i always see so many people talk about tax returns or tax season around this time and its so confusing. to me it seems like free money
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It’s not free money, it’s your money.
This is a US thing. Throughout the year, a set amount of money is taken automatically from your paycheck for the income taxes that you owe. This is a standardized amount.
But most people don’t actually owe the full amount. You might qualify for tax breaks or deductions (for example, a married couple owes less tax per person than a single person, you get a tax break for each kid, and low-income people get a tax break). At the end of the year (really, the beginning of the next year), you fill out some paperwork with the information (the tax return) that shows how much you should actually owe and what tax breaks you qualify for.
The deadline for this is usually in April, which is why the period roughly between February and April is often referred to as “tax season.” If you qualified for tax breaks, then that means over the year you paid too much income taxes with each paycheck, so the government mails you a check for the difference (the tax refund).
If you have a lot of deductions, this check can amount to thousands of dollars. But again, this is money you overpaid throughout the year. Because American’s stereotypically don’t manage their money very well, this extra windfall of money can be a big deal, and businesses often run big sales to entice people to spend it.
You actually have the option to not have your taxes taken automatically, (you can choose this on your w-9 when you start a job). But then, you will owe the government the full amount of taxes come April instead of getting a refund.
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