcome surprise, many people make mistakes when filing for them that can delay or reduce the amount they receive. Here are a few common mistakes to avoid when filing for your tax refund:
1. Failing to Report All Your Income
One of the biggest mistakes people make is failing to report all of their income. Whether it’s money from a side hustle or freelance work, any income you earn throughout the year needs to be reported on your tax return. Failing to do so can result in penalties and interest charges, as well as a delay in your refund.
2. Incorrectly Claiming Deductions and Credits
Another common mistake is incorrectly claiming deductions and credits on your tax return. This could include anything from claiming too many charitable donations to overstating your expenses for a home office. Make sure to carefully review the instructions for each deduction or credit to ensure that you’re eligible and that you’re claiming the correct amount.
3. Filing Late
If you’re due a tax refund, there’s no reason to delay filing your tax return. In fact, the earlier you file, the earlier you’ll receive your refund. Filing late can result in penalties and interest charges, and could even cause you to miss out on some credits and deductions if you’re beyond the deadline.
What Should You Do If You Haven’t Received Your Tax Refund?
If you’ve filed your tax return and are expecting a refund, but haven’t received it yet, there are a few things you can do to find out what’s going on:
1. Check Your Refund Status Online
The easiest way to check on your refund status is to visit the IRS website and check the Where’s My Refund feature. You’ll need to provide some basic information, such as your Social Security number and filing status, and the website will tell you when you can expect your refund to arrive.
2. Call the IRS
If you’re still unsure about the status of your refund, you can call the IRS directly at 1-800-829-1040. Be prepared to provide some basic information about your tax return, such as your Social Security number and the amount of your refund.
3. Wait It Out
If you’ve already checked your refund status and haven’t received any updates, it’s possible that your refund is simply delayed. The IRS can take up to 21 days to process a refund, so if it’s only been a few weeks since you filed, you may want to wait a little longer before taking any action.
In Conclusion
Tax refunds can be a welcome surprise for many people, but it’s important to understand how they’re calculated and what mistakes to avoid when filing your tax return. By following these tips and staying on top of your refund status, you can ensure that you get the refund you’re owed in a timely manner.
Tax refunds are given to individuals or corporations who have paid too much federal tax throughout the course of the taxable year. A tax refund is money owed to the tax payer because the particular applicant’s tax liability is less than the taxes paid. Throughout the taxable year the federal government takes money out an individuals paycheck. Each pay schedule is reduced by a certain percentage through the federal levy.
The government takes the money to fund the military, public services, and current expenditures. When the taxable year ends and the individual files his or her tax return the government will view the amount of income held during the year versus the amount currently owed. If the amount taken during the year exceeds the amount owed the federal government will issue a tax refund in the form of a paper check.
In 2008, over 75% of tax returns yielded a tax refund check. The average refund check was worth over $2,000, this simply means that 75% of the tax applications had more money withheld during the year than owed on April 15th of the following year.
Tax refunds can either be issued through paper check or deposited directly into the individuals bank account. If choosing the direct deposit option, the individual receiving the tax refund has the option of splitting the refund between up to three separate bank accounts. Tax refunds, especially through the increased options, enable individuals to increase consumption, savings, or personal investment.
