When tax season comes around, it brings with it some terms you probably don’t use in your day-to-day life. Two of the most common and easily confused of these terms are “tax return” and “tax refund.” Although the two are sometimes used interchangeably, there is an important difference to be aware of.
Tax Return
This is the form you submit to the Internal Revenue Service (IRS) each year. Typically, your tax return will show how much income you received over the past year, where that income came from, and how much of it was withheld for taxes. Your tax return will also include your various deductions and credits, which can lower your tax bill. The complexity of your tax return depends on your financial and domestic situation. You may need to provide more documentation or fill out additional forms if you have certain types of income or life events. According to the IRS, the 2019 deadline to file your tax return is April 15.
Tax Refund
Although the words “return” and “refund” sound quite similar, when it comes to tax season, they are very different. A tax refund is money that the IRS sends to you after accepting and reviewing your tax return. It’s important to note, however, that not everyone who files a tax return will receive a tax refund. A tax refund usually results when your tax return shows that you paid more in taxes in the past year than you were required to. The good news is that more than three quarters of Americans do receive a refund.
From Return to Refund
While tax returns and tax refunds are not the same, they are closely related. For example, the deductions and credits you claim on your tax return can result in a larger tax refund. And if you’re in a hurry to receive an expected refund, filing online and well ahead of the deadline can speed up the process. With a little bit of knowledge, you can avoid unnecessary stress this tax season, and put your refund to work for you.
*Although we are a debt collector, we are providing these helpful tips because we care about consumers and their general financial well-being. Midland Credit Management does not offer financial advice. If you have questions or concerns about your personal finances, please speak to a financial advisor.