How to Get a Tax Refund
Posted by Frank Gogol in Taxes | Updated on August 26, 2022
Taxes involve a lot of things – documents, money, stress, and so on. People who have to file taxes may have stumbled upon tax returns and tax refunds, and it’s difficult to tell the difference at first glance. So, what are tax refunds, and under which circumstance might you receive a tax refund from the IRS? Read on for the answer to your questions.
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What Is a Tax Refund?
A tax refund is offered when you pay more taxes to the state or federal government than your tax liability. It could happen through payroll withholding, for instance. When this happens, you might feel like it’s not fair that more money was taken from you for taxes, when in reality your actual tax liability is smaller.
Well, in this situation, the government is going to cut you a check for the amount you paid in addition to your taxes, and thus refund it. Back in 2019, the average tax refund was around $3,000 according to IRS’s claims.
Whether or not someone gets a tax refund depends on their financial situation. You can try predicting your tax liability with online tools for tax estimations. If your tax situation is pretty straightforward, then it shouldn’t be that difficult to figure out the amount of tax you will have to pay. If you do the estimation, you might be able to find out whether you are going to owe money when tax day arrives, or whether you should get your finances ready for a cash influx.
People should also note that tax returns and tax refunds are different. A tax return is a form you have to file annually that shows the income, investments, expenses, as well as your other tax-related information. If you live in a state with income states, then this is a form you might have to file. On the other hand, tax refunds represent money you get back when you overpay your taxes. Make sure you don’t confuse the two.
Who Gets a Tax Refund?
Tax refunds are given to people who overpaid their taxes during the year. If you’re in this situation, you can expect a tax refund too. However, you will first have to file your tax return to be able to receive the money that the state or federal government owes you.
Also, the tax refund is money that already belongs to you, so don’t think of it as a way to obtain free money. The money can then be used by you normally, or you can decide to add it to a retirement account, depending on what you want.
Can I Get a Bigger Tax Refund?
It is possible to get a bigger tax refund. There are a few things you should do to make that happen, though.
First things first, you should be more organized by keeping track of all your receipts, as well as tax forms and documents during the year. All these documents may have student loan interest documentation, charitable contributions, property tax forms and other such things included. If you make sure to keep track of all the documents featuring this type of data, then you have good chances to get a bigger refund.
If you can, start working on your taxes as soon as the year begins, and work as much as you can on them so you don’t rush in the last second. Doing things earlier and at a much natural pace will also ensure you don’t forget any possible tax deductions or credits. Not to mention that if you file early, you will make it less likely for a cybercriminal to use your name to file a tax return and take the refund for himself/herself.
One of the best things you could do is to find a tax professional, as this person will know what to do in any situation. It will be extremely helpful when the situation is more complex and you don’t think you could handle it by yourself. Ensure that you visit a CPA or an enrolled agent, as this person has a federal license allowing him/her to represent taxpayers before the IRS. Perform some double-checks to ensure this person is certainly qualified for this.
Beware of different companies like H&R Block or TurboTax, as they might have your filing fees decreased as a result if you can file your taxes for free. Instead, look for the Free File Alliance program that is IRS-partnered. There are around 100 million people who qualify to file free taxes through this program, so make sure to visit them. Unlike the other companies mentioned before, this program actually does things for free, and your refund will not be decreased. This way, you’ll get a higher refund.
Also, you can amend your tax return within three years of the original file date if you think you didn’t get your full tax refund in the year before.
4 Ways to Get a Bigger Tax Refund
Here are some ways to get a higher tax refund:
Use the Correct Filing Status
Using the correct filing status will influence how much you get from your tax refund. Most married couples would consider filing jointly, although it’s better to file separately in some cases. For example, if you or your spouse have any business expenses, filing separately will make the adjusted gross income smaller while increasing the amount of money you can deduct. It might also end up making you miss out on a few tax credits. Look into it and see which filing status would offer more benefits.
Meanwhile, single people could look into whether they qualify for head of the household status. Usually, you must have paid more than half the cost of maintaining the house for yourself and another qualifying dependent during the year. Filing as the head of household might give you a bigger refund.
Claim Your Credits
Tax credits will make the amount of tax you owe to the IRS smaller. For instance, if you owe $5,000 and you claim a $1,000 credit, then the bill becomes $4,000. Some credits can be refunded too, meaning that you can claim them even without tax liability.
Based on your income, filing status, and potential eligible dependents, you may claim different types of credits.
You should not forget about deductions either, as they yield a bigger tax return too. Deductions tend to reduce the amount of income that is subject to tax, so you should consider them. Keep in mind that the amount of expenses you can deduct varies, so make sure that you have appropriate records that serve as proper evidence for your claim. These could be bank statements or receipts.
Max Out Your IRA
It’s also possible to have an additional tax bonus if you put some money aside and set up a traditional IRA. If you fund your IRA for the previous tax year right up to the filing deadline, your contributions might be deductible, either fully or partially.
- Why Was No Federal Income Tax Withheld From My Paycheck?
- Why Do I Owe Taxes?
- Why Do I Owe State Taxes?
- Are You Exempt from Federal Withholding?
- How to File Taxes With No Income
- Can You File Taxes Without a W2?
- H1B Taxes: Everything You Need to Know
If you have to receive a tax return, it’s essential to know the answer to “under which circumstance might you receive a tax refund from the IRS?”Use this article to maximize your tax refund and make sure you’re aware when you should get one.
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