1. You may not always get a refund
A “tax refund” is a reimbursement taxpayers receive when they have overpaid their taxes. While taxpayers usually see this refund as a sort of bonus or even as a stroke of luck, it often defines what is basically an interest-free loan made to the federal or state government.
Overpaying taxes usually happens when employers withhold too much from taxpayers’ paychecks. According to the US Treasury, nearly three-fourths of taxpayers have their taxes overwithheld, which means millions of people get their tax refunds yearly.
While receiving some money back after filing your tax return isn’t uncommon, financial experts point out that expecting you’ll always get a reimbursement can be dangerous.
As Robbin E. Caruso, a certified public accountant, explained, you won’t be owed funds this year just because you received a refund last year. That’s why it’s very important to carefully project your tax liability every year. Also, make sure you make any payments required through tax withholding and with their tax returns, estimated taxes, or tax extensions in order to avoid interest and costly penalties on them.
