How Tax Refunds Happen
Every year from the 1st of January till the 15th of April, everyone hears about taxes. Commercials play for local tax preparation offices, articles are released about this year's tax projection from the government, and many grumble about having to take the time to prepare their taxes. The highlight of tax seasons is when tax refunds are released.
Anyone who makes income during the prior year must file income taxes with the Internal Revenue Service, or IRS.Tax refunds happen when a person owes less in taxes than has been paid to the government. Tax refunds often occur when people are eligible to receive a number of tax write offs. When a person is due a tax refund, the government will send a paper check or direct deposit to the person for the amount owed. Tax refunds can range from a few dollars to several thousands. The amount of the refund will be determined by the taxes already paid, income, dependents and write offs, as well as employment position or career field.
Tax refunds are generally one of the biggest financial gains that many American individuals and families receive in one lump sum. For many, it is important for tax refunds to be put to good use. Some see tax refunds as found money, but this is not necessarily the case. A tax refund may mean that a person is paying more in taxes each pay period than necessary. This can be changed by correcting any claims on your tax form with your employer. These adjustments can usually be made any time during the year.
Deciding whether or not to continue receiving a tax refund, rather than adjusting your withholdings is a decision that must be made individually. Some people believe that their money is most effective when received in many small sums across the year. Others would rather have larger withholdings and receive a larger tax refund in the beginning of the year. Whether or not to receive a tax refund is a personal decision and should be made depending on your monthly income needs and lifestyle. If you need help deciding, you can speak with a financial professional regarding the benefits and liabilities of either decision.
The best part about receiving a tax refund is the ability to spend it on anything that you want. Many people spend their tax refunds shopping, while others choose to save their refund for emergencies or other big ticket item. Some strategically wait to purchase a car or put a down payment on a mortgage until tax time. Before going out and spending your tax refund on your first idea, take into account your needs. Many families have had a hard time during the recession and are behind on bills or have virtually zero savings. Other individuals and families have recovered from the recession, but are not in the financial position that they wish to be in. A tax refund can be a life saver for many reasons. Whatever you choose to do with your refund remember, tax season (and therefore, a tax refund) comes but once a year.