Receiving a tax refund is like coming upon “found money,” but a refund has actually been your money all along, which you overpaid through payroll deductions or quarterly tax payments returned to you. When you complete your tax return, you’ll be able to estimate the amount of taxes you overpaid, which means any surplus will be headed back your way. So sharpen your pencil, turn on the calculator and tackle that tax return – or you may avail yourself to an online tax return estimator that does the math for you.
TL;DR (Too Long; Didn't Read)
You can estimate your tax refund by comparing your yearly tax contributions to your income tax bracket while simultaneously factoring in the various credits and deductions you have taken.
How Much Will I Get Back in Taxes?
It’s all in the math. Although that may not have been your favorite subject in school, you can perform some fairly simple mathematical calculations to determine the amount of your anticipated tax refund. You’ll need to use your tax return form and other paperwork, such as pay stubs, a profit-and-loss statement or 1099 forms, to gather the pieces of your tax return puzzle so you can put everything together.
Choose Your Filing Status
Your filing status helps determine how much tax you pay each year, so it’s important to choose the correct status. Currently, the IRS has five filing categories, which are determined by your marital status as of the last day of the tax year:
- Single. If you are unmarried and no other category applies to you, you’ll file in this category.
Married Filing Jointly. If you are married and you and your spouse file one return together, you’ll file in this category. The IRS recognizes various marital statuses, including: husband-wife marriages;
same-sex marriages that are recognized by state law; common-law marriages, if the state where the couple lives (or where the marriage began) recognizes common-law marriage; and couples who are still married but living separately without having a legal separation. If your spouse died during the tax year, you are considered married for the entire year. If you remarry during the year, you qualify for filing a joint return with your new spouse, and your deceased spouse is included under the married-filing-separately category. If you did not remarry, you can still file a joint return with your deceased spouse.
3. Married Filing Separately. If you are married but you and your spouse file separate returns, you’ll file in this category. You may wish to be responsible for your own tax return, or it may simply benefit both of you by resulting in lower taxes if you file separately.
4. Head of Household. You can file in this category if you meet three requirements: you are unmarried as of the last day of the tax year, your income paid more than half the bills of maintaining your household, and a qualifying person lived in the home with you for more than half the year. Exceptions to this include a child who has temporary absences, such as a child who is away at school, and a dependent parent who does not live with you.
5. Qualifying Widow(er) with Dependent Child. If your spouse died and you did not remarry during the tax year, you may be allowed to claim special benefits under this category.
By claiming one or more exemptions, you can reduce your taxable income, which lowers your taxes. Prior to the 2018 tax year, exemptions were allowable deductions in the form of personal exemptions, which include you and your spouse, and dependency exemptions, which include your legal dependents. For the 2017 tax year, the IRS allows you to deduct $4,050 for each exemption you claim. IRS Publication 501, “Exemptions, Standard Deductions, and Filing Information,” outlines what is legally allowed when claiming exemptions. This publication also notes on which line of your tax return you enter exemptions, depending on which tax form you file. However, recent tax reforms have done away with personal exemptions beginning with the 2018 tax year.
Determine Your Income
Although you may hear the word “income” and think only of wages paid by an employer, “gross income” covers a much broader spectrum of compensation. It does include wages and salaried income, but it also includes other income sources, such as tips, commissions, stock options, some monetary gifts and even various employee fringe benefits. Some income is taxable, while other sources of income are classified as nontaxable, such as moving expenses and alimony. But instead of playing a guessing game, which could lead you to report your income inaccurately, refer to IRS Publication 525, “Taxable and Nontaxable Income.” Use this publication to help you determine your adjusted gross income, which is your income from all sources minus income that is nontaxable.
Find Out if Your Retirement Income Is Taxable
Typically, most retirement income is taxable, but there are exceptions. Although IRS Publication 525 includes taxable and nontaxable income requirements for retirees, another IRS Publication “Tax Guide for the Retiree” provides an easier-to-read overview. This guide also walks new retirees through the process of choosing and setting up payment options for how they pay their taxes.
Don't Forget Deductions
Not to be confused with exemptions, deductions are itemized expenses that reduce your taxable income. You can claim a standard deduction or you can list itemized deductions. Standard deduction amounts are listed in Table 6 on IRS Publication 501. To decide whether you should choose the standard deduction or list itemized deductions, first add your itemized deductions and compare that sum with your allowable standard deduction. Choose the method with the higher amount for a greater tax benefit. The standard deduction is higher for people aged 65 and older, and for those who are blind. Table 7 on Form 501 lists the allowable standard deductions for ages 65 and older, considering age, filing status, and whether the filing taxpayer is blind. If you choose to itemize your deductions, fill out Schedule A, “Itemized Deductions,” as an attachment to your Form 1040. Transfer the amount you enter on Line 29 of Schedule A to Line 40 of your 1040.
Subtract Taxes You've Already Paid
You must pay taxes as you earn or receive income by making tax withholding payments or making quarterly estimated payments.
- Tax Withholding Payments. If you are a wage-earning or salaried employee, your employer withheld taxes from your earnings each pay period based on the information you provided on IRS Form W-4, “Employee’s Withholding Allowance Certificate.” When you receive the W-2 form, “Wage and Tax Statement,” from your employer, you’ll see the total annual taxes that the employer withheld from your paychecks.
- Quarterly Estimated Tax Payments. If you are self-employed or if you receive other income that is not from an employer, such as alimony or unemployment compensation, you can choose to file quarterly estimated tax payments by completing IRS Form 1040-ES, “Estimated Tax for Individuals.” When you file your annual tax return, you'll enter the total of the quarterly taxes you prepaid on Line 65 of your 1040 or on Line 41 of your 1040A.
How Much Tax Do You Owe?
Your refund is based on how much tax you owe, offset by how much tax you've already paid. Any amount you've overpaid will be returned to you. After you've completed your tax return to reflect your filing status, income, exemptions and deductions, refer to the tax tables included with Form 1040. The amount you enter on Line 43 of the 1040 is your taxable income. Find this amount in the income categories on the tax tables, and then find the column of your filing status. Where these two amounts intersect, you’ll find the tax you owe. If the tax you paid, which is entered on Line 74 of the 1040, is greater than the tax you owe (Line 63), the difference is the amount that will be refunded to you.
Helpful IRS Publications
To help estimate how much you will get back in taxes, the IRS provides downloadable publications and forms on the agency's website. You can also order these documents on the website, and the IRS will mail them to you. Ordered forms should reach you within 10 days.
IRS Online Tax Calculator
If your anticipated refund took a disheartening turn in the wrong direction, you may owe more taxes than you've already paid. The IRS provides an online calculator to help you adjust the amount you have withheld from your paychecks (or the estimated amount you pay quarterly). From the IRS website, type "IRS withholding calculator" into the search field. When the search results load, click on "IRS withholding calculator" to begin using this interactive tool.
If You Need Help Estimating Your Tax Refund
Trying to estimate the amount of your tax refund can sometimes be a daunting task, particularly if your filing status, exemptions or deductions have recently changed. If you run into difficulty as you try to prepare your tax return and estimate your refund, the IRS and other tax professionals offer these tax return estimator resources:
- Interactive Tax Assistant (ITA). This is an online tool that answers many tax questions, such as whether certain incomes are taxable and which expenses are legally allowed as deductions. The tool can also help you determine your correct filing status. You can access different topics by using the search feature or by clicking on specific questions. Find this tool by typing “ITA” in the search field at IRS.gov.
- Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). These programs offer free help to complete and file your tax return. People with disabilities or whose income is $54,000 or less may qualify for the VITA program. People who are at least 60 years old qualify for the TCE program. Call your local IRS office or the toll-free number for the IRS at 800-906-9887 for the address of the nearest VITA or TEC office.
- Taxpayer Advocate Service (TAS). The TAS is an independent organization that is part of the IRS. This group advocates for taxpayer rights and helps resolve tax problems. You can download Pamphlet 1546, “Taxpayer Advocate Service,” from IRS.gov.
- Tax professional. Contact a trusted tax attorney or CPA to help you navigate the laws, tax forms and procedures for filing an accurate tax return.
- IRS: Choosing the Correct Filing Status
- IRS: Publication 501: Exemptions, Standard Deductions, and Filing Information
- IRS: Publication 525 - Taxable and Nontaxable Income
- IRS: Tax Guide for the Retiree
- IRS: Form 1040 - U.S. Individual Income Tax Return
- IRS: Estimated Taxes
- IRS: IRS Withholding Calculator
- IRS: Interactive Tax Assistant (ITA)
- IRS: Free Tax Return Preparation for Qualifying Taxpayers
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