A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of refundable tax credits that they claim or the total amount of withholding that they paid.
Some people view a tax refund as forced savings, while others consider a tax refund to be money they allowed the government to borrow interest-free. Those who wish to receive a large tax refund each filing year may purposely have their withholdings set higher than necessary. This increases the amount of money they get back on their tax refund. However, many people mistakenly view their tax refund as free money, forgetting that it was money they earned in the first place. Unless a large tax refund is treated as savings or is invested, it is often better to receive your money each pay period rather than in a lump sum at the end of the year.
Some people love tax season. Others dread it. What is the difference? Usually, people who are expecting a refund love tax time, while people who know that they will owe the government money hate it. Some people get excited about tax time because, to them, it is the time of year that the government hands out free money, while others just look forward to getting back the extra money they paid in taxes during the year.
How to Check on Your Tax Refund?
One way is to use “Where’s My Refund?” an interactive tool on IRS.gov. Simple online instructions guide taxpayers through a process that checks the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, results could be one of several responses, including:
• Acknowledgement that a return was received and is in processing
• The mailing date or direct deposit date of the taxpayer’s refund
• Notice that the refund has been returned to the IRS because it could not be delivered
Receiving The Refund
Refunds are received in three basic ways. The first and most traditional way is by the IRS sending a paper check to the tax payer. Checks are generally mailed within a week of the time the tax return is reviewed, which can take up to six weeks after submitting it to the IRS. Expecting it to take a week in the mail, a paper check can take up to eight weeks to receive. The second, and smartest, way is to have the refund directly deposited into a bank account. The IRS even allows you to split the amount between two bank accounts. Direct deposit refunds are faster and are usually deposited immediately upon your tax return being reviewed. That cuts out two weeks compared to the paper check option. Finally, a tax payer can go to a major tax preparation company and get an instant “refund anticipation loan.” These loans allow the person to get their refund the same day that the tax return is filed. These refund loans, however, come at a steep price and most people would be better off waiting for the tax return to come on its own.