A refund is an amount of money returned to the person or company that paid it.
Tax refunds are given when the amount of tax paid turns out to be higher than the amount of income tax actually owed for the entire year.
Companies usually facilitate the withholding of tax for every pay period, then turn over this amount to the tax agency. When the income tax is filed and all the factors (such as deductions, exemptions, and so on) are taken into account, it is possible to find that more money than was owed has been paid. The excess is then returned to the individual.
Tax refunds can function as way to save money. It is possible for some people have a higher amount withheld per pay period so that they receive a larger amount of money at the time of the refund. This might be especially useful for people who find it difficult to set aside an amount for savings at the end of the pay period. The lump sum amount may be used for a vacation or big purchase that an individual might want to make at the end of the year.
This may make tax refunds seem like a boon, but others are not so enthusiastic. After all, this was money a person earned, so there is no additional benefit from getting a bigger amount of money after one year. It is sometimes more practical to have access to the right amount of money every month rather than get a certain amount some time after. Also, some individuals believe that this is actually money an individual has loaned to the government without interest.
