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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In the United States the system is set up so that most employers take money out of employee paychecks and send it to the government as “withholding” toward their taxes. The amount of money withheld typically depends on the employee’s income and their family size, but it varies a bit. This amount is not the actual amount for taxes, but something like a really bad approximation.
When “tax season” comes around, which is typically 1 January to 15 April, where individuals “file their taxes” for the preceding year, by filling out a bunch of forms (or doing it electronically these days) where items relevant to taxes are reported – income from jobs and from investments, family size, mortgage payments, medical expenses, education expenses, retirement savings, and potentially a whole host of other things. These figures are factored into the taxes in various ways.
The end result is a number dollar figure of the taxes the person needs to pay for the year. That figure is compared to the amount that was withheld. If the government took too much money then the remaining will be a tax return given back to the person. If the government did not take enough money then the person needs to pay what they owe.
Much more important than the amount of money they get back, is the amount of money they don’t get back.
This is a rather simplified explanation, but it does the trick.
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