Takeaways
- A tax refund is an overpayment of income taxes returned to the tax filer.
- Tax refunds are issued after you file your annual federal income taxes.
- In 2024, the IRS issued tax refunds of approximately $245 billion to U.S. taxpayers.
- Large tax refunds could mean you need to adjust your W-4 more accurately.
- The IRS has updated its website so that filers can track the status of their refunds through their online Where’s My Refund portal.
What Is a Tax Refund?
A tax refund is when the government reimburses taxpayers who overpaid their income taxes during the year. These overpayments can occur for various reasons, such as withholding too much on your W-4 throughout the year, overpaying estimated taxes, or becoming eligible for tax credits. A tax refund is simply the return of money owed to taxpayers who overpay based on their income tax brackets and rates.
The Internal Revenue Service (IRS) handles the processing and payment of federal-related tax refunds. In fact, in 2024, the IRS distributed over $245 billion in refunds to U.S. taxpayers.[1] State offices of revenue handle the payment of state refunds. Check with your state’s income tax resources to read the specific requirements.
Tax refunds can happen for a variety of reasons. Some taxpayers intentionally elected to withhold additional taxes from their paychecks to ensure they are entitled to a refund and don’t incur tax liability. Also, if you are eligible for enough tax credits, like the Earned Income Tax Credit or the Child Tax Credit, and these credits exceed your total tax liability, you will be refunded the excess. [2][3]
If you are like most U.S. tax filers, getting your refund could be a cash boost you can count on. For many, it is a welcomed cash infusion that helps you save an emergency fund, pay off credit cards, or boost your down payment fund. Alternatively, it can fund a much-needed vacation or home improvement project.
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How a Tax Refund Works
The best online tax filing softwares have made the process of filing your taxes fun, especially watching your tax refund amount increase throughout the process.
Here’s how the tax refund process works. First, you need to collect all your income information. This includes your W-2 from your employer, freelance income, or side hustle money. Then, determine which tax credits and deductions you qualify for. Some online tax filing software platforms will automate this process for you. At the end of this process, you will compare your tax liability based on your total income earned and compare that to your deductions and credit.
- Get the Most Out of Your Tax Refund. Learn the 9 Best Ways to Use Your Tax Refund.
If you paid more in taxes through the year than you technically owe, you are entitled to a tax return. Once you formally file your tax return to the IRS or your state tax authorities, they will verify the information you submitted and process the tax return due. Depending on how you file your taxes, you can receive your tax refund via an online direct deposit or paper check.
While filing your taxes sounds simple, it can get uber complicated. If you have investments in stocks, bonds, certificates of deposits, real estate, or other asset classes, your taxes can get complicated quickly. You could also have a complicated tax filing if you own your own business. Depending on your tax situation, consider consulting with a tax professional.
To remove some of the stress of waiting for a tax refund to arrive, the IRS has online tools to help give taxpayers some information. The IRS’s Where’s My Fund? tool allows taxpayers to follow the status of their refund from the time the return is sent in until the refund has been issued.
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How Do You Get a Tax Refund?
Getting a tax refund is pretty simple at its core. You need to pay more to the government than you will owe. Then, you must file your taxes and have your return accepted.
First, gather all of your paperwork and documents. This includes your W-2s from employers, 1099s, any independent work or additional income, and proof or documentation for any other deductions or credits that you will be claiming. It might also include receipts for charitable donations, interest statements from your mortgage lender, or records of medical expenses.
Next, you must complete your tax return with online tax preparation software, the free filing service provided by the IRS, or a personal tax professional. Ensure everything is reported accurately and claim all the credit and deductions you are eligible for. Online tax software is excellent because it is built to spot potential credits or deductions you have missed.
Then, you need to send in or submit your tax return to the IRS and local tax agency. E-filing is the preferred way to file your return, and it is the fastest and most efficient. It can also help catch things you may have missed or omitted, which allows you to reduce refund delays.
Once your return is submitted, track it with the online tool - Where’s My Fund? - provided by the IRS. This free service lets you keep an eye on the status of your return as it moves from “Filed” to “Received” and eventually to “Accepted” and “Refund Issued.”
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When Do You Get a Tax Refund?
E-filing is the most efficient way to process your tax filing and receive a refund quickly. Sending your tax return in the mail, on the other hand, will take much longer.
The second significant fact is how you choose to receive your refund. If you sent up a direct deposit, it could only take a matter of days and weeks. In most cases, the IRS will issue a refund within 21 days of receiving an e-filed return, but up to six weeks longer if you filed paper.[4]
If you opt for direct deposit when filing your return, you will need to provide the account and routing number to your checking or savings account. The IRS processes e-filed returns much faster, and direct deposits hit bank accounts quicker. Additionally, if your return has credits that need additional verification (like the Earned Income Tax Credit or the Additional Child Tax Credit), it might add a delay to your return.
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Smart Summary
A federal tax refund is a reimbursement from the IRS or your state income tax authority for overpaying taxes. Most taxpayers rely on their tax refunds to give them a cash boost for their savings. Use one of the best online tax software to file taxes to help you get the most out of your filing experience. Paying more taxes than you owe throughout the year will ensure you have a tax refund and not a tax liability.
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Frequently Asked Questions
You can follow the status of your federal income tax refund by using the IRS’s Where’s My Fund? Tool. You will need your social security number, refund amount, and filing status to check on your return.
For the tax year 2024, the IRS requires you to file your taxes by April 15, 2025.
This depends on how you file your taxes. If you file electronically and set up a direct deposit, you can expect to get a refund in approximately 21 days. However, if you file it by mail, this process could take over six weeks.
(1) Internal Revenue Service. Filing season statistics for week ending April 19, 2024. Last Accessed January 14, 2025.
(2) Internal Revenue Service. Earned Income Tax Credit. Last Accessed January 14, 2025.
(3) Internal Revenue Service. Child Tax Credit. Last Accessed January 14, 2025.
(4) USA.gov. Check your federal or state tax refund status. Last Accessed January 7, 2025.
