Civic · 6 pages · 12 min

Why a refund is often your own money returning

An income-tax refund is often excess withholding or estimates coming back, not a new payment from the government.

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From the opening

When the tax computed on a return is smaller than the sum already withheld or paid through estimates, the difference is refunded to the filer. In that common case the payment is the filer's own money returning, because it was sent in as tax and turned out to be more than the tax the return computed. The opening covers excess payment is the common case, computed tax is the year's tax, and refundable credits can add more.

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Inside

Excess payment is the common case
Computed tax is the year's tax
Refundable credits can add more
Smaller refunds need not mean higher tax
Where the idea stops applying
A distinction worth keeping

Sources

Income tax overpayment refund
Refundable tax credits

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Why a refund is often your own money returning

From the opening

Inside

Sources

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