Tax Return vs. Tax Refund at a Glance
Here’s how the two compare.
| Tax return | Tax refund | |
|---|---|---|
| What it is | A form reporting your income and the tax you owe | Money returned to you because you overpaid |
| Direction | You send it to the IRS | The IRS sends it to you |
| Who has one | Most people whose income requires them to file | Only filers who overpaid or qualify for certain credits |
| When it happens | After the tax year ends | After the IRS processes your return |
For federal taxes, most individuals file Form 1040. You file a return whether you’re getting money back or owe more, so the return always comes first. Not sure you need to file? Check whether you must file and what goes into a tax return.
How a Tax Return Determines Your Refund
Your return compares two numbers: the tax you already paid during the year and the tax you actually owe. The gap between them decides whether you have a balance due or get a refund.
Withholding and Tax Liability Defined
Withholding is the tax your employer takes out of each paycheck and sends to the IRS for you. The amount depends on the Form W-4 you fill out when you start a job.
Tax liability is the total tax you owe for the year. It’s based on your taxable income (income after deductions, less applied credits). Your tax liability is then compared to payments you’ve already made (withholding and estimated) to determine whether you have tax due or will receive a refund.
A Simple Refund Example
Say your employer withheld $5,000 during the year and your tax liability is $4,200. You overpaid by $800, so you get an $800 refund.
Now say your liability is still $4,200, but only $3,500 was withheld. You underpaid by $700, so you owe $700 when you file.
| Refund scenario | Owing scenario | |
|---|---|---|
| Tax withheld | $5,000 | $3,500 |
| Tax liability | $4,200 | $4,200 |
| Result | $800 refund | $700 owed |
Some credits can also create a refund. A refundable tax credit can pay you money even after your tax bill reaches zero.
If you owe every year or get a much bigger refund than expected, you can change your withholding. The IRS Tax Withholding Estimator helps you decide what to put on a new Form W-4.
Getting and Tracking Your Refund After You File
Once you file, you can track your refund with the IRS Where’s My Refund? tool. Refund status is available 24 hours after you e-file a current-year return. It generally takes 3 or 4 days after e-filing a prior-year return and 4 weeks after mailing a paper return. For estimated timing, check the IRS refund schedule.
What Can Delay Your Refund
Several things can slow down your refund:
- Common mistakes, such as forgetting to sign your return or math errors
- Claiming the Earned Income Tax Credit or the Additional Child Tax Credit, since the law holds these refunds until mid-February
- Filing an amended return
If you made a mistake on your return, you correct it by filing an amended return.
Why Your Refund Might Be Smaller
Your refund may be reduced to pay prior taxes you owe. It may also go toward past-due debts, including child support and federal nontax debt. Past-due state income tax can be taken out, too.
Sources
- IRS, Refunds
- IRS, Where’s My Refund?
- IRS, Tax Withholding
