Tax Refund
Money returned when tax payments exceed actual tax liability.
A tax refund occurs when your total tax payments (withholding and estimated payments) exceed your actual tax liability for the year. While a refund feels good, it means you gave the government an interest-free loan. Most refunds are issued within 21 days of e-filing. The average refund is approximately $3,000.
Example
An employee had $15,000 withheld from paychecks but only owed $12,500 in federal tax—the IRS issues a $2,500 refund after filing.
Why It Matters for Your Business
A large refund means your withholding is too high—adjusting your W-4 puts that money in your pocket throughout the year instead of waiting for a lump sum.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
Related Financial Guides & Resources
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