Tax Refund
A tax refund is a repayment made by the government to a taxpayer when they have overpaid their taxes for the year. This can occur when too much tax has been withheld from wages, or when the taxpayer has claimed deductions, credits, or other tax incentives that reduce their final tax liability below the amount already paid. Tax refunds are usually issued after a tax return is filed and processed.
Example
After filing his tax return, a taxpayer discovers he overpaid due to excessive withholding from his paycheck and receives a $1,000 tax refund from the government.
Key points
• Occurs when a taxpayer has overpaid their taxes during the year.
• Typically received after filing a tax return and processing by tax authorities.
• Can result from excess withholding, deductions, or tax credits.
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