Wwhen it comes to paying taxesit’s popular belief that it’s a complicated affair but many assure that it’s not that hard at all once you break down the different fundamentals there are and understanding the terminology used by the IRS.
For instance, tax returns and tax refunds aren’t the same, even though they sound similar, which often makes people confuse them.
What is a tax refund?
Tax refunds are issued by the US Treasury when an individual paid more taxes than needed, in their state or federal filing, like when an employer withheld more money than needed from their employee’s check.
Also those who file estimated taxes each quarter, due to them being self-employed, are usually the individuals who receive back the taxes they overpaid.
The IRS reimburses the overpaid amount in a single payment to the taxpayer.
What is a tax return?
A tax return on the other hand is the form that is filed by an individual to the IRS with your adjusted gross income, expenses, and other financial information, with most of the information being taken from the W-2 statement, provided to the taxpayer by their workplace in advance.
Among the information you can find in your tax return are many of the ones you need to file your taxes, like the amount you have already paid in taxes, your gross income and more.
A tax return also includes deductions like charitable donations, health care coverage, home office and business expenses, contributions to your Roth IRA and deductions for children.
In other words, to get a tax refund an individual must first file a tax return.