Tax refunds are a commonly utilized method through which American taxpayers reduce the financial burden that they have before the government. The federal tax refund status which the IRS assigns to any given taxpayer can result in that person being given back a small allocation from his or her taxes, frequently in the range of between two and three thousand dollars, though amounts can be higher.
Though many American taxpayers have little to no understanding of how the government determines their federal tax refund status, the tax refund schedule can potentially be utilized more effectively by the relevant applicant if he or she has a better-informed idea of how the IRS comes to these decisions.
The tax refund schedule is determined by the IRS according to three primary criteria: taxes withheld throughout the year, estimated taxes, and refundable tax credits. Taxpayers can determine the validity of their federal tax refund status by adding up the sum of the payments they made for the two two kinds of taxes and the amount to which they are obligated by the third.
If this amount exceeds the taxes which the taxpayer gave to the government over the course of that tax year, then they may be eligible for federal tax refund status. People who are considered a part of the tax system may also be accepted by the IRS for the tax refund schedule before they have actually paid any fees, as can be determined by projections for later withholding of taxes and by the earned income tax credit.
Taxes which are withheld are an important part of the tax refund schedule, referring to the amounts which are regularly withheld from employee paychecks in order to ensure that the taxpayers’ burden for the whole course of the year is met.
Different forms of taxes as are required of taxpayers may be withheld in this way, including income, Social Security, and Medicare taxes. If this amount exceeds the income taxes for which the taxpayer was liable during that year, then she or he will be due the amount by which the withheld taxes exceeded the tax liability.
Estimated taxes represent another factor that is taken into account for determining federal tax refund status. This kind of tax essentially includes all of the ways through which people gain income other than by regular employment, and can also be used to require taxpayers to make up the financial obligations as are not met through withheld taxes.
Refundable tax credits, as will be accepted under the tax refund schedule, can commonly come from the means-tested earned income tax credit. This option can prove the eligibility for receiving tax refunds of a person who has not yet paid taxes. A “means-tested” credit is one provided to people based upon their demonstration of a financial need.
The credit is thus commonly provided as a part of the United States government’s policy of reducing the financial burden imposed by its taxes on those people who are actively engaged in the workplace but not to the point where taxes are easier to meet.