What’s the Difference Between a Tax Return and Tax Refund?
Taxes are a big part of our lives and they can be complicated to understand. One of the things that often confuses people is the difference between a tax return and a tax refund. Knowing the difference between the two can help you be prepared come tax season.
What is a Tax Return?
A tax return is the form that you submit to the IRS at the end of each year that shows your total income and taxable deductions. This form is used to calculate how much income tax you owe for the year. A tax return can be simple or complex depending on your job and financial situation.
What is a Tax Refund?
A tax refund is the refund you receive from the government as a result of filing your tax return. A tax refund is the difference between the taxes you paid throughout the year and the total taxes you actually owe. If you overpaid on taxes throughout the year, this excess will be returned to you in the form of a tax refund.
Types of Tax Returns
There are a variety of different types of tax returns. They include:
• 1040: This form is the most common type of tax form and is used to report an individual’s income.
• 1040A: This form is similar to the 1040, but it’s used by individuals who make less than $100,000 in income.
• 1040EZ: This form is used by individuals who make less than $100,000 and have limited income sources.
• 1040NR: This form is used by non-residents and part-time residents of the United States.
• 1040X: This form is used to amend a previously filed tax return.
Calculating Your Tax Refund
Your tax refund is determined by several factors, including the amount of taxes withheld from your paycheck and the deductions and credits you are eligible for. If your withholdings are greater than your total taxable income, you’ll receive a refund.
The best way to calculate your tax refund is to use a tax calculator. These can be found online and will help you figure out the exact amount of your refund. Additionally, some of the top tax preparation software programs will also provide you with an estimated tax refund before you file your return.
Tax Refund Processing Times
When it comes to tax refunds, the IRS typically processes them within 21 days of your return being filed. Your refund can end up taking longer to receive if there are any discrepancies or errors on your return.
Additionally, if you claim certain credits like the earned income credit or the additional child tax credit, your refund may take longer than usual. The IRS has an online tool to help you track the status of your tax refund.
Receiving Your Tax Refund
When it comes time to receive your tax refund, there are a few options available. You can choose to receive it via direct deposit, a paper check, or a prepaid debit card.
There are also a few other options for receiving your tax refund, including having it deposited into a savings account or into a special savings bond.
What Happens if You Owe Money?
If you owe money on your tax return, you can make a payment directly to the IRS. However, be aware that the payment must be made on or before the due date. If you fail to pay by the due date, you may be subject to late fees or penalties.
A tax return and a tax refund are both important elements of filing taxes. A tax return is the form that you submit to the IRS that includes your total income and deductions. A tax refund is the difference between the taxes you paid and what you are actually liable for. Additionally, the IRS typically processes tax refunds within 21 days of the return being filed. Knowing the difference between a tax return and a tax refund can help you be prepared come tax season.
