We all know about income tax. It is the money we pay to the government for the financial income we make in its jurisdiction. But what is a tax refund? Wikipedia quotes it as “A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid”. Simply put, income\e tax refund is the money given back to a citizen when a financial year ends.
Why would you be paying the money?
It often happens that the tax that taxpayers should pay is less than the sum of the withholding and the estimated taxes combined with their refundable tax credits. In this case, they are paid back the extra that they paid in the form of income tax refund. The amount, of course, depends on the tax you have paid, which, in turn, depends on the tax rate. Currently, there are 7 rate brackets for filing tax depending on your filing status and your income. These are 10%, 15%, 25%, 28%, 33%, 35% and 39.6% respectively.
Getting the Income Tax Refund
There are several ways of getting your income tax refund. You can choose between receiving a check, having it directly deposited into your bank account or having that money as the rebate in the following year’s income tax filing. Considering that as of 2011, the average income tax refund was $2,100, it is no wonder that you should keep an eye out for your tax refund. The average time for receiving a tax refund is around 3 weeks.
How efficient is it?
Essentially, an income tax refund is nothing but an interest-free loan that you are providing to the Federal Government which means that you, as a taxpayer, are losing out. While it is often looked at like a bonus, and others think of it as being forced to save money, the reality is that it can all be avoided. All it takes is that a taxpayer pays particular attention while filing for the income tax so that the deductions are taken into consideration. However, in case a taxpayer has just entered a workplace or has been unemployed for a stretch of time, the government keeps back far more of the money than should be needed, returned in the form of income tax refund.
Are you eligible?
How do you find out whether you are eligible to receive income tax refund? There are 3 ways that the US Federal government offers to find out. They are:
- Calling them up on their automated phone number
- Using the IRS website
- Using the IRS2GO app, available in both android and apple app stores
Note that you will need to provide some information to access the data. This includes providing your Social Security number, the accurate amount of tax filing and your filing status. However, in case you think that you are due to get an income tax refund and do not see that, you should not worry. The system often has a heavy load, especially towards the end of the financial year on April 15th, and can take the time to catch up on all the information.
In short, be sure to keep tabs on whether you qualify for the tax refund. After all, a little extra money never hurt anyone (even if it was yours in the first place).