You might not think about your tax return or refund when it’s not tax season. However, as a taxpayer, it’s important to understand the function of each. Although "return" and "refund" both sound like something is being given back to you, these terms are not interchangeable. For proper tax return preparation, learn what each entails below.

Tax Return

The forms you fill out and submit to the Internal Revenue Service (IRS) and your state’s taxation department annually make up your tax return. This paperwork outlines your place of employment, yearly income, the amount withheld for taxes, and other relevant information, like expenses and investments.

Your tax return also has a section for deductions and credits you can use to decrease your bills. If you’re using software for tax return preparation, you can calculate your tax liability and schedule payments if you’ve underpaid the federal and state government.

Tax Refund

Meanwhile, a tax refund is a reimbursement issued in the form of a personal check, direct deposit, or U.S. savings bond if you overpay the federal or state government. Many taxpayers look forward to receiving a refund.

However, you only receive a refund if your tax return shows that you’ve paid more taxes than needed during the year. This often happens when you choose to withhold too many taxes on your W-4 or forget to update your paperwork to reflect a change in life circumstances, like having a child. 

You can also receive a refund if you qualify for certain tax credits. For example, those who earn less than $53,930 or have a child enrolled in school can receive credits. An accountant can walk you through other options you may qualify for. 

Let James & Associates in Wailuku, HI, help with your tax return preparation needs. With over 25 years of experience, their accountants provide affordable and comprehensive financial services for individuals, small businesses, and non-profits, including filing federal and state tax returns and IRS representation. Learn more about their offerings on their website, or call (808) 244-2030 to schedule a free consultation.