Tax Return vs. Tax Refund: What Are The Differences?

The main difference between a tax return vs. a tax refund is that a tax return is a document filed to report your annual income and the amount of taxes you owe, while a tax refund is a reimbursement for the excess taxes you have paid.

Although they might seem similar to a layman, the distinction between these two terms is quite substantial and fundamental, which is why we dedicated this article to explaining what sets them apart.

This article will guide you in navigating through important tax-related terminologies to prepare in time for this year’s tax deadlines.

Key Takeaways

• The main distinction between a tax return vs. tax refund is that the former reports a taxpayer’s earned income and tax liabilities, while the former reimburses taxpayers for any excess in the amount of taxes they’ve paid.
• Taxpayers are required to file their federal and state income tax returns annually. Meanwhile, the IRS only reimburses tax refunds to qualified individuals.
• The amount of tax refund you will receive depends on how much you overpaid on your taxes. It is also based on your qualified tax credits and deductions.
• The deadline for filing tax returns this year is April 15, 2024, while filing for an extension will move the deadline to October 15, 2024, to prepare all your tax paperwork.

What is a Tax Return?

A tax return is the document or form you use to report your income, expenses, and tax liability for the recently concluded year.

For employees and freelancers, you’ll need either of the following IRS forms to file your tax returns:

• Form W-2, Wage and Tax Statement
• Form 1099-NEC, Nonemployee Compensation
• Form 1099-MISC, Miscellaneous Information

On the other hand, businesses use either Form 1120 or Form 1065 to file their taxes, depending on their business type and size.

In the US, tax season officially started on January 29, 2024, giving taxpayers more than enough time to process all tax returns from 2023.

This year, taxpayers must file their federal tax returns by April 15, 2024. If you live in Massachusetts or Maine, you have until April 17, 2024. It is also important to note that the deadlines for filing state taxes may vary per state.

If you filed for a tax extension, you have until October 15, 2024, to file all your returns.

Most U.S. citizens and permanent residents working in the U.S. must file their tax returns. That means whether you’re an employer, an employee, a freelancer, or self-employed, you need to file your taxes come tax season.

Aside from your total income and amount of taxes owed, your tax return also declares other essential information about your finances and the tax deductions you may qualify for, such as unreimbursed business costs, home office deductions, charitable contributions, and medical expenses.

What is a Tax Refund?

A tax refund is a reimbursement of excess federal or state taxes paid. In other words, qualifying for a refund means you may have overpaid your taxes from the last tax year.

Below are a few tax refund examples describing situations wherein you may qualify for a reimbursement on your paid taxes:

• You committed errors in your Form W-4. Your W-4 form gives your employer information on how much tax to withhold from your income. If you mistakenly filled out your Form W-4 or needed to update the information provided in the said tax form as needed, it may reflect inaccurate withholding tax amounts on your pay stub.

• You qualify for refundable tax credits. Examples of refundable tax credits include the Earned Income Tax Credit (EITC), Child Tax Credit, American Opportunity Tax Credit, Saver’s Tax Credit, Employee Retention Credit, and Lifetime Learning Credit.

• You filed quarter estimated taxes. Self-employed individuals and independent contractors file quarterly estimated taxes. They base their estimated taxes on their reported income and pay the approximate amount to avoid penalties on underpaid taxes.

If you qualify for a tax refund, the IRS can issue your reimbursement in 21 calendar days or less. You can also monitor your tax refund status through the IRS’ Where’s My Refund tool.

Tax Return vs. Tax Refund: Key Differences

Now that you know the individual tax return vs. tax refund definitions, it’s time to go in-depth into the key differences.

Purpose

A tax return reports all your income, expenses, and tax liabilities. It also declares qualified deductions or credits on your taxes. In contrast, a tax refund is never used for paying taxes; it’s quite the opposite—a reimbursement of excess taxes paid.

Qualification & Responsibility

All taxpayers—employers, employees, freelancers, and self-employed individuals whose earnings fall within the IRS’ minimum required income—must file their returns.

Between a tax return vs. tax refund, the first is everyone's responsibility, while only some people are entitled to receive the latter. As mentioned before, you may receive a refund if you qualify for refundable tax credits, overpay your taxes, or commit errors in your Form W-4.

Deadlines & Forms

While you do have firm deadlines for filing your tax return, you do not need to file any tax forms to receive your tax refund. The IRS usually deposits your refund directly into your account within 21 days after filing your return.

Now, to drive this differentiation home, here’s a table that summarizes key points in the tax return vs. tax refund debate:

Final Thoughts

A responsible taxpayer simply must understand the differences between a tax return vs. tax refund.

Some taxpayers need to pay more attention to the meaning behind each tax term. Otherwise, they may end up incurring penalties or wondering why they received a refund on the taxes they have paid.

On the other hand, you can always check out our blog if you’re interested in learning more about other tax-related topics.

We’ve tackled various subjects involving taxes, including calculating how much tax you owe as a freelancer, figuring out who gets a tax refund among your employees, and understanding the consequences of not filing a Form W-2.

Tax Return vs. Tax Refund FAQ

#1. How can I know if I will receive a tax refund?

If you want to know if you are entitled to a tax refund based on your 2023 tax return, you can use the IRS’ Where’s My Refund tool. You can also backtrack on your expenses and tax information.

For instance, if you overpaid your taxes or qualify for refundable tax credits and deductions, you can expect to receive a reimbursement from the IRS.

#2. Does everyone get a tax refund?

No, only those who qualify for refundable tax credits and taxpayers who overpaid their taxes for the previous year qualify for a tax refund or reimbursement from the IRS.

#3. How long should you keep your tax return?

The IRS recommends keeping records of your income tax returns for at least three years. However, you may be required to hold your tax returns for many years, depending on your tax situation.

#4. Do I have to file a tax return if I don’t earn any income?

No, you are not required to file a tax return if you don’t earn any income. On the other hand, if your earnings fall below the minimum required income, you may or may not have to file taxes, depending on your circumstances.

It is essential to check the IRS website or consult a tax expert to guide you in assessing your tax obligations.