An important question for the season when tax refunds are awaited is, ‘How much do I get back in taxes?’ the amount you owe (at its simplest). But the complex calculations and various factors contributing to the amount of tax refund, so the basics are the best place to start with in order to know how much I would get back in taxes.
Tax is the amount which is charged from the tax payer (the financial amount that is levied upon the tax payer based on several determinants in order to fun public expenditures; avoidance of payment of taxes results in a punishment enforced by law. The taxes are of both, direct and indirect nature and are payable in monetary terms on the price of goods/ services or on annual income.
Tax Refund is the amount that the refund amount on the taxes paid by the individuals/ entities to the government when their liabilities are less than the amount of tax paid by them earlier. The question regarding ‘How much do I get back on my taxes’ is answered with this that the amount of tax payable by the government to you would be the surplus of taxes you’ve paid which you didn’t owe.
The question that pops in the minds of masses is ‘how much do I get back in taxes?’, but little is stressed upon the fact that whether or not an individual is eligible for receiving and (or) applying for tax refunds. Having learnt about the factors that affect the size of tax refund you receive, it is also important to know first and foremost whether or not you’re entitled to receive tax refunds or not. Some of the individuals who work on hourly or daily wages file their tax return and receive good amount of tax refund. However, some of the individuals fail to receive the amount they thought they deserve of tax refunds.
This uncertain situation arises due to the fact that the amount of withholding by the employer for the taxes payable is the reason why some individuals may file for the tax refunds and get the amount because the taxes that have been deducted from their salaries (Paychecks) have surpassed the amount that is actually liable for these individuals. The amount withholding is the difference one could see in the paycheck from gross earnings and net amount paid to the employee. The question ‘how much do I get back in taxes’ could be answered with the calculations of how much is withheld and out of that how much is owed by the individual to the government. This is a better procedure for some of the individuals than having to save the amounts of taxes payable each year to pay the tax amounts one owes.
The employees who are not paying a surplus in the tax payments annually are definitely not eligible for tax refunds, however the individuals who have paid taxes which sum up to a total higher than the amount of tax payable by them in a year are eligible to receive a tax refund by the end of the year.
Important Tax Refund Factors
In order to understand and comprehend how much would I get back in taxes, the clear understanding of tax refund factors is extremely important so to calculate on your own about how much would you get back in taxes. These important elements are:
a. Personal Allowance
Personal allowances consist of the size of income which is withheld for taxes (federal tax) and that in turn has an impact on the size of your tax refund. So next time you question and fret about how much would I get back in taxes, keep in mind the personal allowances you have claimed on the W-4 form. An individual if claims no refund brings back very less gross amount for the high amount of tax rates but would bring a huge chunk at the end of the year. The one who claims biannual allowances would definitely bring a lesser amount.
b. Annual Income
The amount of gross annual income is one of the prime factors to be understood in order to understand how much would I get back in taxes. The percentage range of the income tax payable by an individual is between 10 to 36 percent of the annual income of the individual. The income tax rate however increases with the gradual increment in the income of an individual. The gross amount of annual income includes the entire earning sum including wages, tips, business loss/gain, income earned by self employment, earnings on shares, rent, intellectual property etc. Any forms of passive income are also included in the sum total of gross annual income of an individual.
c. Filing (Jointly/ Separately)
Some individuals file the tax refund jointly along with their spouse after marriage which results in a definite amount of tax refund based on their liabilities minus the amount of tax they paid,. However, those filing separately for tax refunds are likely to receive a larger chunk of tax refund amount calculated separately on their earnings and expenses (and liabilities etc). The household’s total refund increases in most of the cases when the husband and wife file separately for the tax refund thus each could be satisfied with the answer in the form of hefty amount, to their question ‘How much do I get back in taxes?’.
d. Federal Taxes
The tax amount that is deducted from your paycheck is the federal tax amount that you owe to the government. This is the part of the total amount you owe annually to the state and cannot be avoided for the fact that it is the amount that is deducted from salary before it reaches your account. However, in case of self employed employees (freelancers etc) the amount has to be transferred to the IRS (Internal revenue Service). These deductions are then calculated at the end of each year and the payments which weren’t due on the tax payer are refunded in the form of tax refund amount. Thus the simple formula answers the intriguing question about ‘how much do I get back in taxes’.
e. The Internal Revenue Service (IRS) Contributions
The contributions in retirement plans as well as payments made in the account of employer-sponsored retirement plan also results in reduced amount that an individual or entity owes; which in turn increases the amount of tax refund. The amount you get back in taxes also depends on the filing status along with amount of annual income.
f. Number of Dependants
The number of dependants on an individual such as the children he/she has is a great factor contributing to the calculations of tax refund amount. The amount of tax owned by an individual is reduced which results in an increment in tax refund payment amount, if the number of dependants on him/her is higher. The households with maximum number of five dependant individuals receive tax deduction of about $3,500 (as per 2015 tax refunds).
Along with the IRS contributions, filing status, and number of dependants, the credit amounts on home improvement, higher education and care for dependant all increase the amount of tax refunds for an individual.
What Internal revenue Service (IRS) Wants You To Know About Tax Refunds?
The Internal revenue Service (IRS) wants each individual to pick up on some important points and keep them in consideration when filing for tax refunds, such as:
- The amount of refund could be requested to be transferred to different accounts such as retirement/ savings account. This has to be mentioned in the form 8888. This is done to ensure a secure amount which could be assessed upon any occurrence of need.
- There are three options available for tax refund, such as direct deposit (in your account), a check or a savings bond that is equivalent to the same amount of tax refunds.
- The fact that most of the individuals worry about ‘how much do I get back in taxes’, some worry about the time duration it takes as well. The processing time of tax refunds is based on the accurate filing procedure as well as completion of required information, by the IRS. Electronically filled forms are more likely to result in quicker payments as the employees of IERS are saved from data entry procedure that comes with paper filings.
- The status of tax refund could be traced by phone. The IRS hotline for refunds is ‘800-829-1954’ and could easily be reached from any destination to inquire about the status of tax refund.
- The tax refunds could also be traced by the online services available by the IRS. The website gov allows you to track down your tax refund payments instead of anxiously waiting and pondering over when and how much do I get back in taxes.
- Late filing, incomplete filing or incorrect information in the tax refund forms result in delayed payments. Tax payers should fill in accurate information to avoid the anxiety of when would I and how much would I get back in taxes.
- There could be cases when you might receive the refund amount larger than what you owned. In such cases it is better to wait for encashment of those checks until you receive a notice explaining the amount and heads.
- The application launched by IRS for tracking tax refund is yet another accomplishment and an ease for the tax payers waiting for refunds. The IRS2Go is a Smartphone application for tracing tax refunds and filing any issues regarding it. The inquiry results are on your fingertips now and the application is available on both, Apple and Android store.
- The people worried about how much would I get back on my taxes, could be the result of receiving less than expected refund amounts by IRS. If such a case happens, use the cash amount as per convenience and you would receive the other chunk of it later. If two weeks pass without any progress on notice or the remaining amount, call 800-829-1040 for inquiry and help.
- In case of change of address or wrong address mentioned in the documentation procedure, the check could be lost as well. Report it after the adequate waiting period and a refund would be received by you soon.
The Percentage of Income Tax We get Back
The major question of how much would I get back on my taxes is answered in the following sections:
a) The complete refund
100% of income tax refund is received by some individuals, this usually happens when the filing of income tax refund forms has been on accurate timings, in correct manner, with information that is reliable and carries all the required documentation and signatures etc. also there are certain amounts set by IRS that could be calculated in order to determine the total percentage of income tax refund received (100% in this case).
- Single Individual, Earning less than $9,370 -100% Refund.
- Head of Household, earning less than $12,000 – Refund of all withheld taxes.
- Married (under 65 years of age) , filing jointly and earning less than $18,700 – Refund of all withheld taxes.
b) Child Tax Credit
This is the helpful tool for those making less money to support a child adequately. Even if a person does not owe taxes, the tax refund could be increased for him for the child tax credit. The claim has to be $1,000 per child dependant on you. If the income increases than the qualifying level for child tax credit, then the refund amount would be reduced.
- Single Parent/ Widow/ Widower/ Head of Household, Earning less than $75,000 – 100% Child Tax Credit.
- Married and filing separately, earning less than $55,000 – 100% Child Tax Credit.
- Married and filing jointly, earning less than $110,000 – 100% Child Tax Credit.
Even if the 100% credit is not received because of the gross income slightly higher than the range set, you could still apply for a certain amount of Child Tax Credit.
c) Earned Income Tax Credit
If an individual is aspiring to get a tax refund of more than what they paid in taxes, earned income tax credit is just the option for them. This requires a person who has dependable individuals on him/her including a child (which may be biological or adopted). One’s siblings and their children could also be considered for the same level of dependency. Single individuals without children are also eligible for this earned income tax credit. As the number of dependent children under 19 increases, the amount of tax refund increases gradually at a certain set criteria.
d) Payroll Taxes
The withholding amount of taxes is calculated based on the tax tables published by IRS. These calculations are then used to determine the amount of taxes levied on one’s paychecks. The taxes owed on one’s gross income are based on these tables and the percentages usually range from 10% – 35% of withholding amount, which of course mainly depends on the income of a person. These tax deductions on the payroll save the time consumed by saving for taxes each year and paying them. The excess amount would easily come to you as a tax refund.
The above computations and criteria clearly answer the ambiguity of how much do I get back in taxes.
Tips To Get Huge Tax Refunds
As a person constantly calculates and wonder how much do I get back in taxes? It is also often thought of, as to how to increase the amount of tax refunds I am already receiving. Following are some of the tips to follow to increase the amount of tax refunds for better savings:
- With increasing the withholding amount in your W-4 form with human resource department at work, you’d be able to keep the amount in tax refund account in one way. The amount received would be greater than what would have been under normal circumstances.
- If any of the expenses at work are incurred and you have to pay for them from your pocket, and the boss doesn’t reimburse for those expenses; that amount could be deducted from the taxable income and make up for the amount. Such cases could be with cell phones, laptops, and travel expense (for business purpose) etc.
- The different filing statuses qualify for different amounts of tax refunds. The filing of a married couple separately could result in higher amount of tax refund than those filing jointly.
- The religious donations, charity and amount donated in community groups are all part of the tax exempted groups and by deducting taxable income in charitable contributions you could get more in refund. IRS allows individuals to deduct up to 50% of their income (taxable) in charitable contributions to different hospitals, communities etc. these contributions include money, stocks, expenses incurred in volunteering etc.
- If you’re not covered by a sound retirement plan, that amount that could have been saved for it could be deducted from the taxable income.
- The expenses incurred on immediate family could be deducted from the taxable income such as child’s daycare expenses, expenses incurred on the health and care of parents or a close relative, expense of alimony to a former spouse and children could be deducted from the taxable income.
- If you have a business you’re operating from your home, the electricity and other utility bills could be deducted from taxable income. Mortgage or rent of the house could come in the same category thus saving a lot of money.
- The buying of energy efficient vehicles or building a house in such manner could result in less fuel and energy consumption; and since government promotes it and has reduced taxes for it, this could be an ideal tip too.
The question ‘how much do I get back in taxes’ could be answered in the comprehensive manner by elucidating on not only the calculations and factors affecting them but also the ideas and tips to maximize the tax refund amount. The individuals could use several techniques to save on their taxes or increase the final amount of tax refunds and save for retirement plans, businesses, or as personal savings.