What Is a Refund?

A refund, in the context of taxes, is reimbursement for an overpayment of taxes by 𓆏a government taxing authority. In a wider context, businesses and merchants issue refunds to customers who are dissatisfied with the goods or services they purchased.

How a Refund Works

The 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) is the biggest issuer of tax refunds, although state and local governments also refund taxpayers. In the 澳洲幸运5官方开奖结果体彩网:fiscal year 2021, the 澳洲幸运5官方开奖结果体彩网:IRS issued more than 129 million refunds totaling over $365 billion. The average tax refund issued was $2,815.

The IRS issues refunds regularly throughout the year. Using the tool on the IRS website, a taxpayer can check the status of an expected refund. Users input their Social Security number or 澳洲幸运5官方开奖结果体彩网:tax identification number (TIN), filing status, and the exact amount of the expected refund to retrieve the status, which is typically updated once per day.

According to the IRS, 90% of electronically filed 澳洲幸运5官方开奖结果体彩网:tax returns are processed within 21 days from the e-file acceptance date. Mailed paper returns, meanwhile, usually process within six to eight weeks from the date they are received.

Special Considerations

On Dec. 18, 2015, Congress enacted the 澳洲幸运5官方开奖结果体彩网:Protecting Americans fro﷽m Tax Hikes (PATH) Act. The act requires that the IRS not issue refunds for tax returns which include the 澳洲幸运5官方开奖结果体彩网:Earned Income Credit (EIC) or Additional Child Tax Credit until Feb. 15. For some taxpayers, this act extends the time between submitting a return and the processing of their refund.🍨

State Income Taxes

State taxing authorities also issue refunds, and most states have🎀 a system that allows taxpayers to verify the st💝atus of them.

Eight states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—have no state 澳洲幸运5官方开奖结果体彩网:income taxes. Residents of these eight states do not file state tax returns but are still responsible for filing a federal tax return. As of 2021, just New Hampshire does not assess taxes on wage income but does tax investment income and dividend income. Tennessee used to tax investment income as well but the tax was repealed on Jan. 1, 2021.

Each state regulates the form and amount of business, or corporate, income tax. Some states tax 澳洲幸运5官方开奖结果体彩网:gross receipts and others tax 澳洲幸运5官方开奖结果体彩网:business income. According to the Tax Foundation, an independent tax policy non-profit, state business rates ranged between 2.5% and 11.5% in 2021.

Types of Refunds

Beyond 澳洲幸运5官方开奖结果体彩网:tax refunds, there are also refunds for goods or services that businesses issue. Companies may issue refunds to customers based on their return policy. Although rare, some businesses have liberal return policies that allow customer꧃s to return purchased goods at any time for a full refund, with or without a receipt.

Typically, 澳洲幸运5官方开奖结果体彩网:e-commerce businesses wait until the returned product is received before they will issue a refund. Companies create return policies that strike a balance between excellent customer service and the company's profitability. Service providers, too, may allow partial or full refunds for unsatisfac🐲tory or unfulfilled services.

Example of Tax Refunds

After the passage of the 2017 Tax Cuts and Jobs Act, the actual amount of taxes the IRS refunded . This is because 🔯rule changes redu✅ced the amount of money employers needed to withhold from paychecks. The benefit to workers has been more take-home pay, but the tradeoff is less money returned after filing.

Having a smaller tax return is proba🐼bly better than having a 💞larger one, however. The money held by the government throughout the year does not earn interest🍰. If taxpayers and employers withheld money for taxes in a savings account, for example, it could earn about 0.5% interest over the course of the year.