Tax refunds are one of the most anticipated parts of the financial calendar, offering you a chance to reclaim some of the money you've contributed throughout the year. For many, receiving a tax refund is an exciting moment, while for others, it can be quite puzzling.
Understanding tax refunds is important as they can significantly impact your financial planning and goals. But what exactly determines the size of your refund, and how does the process work?
Our tax refund guide is here to simplify the complexities related to the tax refund process. You'll get to know some of the key factors that influence your refund amount and discover strategies to make the most of this financial opportunity. So, let's get started on your tax refund journey and discover everything you need to know to make the most of it.
How To Get a Bigger Tax Refund
When tax season rolls around, many of us are on the lookout for ways to maximize our refunds. With a little planning and some smart moves, you can make sure you're getting back every dollar you're owed. Here are a few of the best ways to maximize tax refunds.
Choose the Right Filing Status
Your filing status significantly impacts your tax refund. If you're married, filing jointly is usually the go-to, but filing separately might save you more, especially if one of you has big medical expenses. For single parents or those caring for a dependent, filing as Head of Household can unlock a bigger standard deduction and lower tax rates.
Take Advantage of Deductions
Deductions are your best friend at tax time because they lower your taxable income. Some commonly overlooked ones include:
- State Sales Tax: Use the IRS calculator to see how much you can deduct.
- Charity contributions: Keep track of out-of-pocket donations, even small ones.
- Student loan interest: Even if someone else paid the loan, you might still qualify for the deduction if you're the responsible party.
Maximize Your Savings for Retirement and Health
Contributions to traditional Individual Retirement Accounts or Health Savings Accounts can lower your taxable income. You have until the tax deadline to make contributions for the previous year, so consider taking advantage of this flexibility.
Plan Your Timing
A little calendar strategy can go a long way. For example, paying January's mortgage in December adds to your deductible interest, and year-end charitable donations can also work in your favor. If you've been putting off medical appointments, scheduling them before the year-end might increase your deductions, too.
Claim Tax Credits
Tax credits are the ultimate refund boosters because they cut your tax bill dollar for dollar. Here are a few big ones to consider:
- Earned Income Credit: This one's apt for families with moderate or low income, offering thousands of dollars back.
- Child Tax Credit: Get up to $2,000 for every qualifying child under 17.
- Education credits: Whether you're in college or paying for your kid's tuition, credits such as the American Opportunity Credit can help a lot.
- Energy credits: If you made home improvements such as installing solar panels, you could qualify for a hefty credit.
By being proactive and informed, you can take steps to ensure you're not leaving any money on the table.
How Do Tax Refunds Work?
Tax refunds are often eagerly anticipated, and understanding the process can help you set realistic expectations and avoid unnecessary delays. Here's a streamlined guide to help you manage every step from filing your return to receiving it.
How Form W-4 Impacts Your Refund
Form W-4 determines how much tax your employer withholds from your paycheck. The 2020 update to this form, prompted by the Tax Cuts and Jobs Act, simplified the process and improved accuracy. Key sections include:
- Personal details such as your name, filing status, and Social Security number
- Income from multiple jobs or a working spouse, which ensures proper withholding
- Dependents, including the Child Tax Credit, which can adjust your tax liability
- Custom adjustments for additional withholding or deductions
It's important to review your form after major life events such as marriage or the birth of a child, as these changes can impact your tax situation.
How Do You Get a Tax Refund?
Here are the steps your refund goes through before it reaches you:
- File your return: Simplify the process by using tools such as TaxAct, which guide you through deductions and credits to maximize your refund.
- Choose E-filing: E-filing with direct deposit is the fastest way to receive your refund. It's quick, secure, and convenient.
- Await IRS processing: Most returns are processed within 48 hours. Platforms such as TaxAct or the IRS will notify you of the status of your return.
- Get your refund issuance: Once your return is approved, the IRS generally issues refunds within 21 days. If you've opted for direct deposit, expect up to five additional days for the funds to be reflected in your account. However, for state refunds, check with your state tax agency, as timelines can vary.
Checking the Status of Your Tax Refund
You may be wondering, "Can I track my tax refund?" The answer is that you can. To do so, use one of the IRS tools: the Where's My Refund? online tool, the IRS2Go mobile app, or the TeleTax System at 1-800-829-4477. If you e-filed, you can check your status within 24 hours. However, paper filers will need to wait for about four weeks after mailing their return. The refund will go through three stages: Return Received, Refund Approved, and Refund Sent. Avoid calling the IRS unless it's been 21 days since e-filing or if you're instructed to do so.
Benefits That Increase Your Tax Refund
Boost your tax refund by utilizing valuable benefits such as the Child Tax Credit (up to $2,000), Child and Dependent Care Credit (up to $2,100), and Earned Income Credit (up to $7,830). You can also deduct student loan interest (up to $2,500), mortgage interest, property taxes, and home office expenses if applicable.
Contact Pasquesi Sheppard LLC for Your Tax Filing
Whether you prefer expert assistance or handling your taxes on your own, it's essential to have reliable support every step of the way. Pasquesi Sheppard LLC provides expert, personalized tax services in Illinois to fit your unique needs, ensuring everything is accurate and that you get the maximum refund possible. With our professional guidance, you can confidently process your tax filing. Contact us today for any expert help you need related to your tax filing, and leave everything to us.