FAQ on Tax Refunds

What is a Tax Refund?

Tax refunds are sent to individuals and businesses who overpaid federal or state taxes last year. If you are an employee of a business, your employer probably withheld portions of your paychecks throughout the year to cover federal and state taxes. This amount is called Withholdings and the amount taken per paycheck depends on the information you provided on your W4 upon hire. If you are a business owner, you probably paid your taxes quarterly or will pay these owed taxes upon filing your taxes.

Some individuals will not get tax refunds. If you haven’t paid enough at federal and state levels, you might actually owe taxes to the IRS. Only those who have overpaid will receive tax refunds in varying amounts. For example, if your tax return shows that you paid $1200 in income taxes but should have only paid $1000, you will receive a $200 refund check from the IRS once you file. It works the same way with state taxes.

Why is there a need for tax refunds?

First of all, the government should take the proper amount of money, based on your income level and deductions – no more, no less. Also, when your employer withholds taxes, they loosely base it on the number of dependents you have and other circumstances. It’s hard to account for events that will occur throughout the year. For example, when you filed last year’s taxes, you might have medical deductions, education credits and other deductions that weren’t accounted for. Because your income and deductions aren’t always predictable, tax refunds are necessary.

How do I get my tax refunds?

In order to get your tax refunds at the state and federal levels, you must file your taxes by the deadline, April 15th. There are several ways to get your tax refunds. You can pick up tax forms, such as the 1040A or 1040EZ, fill them out and mail it by the deadline. You can also visit a tax accountant or preparer to have him or her do the work for you. The easiest and quickest way to file now is to file your taxes online. The IRS has a wealth of information on this topic.

Once you enter in your information and add up the appropriate lines, you’ll see the amount of taxes that you were supposed to pay. This amount gets deducted from what you have already paid and if there is a balance, you will get tax refunds from your state as well as the federal government. In some cases, you might only get a refund check from federal tax overpayment, but not for state taxes. This all depends on how much was paid in taxes throughout the year.

What can I do to maximize my tax refunds?

The best advice on this subject is to overpay. In the worst case, you might actually owe money for underpayment of taxes. To avoid this, you can pay a little extra throughout the year, even if they are small amounts of $5 or $10 per week. You can always get tax refunds for overpayment, but it might become a struggle when you find out that you have underpaid.

To maximize tax refunds, look closely at your deductions. Have you missed anything? Thankfully, tax filing programs will take you through the steps so that you won’t miss a deduction. Individuals are encouraged to use online tax filing programs to file their taxes for this reason.

Common deductions include education / tuition expenses, childcare expenses, medical and/or disability expenses, student loan interest payments and donations to charitable causes. Receipts for your deduction will also help maximize your tax refunds, so make sure you hold onto them throughout the year.

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