A tax refund represents the surplus amount of money a taxpayer overpaid to the government throughout the tax year. This situation typically occurs when the total taxes withheld from your paychecks, combined with any estimated tax payments, exceed your actual calculated tax liability.
When you file your annual tax return, you report your total earnings, deductions, and tax credits. If the calculations demonstrate that your payments were greater than the final tax amount owed, the IRS or state tax agency returns the difference to you as a refund.
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