The deadline for filing your 2020 taxes is May 17, 2021. Here’s what else to know.
What is a refund?
A refund is the payment the federal or state government makes to a taxpayer who pays an excess amount of taxes during the previous year. This payment comes in the form of a check, direct deposit or savings bond.
There are two primary views on refunds. One side sees tax refunds as evidence of an interest-free loan given to the government. The other considers them as forced savings, since the taxpayers do not have access to the money until after they receive the refund.
Those who want to reduce or eliminate their tax refund need to increase the number of exemptions they claim, and those who want to increase their refunds should decrease their claimed exemptions. People who want to make these adjustments should talk to a tax professional about their options.
Some taxpayers receive a refund even if they don’t pay any taxes to the government. Designed to benefit low- to moderate-income households, the earned income tax credit reduces the amount of taxes the taxpayers owe. This reduced tax bill can lead to a tax refund.
Each year when you complete your tax return, you list your income for the year and subtract from that amount available deductions to determine your adjusted gross income. This is the figure the IRS uses to calculate the amount of tax you owe.
If you have a job, your employer deducts taxes from your paycheck and sends the money to the IRS. When the total amount of taxes you paid out of your paycheck is greater than what you actually owe, the government returns the overage to you, and that is your refund for the year.
Are you wondering if you qualify for earned income tax credit to increase the amount of your refund? Use Bankrate’s earned income tax credit calculator to see how it can help you and your family.