Tax Refund

Tax Refund

A tax refund is a reimbursement to a taxpayer of any excess amount paid to the federal government or a state government. Taxpayers receive a refund when they have overpaid their taxes, typically through withholding or estimated tax payments during the year.

Examples:

• If a taxpayer’s total tax Liability for the year is $3,000, but they had $4,000 withheld from their payCheck, they will receive a tax refund of $1,000.
• A self-employed individual who estimates their taxes and pays $5,000 quarterly may find their actual tax Liability to be $4,500, resulting in a $500 refund.

Cases:

Common scenarios where taxpayers receive refunds include:

• Employees whose tax withholdings were too high.
• Taxpayers eligible for refundable Credit/">Tax Credits, such as the Earned Income Credit/">Tax Credit (EITC), which can result in a refund even if no taxes were paid.
• Individuals who qualify for deductions or Credits not factored into their withholding amounts.