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Tax Refund

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A tax refund is a payment by the IRS or a state government due to the overpayment of taxes. A tax refund is generally the result of excess withholding from paychecks. However, a tax refund can also result from overpayment of estimated taxes, or the under-estimating of tax credits, deductions, and/or exemptions. When a W-4 form is filed with an employer, the amount of withholding allowances checked will determine the amount of taxes withheld and thus factors into the amount of a tax refund, if applicable. An accurate tax return that warrants a tax refund will result in such tax refund being received within 6 weeks of receipt of filed taxes. If taxes are filed electronically, a tax refund, if warranted, can be expected three weeks after the received date. A tax refund may be received either by direct deposit or via a mailed check. In some instances, a tax refund from the federal government may be considered income and must be reported on state taxes. While a tax refund at the end of the year is welcomed, it does amount to an interest free loan to the governing body. In addition, consider that income earned in the early months of the year will take a year or more before it is returned by the taxing authority and inflation will have reduced the purchasing power of those excessive tax payments.

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