You can receive a tax refund from the IRS when the amount of payments and credits relatable to your tax made in the previous taxation period is more than the tax you currently owe to the state.
A tax refund from the IRS is a procedure in which the taxpayer is repaid any excess money paid to a federal or state government. The situation typically occurs when an individual does not know the intricacies of taxation and overpays the government, resulting in an interest-free loan to the state or country. The reasons for overpaying taxes are numerous. The majority of regular employees end up overpaying their taxes by filing the Form W-4 incorrectly or belatedly, resulting in discrepancies with the system. Alternatively, the individual did not account for deductible tax credits associated with a change of social status. Some examples of this include minimal income tax credits, housing credits, or giving birth to a child, thus becoming eligible for Child Tax credit. It allows for up to 2,000 dollars in tax deductions, but only 1,400 dollars are refundable. Other credits may not be refunded. Finally, concerning self-employed individuals, they typically receive a tax refund from the IRS when their deductions and estimations are made incorrectly.
Tax refunds are issued by the IRS in several forms. These include personal checks, savings bonds, or direct deposits. These are transferred to the taxpayer one they file a tax return. The procedure normally takes up to three weeks. Overuse of the tax refund procedure may result in a penalty with the IRS for not filing one’s withholdings correctly.