Will I Get a Tax Refund?

A tax return is a form you need to file every year outlining your income, expenses, investments, and other pertinent information.  The average taxpayer files a federal tax return with the IRS using Form 1040 as well as a state tax return. Other documents that may be included when doing your taxes are W-2, which shows the earnings of an employee and how much was paid in taxes; Form 1099-MISC, which computes tax liability for self-employed individuals; and Form 1099-DIV, for those with dividends earned from investments.

You will be eligible for a tax refund if you have paid more taxes to your state or federal government than your actual tax liability. 

Who Will Get a Tax Refund?

Most households have received a tax refund at one point. In fact, many receive tax refunds every year. To get the refund however you need to file your tax return to determine if you have paid more taxes during the year.

Experts say that individuals may have some control over the amount of refund they will get. The average tax refund in 2020 was $2,546, according to the IRS. They processed 163 million returns and about 125 million of these were given refunds.

There are a few levers you can pull to reduce tax liability and receive a bigger refund. For example, you can make sure you get the appropriate tax credits for your dependents, or see to it that all your charitable contributions are included in the deductibles. Companies like HR Block can make sure you get the full amount of tax refund you deserve.

When Will I Receive My Tax Refund?

You will receive your refund within 21 days of filing your return. However, there may be delays including processing issues. You can always check the status of your refund on the IRS website (you’ll need to set up an account with them online). 

Once you have received your refund, you may be tempted to splurge on a vacation or buy that expensive handbag you’ve been eyeing for months. But you should use it wisely – such as paying off your credit card debt or setting it aside for emergencies.

Some people however, may have spent a portion of their tax refund in advance – even before they filed their tax returns. For example, in 2021 a portion of the refunds were already used since many jobs and income sources were affected with the covid pandemic and families needed funding to help them with living expenses.

Tax Refund vs. Tax Liability

When you receive a tax refund you are merely getting back your own money which you sort of loaned to the government. Form W-4 is the form you filled out at the beginning of your employment and this form basically authorizes your employer to withhold a portion of your salary and give it to the federal government. The fund you get is the balance from the withholdings from your employer less the taxes owed for the year. So simply put, tax refunds are the difference between paycheck withholdings and your tax liability. If the withheld amount is higher than your tax liability, you will get a refund.

Tax liability, on the other hand, is the amount you owe in taxes and it is determined by your taxable income, filing status (single, married, married with kids, widow/widower, etc), tax bracket, and tax credit.

To know whether you are eligible for a tax refund, it’s best to consult with experts like HR Block and Jackson Hewitt.

Category: Tax Tips

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