A tax return and a tax refund. They sound similar and sometimes go together, but they’re not the same things. And this year, there are more nuances than ever, as a result of the COVID-19 pandemic, the $1.9 trillion March stimulus bill and stimulus checks going out now for up to $1,400 apiece. So what’s the difference between the two and what are the biggest changes you need to know about?
Tax season is ongoing, and with May 17 set as the new Tax Day deadline, you may have questions. We’ll explain the details of each term below and everything you need to know about how tax refunds are different this year and how to find out if you’re getting one. Also, once you file your tax return, here’s how you can track the status of your refund.
What is a tax return?
A tax return is a form you file each year with the IRS that details your adjusted gross income (AGI), expenses and other financial information. Most of these details comes from your W-2 statement that your workplace provides you weeks in advance to file your taxes, but you might also have a 1099 or other form for recording your income.
Your tax return will include your gross income (which is different from your AGI), how much you’ve already paid into taxes (through your company’s withholding or estimated taxes that you prepaid if you’re self-employed) and other important information you’ll need to file your taxes.
However, the tax return will also balance deductions for your kids, as well as how much you paid in student loan interest, health care coverage, Roth IRA contributions, home office expenses, business expenses, charitable donations and more.
You must file a tax return in order to get a refund. However, just because you file a return doesn’t mean you’ll get a tax refund.
What is a tax refund?
A tax refund is what’s issued to you by the US Treasury if, in the previous year, you paid more in state or federal taxes than you needed to. For example, maybe your workplace withheld more money than was actually needed from your paycheck, or you’re self-employed and wound up overpaying quarterly estimated taxes.
The government will reimburse you, or “return,” the difference between what you paid and what you owed as a lump sum payment; in other words, your tax return. Also, any deductions on your taxes (see above) can also add to the amount you can expect to receive. Here’s how to track your 2021 tax refund with the IRS.
What’s different about tax refunds now?
For one, the due date is now May 17, not April 15 — and that could affect your stimulus check amount, which might mean you have to file for an adjustment down the line, which could mean a larger refund in 2022. The IRS may also send you a second refund in 2021 for unemployment benefits you were taxed on.
For your 2020 taxes (the ones you file in 2021), any missing stimulus money you claim from the first or second stimulus checks could also be included in your tax refund. To get that money, you’ll have to file a Recovery Rebate Credit on your tax return. Also, if you received a stimulus check last year, you won’t be taxed on it or refunded less because the IRS doesn’t consider it income.
Child tax credits could also help you receive more money on your tax refund this year and next by giving qualified families up to $3,600 per eligible dependent. Here’s what to know about when the CTC payments could come.
Other changes for 2020 taxes include the standard deduction for single filers ($12,400) and married joint filers ($24,800) and deductions of up to $300 to qualifying charities.
How will I know if I get a tax refund?
If you use tax filing software or service, you’ll see a final estimate of how much you should receive after you file your tax return (including if you self-prepare). Once the IRS receives your return, they’ll send you an email or a text message letting you know your final refund amount.
Then, after they accept your refund, that means your money is on the way to your bank account or mailbox. You can track your refund from the time you file your taxes until you receive your payment. Note that it can take anywhere from one to three weeks to get your refund back, assuming there are no errors found on your tax return.
For more tax information about your 2020 taxes, here’s the deadline for filing your 2020 taxes, seven tax credits and tax breaks you could get and what to know about this year’s taxes and stimulus checks.