While the terms “tax return” and “tax refund” are often used interchangeably, they’re not the same. Every filer should understand their differences to be well-informed about what they owe in taxes and what, if any, money back they will receive from the Internal Revenue Service. Learn about some of the key distinctions between returns and refunds below.

Tax Returns

A return is a form you complete and submit to the IRS. Returns detail crucial financial information about your earnings and losses over the previous tax year. This includes income amounts, the source of that income—such as employers, spousal support, or Social Security payments—and the amount withheld for taxes. You can also claim credits and deductions on a return, which helps minimize your overall tax liability.

Once all income and deductions have been entered into the appropriate spaces on a return, you can calculate any money owed or any refund due from the IRS. By law, everyone who earns an income, through work or other means, must file a tax return.

Tax Refunds

Refunds are reimbursements for taxpayers who overpaid on their federal or state taxes during the prior tax year. While taxes are automatically taken out of most employer-issued paychecks, these amounts don't take into account an individual's deductions. When those deductions are greater than what one has paid into the system, the individual receives a refund.

In some cases, a person might over-withhold on their taxes, meaning their employer takes out more money than necessary. These filers will also receive refunds since they've overpaid into the system.

But not everyone receives a refund. It depends on the credits and deductions you can legally take and how much you've already paid for the tax year.

Consult an accountant from Tudor Wilson & Associates CPAs to help prepare your tax returns and let you know for certain if a refund is forthcoming or a payment is due. Their accounting team has served the Honolulu, HI, area since 1999, offering tax preparation and planning for both individual and business clients. Call (808) 592-2000 or visit them online to explore their services in more detail.