Why do I get a tax refund?
A refund occurs when the tax withheld from your paychecks during the year exceeds your actual federal tax liability. The standard deduction, tax credits, and adjustments reduce your tax, so any excess withholding is refunded when you file.
How do tax credits affect my refund?
Credits reduce your tax dollar-for-dollar. Refundable credits (like the Earned Income Tax Credit or part of the Child Tax Credit) can produce a refund even beyond what you paid in. Nonrefundable credits can reduce your tax to zero but not below. Both increase your potential refund.
How soon will I get my IRS refund?
The IRS issues most refunds within 21 days of accepting an electronically filed return with direct deposit. Paper returns take longer. Refunds that include the Earned Income Tax Credit or Additional Child Tax Credit are held until later in the season by law.
Should I aim for a big refund?
A large refund means you gave the government an interest-free loan all year. Adjusting your Form W-4 to withhold closer to your actual liability puts more money in each paycheck. Some taxpayers still prefer a refund as forced savings; it is a personal trade-off.