Do The Math: Understanding Your Tax Refund

For most people, tax is collected by an employer at a rate that estimates your tax for the year. Your actual earnings and the deductions that you are allowed to claim might cause you to pay too much tax, which leads the Internal Revenue Service(IRS) to issue you a refund. The idea behind a tax refund is when you pay more tax than you owe, the Internal Revenue Service returns the overpayment as your refund.
The following are tips understand on tax refund;

Income tax with holding

When you start a new job, you will complete form W-4. This is the Employee’s Withholding Allowance Certificate (EWAC), from which your employer determines your rate of tax withholding. It is based on the personal allowances you declare or calculate, your income and any additional tax you wish to withhold. The IRS recommends that you complete a new W-4 annually or whenever your life circumstances change, to prevent having tax deducted at an unrealistic rate. If you regularly owe taxes when you file your return, or if you have other income sources or deductions that may affect your tax rate, adding an additional withheld amount on line 6 of your W-4 may put you in a refund position.

Using tax deductions

There are ways to get a refund when you file your return. You need to reduce the taxable portion of your income to swing your tax return toward the refund side. Tax deductions you qualify for will reduce your taxable income. The standard deduction offered by the IRS is a simple way to reduce your taxable income, but you have the option to calculate your own itemized deductions, using your actual deductible expenses. If you have a qualifying home office or other business expenses that you pay for under terms of your employment you may be eligible to deduct those expenses from your income. If you own a home, the interest on your mortgage and your property taxes are generally deductible. TurboTax can guide you through the process of itemizing your deductions. Visit this site for more information : taxreturn247.com.au

Using tax credits

While tax deductions reduce your income, the effect is that they only reduce your tax by a portion of the amount deducted. Tax credits, on the other hand, reduce taxes dollar-for-dollar and frequently address hot topic expenditures, such as energy efficiency initiatives.  Even the Affordable Care Act(ACA) spawned the premium tax credit, to assist modest income earners who purchase health insurance coverage through state and federal health insurance marketplaces.

Savings plans and deferred tax

Tax deferral is another way to increase refund, while providing for yourself down the road. Individual retirement accounts are a common way to accomplish this. Deductible contributions to a qualifying plan reduce your taxable in the year you make them, and income tax is paid when you withdraw funds. Your tax rate after retirement will be lower than when contributions are made, so you end up paying less tax down the road, as well as increasing your tax refund in the current year. Contributions to health and education savings plans can also reduce taxable income and increase your refund the year made, and, if used for the intended purpose, may be tax free upon withdrawal.

Therefore, there are many deductions that can ensure that you are getting some refund back. But, if you do not know what you can get some relief from, you will not know to file for the deductions. This is where a tax return company can come in. They will ensure that you can get all the deductions that you are qualified for.

TOP 6 THINGS TO CAUSE A TAX REFUND DELAY

Whenever people think tаx rеturnѕ dеаdlіnе, their mіndѕ are uѕuаllу fіllеd wіth thе possible реnаltіеѕ that they are lіkеlу tо receive frоm thе revenue соmmіѕѕіоn. However when it соmеѕ tо аѕkіng fоr tаx rеfundѕ, many реорlе hearts аrе uѕuаllу fіllеd wіth thе fеаr оf dеlауѕ, еxсuѕеѕ, аnd аrgumеntѕ from thе ѕаmе rеvеnuе соmmіѕѕіоn. Hоwеvеr, this ѕhоuld actually nоt bе so because thе соmmіѕѕіоn is not really dоіng you аnу fаvоrѕ. Sо, whаt аrе some оf the reasons thаt саuѕе thеѕе hurdles?

  • Late Fіllіng оf Returns

One of the rеаѕоnѕ why thе delays аrе always еxреrіеnсеd is bесаuѕе оf thе lаtе fіlіng оf thе rеturnѕ. Whеn реорlе fіlе rеturnѕ lаtе, thеу ѕhоuld nоt rеаllу expect thе rеfundѕ tо be done fаѕt. Thе rеаѕоn for this іѕ thаt durіng thе lаѕt days оf fіlіng the rеturnѕ, there is usually a vеrу hіgh level оf activity. Thіѕ mеаnѕ thаt thеу will first concentrate on mееtіng thе nееdѕ оf thоѕе реорlе who fіllеd the returns оn thе lаѕt days before thе deadline.

  • Pооr Dосumеntаtіоn

Onе thіng thаt you nееd tо knоw about the рrосеѕѕ of applying fоr a tаx rеbаtе іѕ thаt уоu wіll nееd to рrоvіdе аѕ muсh рrооf аѕ possible thаt іndееd thіѕ іѕ money оwеd tо уоu and whісh needs tо be раіd bасk. It does nоt really mаttеr hоw “obvious” іt ѕееmѕ to you that you ѕhоuld have thе money rеfundеd tо you. Fоr this rеаѕоn, іf уоu wоuld lіkе tо hаvе your rеbаtе сlаіm рrосеѕѕеd fаѕt, уоu ѕhоuld mаkе ѕurе that you hаvе аll thе documents thаt уоu wіll need wіth you bеfоrе making the сlаіm.

  • Lоng Delays In Asking Fоr Thе Refund

Onе thіng thаt you need to know іѕ thаt thе lоngеr уоu tаkе wіthоut аѕkіng fоr your refund, thе longer it will tаkе for уоu to rесеіvе уоur mоnеу оnсе уоu hаvе mаdе уоur сlаіm. Rеgаrdlеѕѕ of hоw muсh efficiency уоu are expecting frоm thе tаx office, уоu rеаllу саnnоt еxресt thеm tо асt fast оn уоur claim іf аt аll you аrе mаkіng a сlаіm fоr mоnеу thаt thеу hаvе оwеd you fоr ѕіx уеаrѕ. Check here !

  • Amending your tax return

If you need to amend (make changes to your taxes) after filing you will need to prepare an amended return. Amended returns cannot be filed electronically, and must be mailed in. Amendments take an estimated eight to 12 weeks from the date the IRS receives the return. “Often the IRS system catches small transposition or mathematical errors when a return is processed, and adjusts the refund amount prior to sending it out,” according to Holland. Incorrect direct deposit information

  • Incorrect direct deposit information

The fastest way to receive a refund is to e-file a correct return and requests a direct deposit of the refunded amount. This is one area, Holland says, where you should triple-check your data entry. “A simple mistake in the routing or account number can delay a refund for weeks or even months,” he adds.

  • Filing early or late

We all know there are penalties for filing your taxes late, but did you know that filing early could also delay your tax return as well? Often changes to the tax code or procedures happen last minute, and refunds can be delayed while the IRS updates tax software. It’s best to wait until the second or third week of the year before filing your taxes. Find out more in this site : taxreturn247.com.au

The 4 Best Ways to Spend Your Tax Refund

Tax refunds are fantastic because the amount you receive can vary considerably and range from a few hundred to a few thousand dollars. However most people rush to spend the money as they are so excited about this unexpected windfall but later regret it. There are many good ways to spend your refunds and you should consider the best ways first before splashing the cash around.

Upgrade Your Home or Make Necessary Repairs

If your home is in need of serious repairs then whatever tax refund you receive should go towards that. It could be minor repairs or major ones but these repairs could prove very useful in keeping your home in good condition.

The money could be used for general maintenance of the home too or if there are no repairs required at the moment, the money could be put away for such time. However, the refund could be put towards improving the home such as upgrading the doors or windows or installing new fixtures and fittings. Your refunds could be sizable too so consider spending it wisely on your home.

Set Up or Add To an Emergency Fund

Emergency funds are just so crucial for every household today and whether you have very little or a lot of money put away for a rainy day, it could all prove useful. However you can’t have too much in your emergency fund because you never know when you’re going to need extra cash or for what purpose. Knowing money is there for tough times can lift a weight from your shoulders and while it may sound like a boring way to use the tax refunds it’s actually pretty smart.see post from http://www.bankrate.com/finance/taxes/ways-not-to-spend-your-tax-refund-1.aspx

Pay Off Debts

Having debt looming is always worrying because you fear about a missed payment or the creditors knocking at the door. It’s stressful with debt and even if it’s only a few hundred or thousand dollars, you still worry deeply about it day-after-day.

However your tax refund could be used to put towards old debts. You could pay off many debts depending on the amount you owe and the amount you receive but it could help pay the debts off faster and improve your credit score at the same time. Again, paying off debt isn’t exactly an exciting way to spend your refund but in all honesty, it’s a smart way to spend the money.

Invest

Spend Your Tax RefundInvestments are something which many get the wrong idea about. You don’t have to invest all the money from tax refunds and you don’t have to go into the stock market either. You could invest money in a new family vehicle or use it as a down payment for a new home. You could even invest in yourself and the choices are endless. Of course you could invest in the stock market if you wanted to but it isn’t the only investment option available to you. There are many great ways to invest such as putting the money towards buying a new home.

Be Smart With Your Tax Refunds

None of the above four suggestions may sound appealing but they are really the best ways to spend your refunds. They are the smart options simply because you’re putting the money to good use rather than wasting it by spending it on luxury items you rarely need, want or use. Yes treating yourself is good and you should but in moderation. Spend your tax refund wisely.

Tax Refunds – Time Limits to Claim Refunds

Tax refunds do have certain time limits in which they can be claimed. You wouldn’t think this would be the case but the truth is that if you miss the deadline and not just the final deadline for your yearly return, you may say goodbye to the refund forever. This has happened because people don’t realize there are certain limits to what can be claimed and for how long also. So, what are the necessary time limits in which you can claim your refunds?

The Maximum Time Allowed

In most cases, you will claim refunds every year when filing your tax return but for some this isn’t always the case. However the Australian government will allow an exceptional time limit as to how long you can claim any past or previous refunds. You can claim within a two year period of paying your taxes for that dated year; but you can also claim within three years of when the returns have been filed. Now ideally you will file well before two years because the longer you wait the harder it may be to claim refunds.

Unlimited Time for Mentally or Physically Impaired Individuals

However for those who have been hurt in an accident and have become impaired and unable to handle financial matters themselves they don’t have a time limit. Mentally and physically impaired individuals do not have to rush to deal with these matters as there is no limitation as to when they can file for their refunds.read post here! Now, ideally if these individuals aren’t able to handle a tax return then a capable adult or guardian should help seek professional help with these matters. If the individual can’t file the returns themselves they could elect someone to do so for them and claim the refund amounts also. The money would still go to that individual however.

Joint Returns

Limits to Claim RefundsIf you file a joint return with your husband or wife then you have around six years to claim the tax refunds. However there may be a few issues if your partner has outstanding debts as your personal refund may also be taken to cover their debts. Now, this may or may not happen but it’s a possibility which is why you have to be aware of the risks of filing joint returns.get more info from http://www.techtimes.com/articles/171986/20160731/nvidia-geforce-gtx-970-customers-could-get-30-refunds-in-false-advertising-settlement.htm .Your refund may still be awarded as long as you claim the refund within a six year period; and as long as the debts of your partner have been paid off.

Yearly Filings

In most cases if you were to file at the end of the year your refunds would be whisking their way to you within a few weeks. However if you have failed to claim your refunds then there is still time to do so but you have to be quick. You are limited severely in many instances so you can’t afford to be lax about this. When you file your tax return you should look to ensure you are also claiming for any past or present refund so that there are no delays in getting it to you.