Taxes

Thanks Becki,

When I said double taxed I mean that you have to report your refund as income on your tax return.  I assumed that meant you were taxed on that amount.  Am I wrong?

Thanks again,
Heather

Hey Heather!

Think of it this way.......you paid the government throughout the year to use part of your paycheck for whatever they wanna use that money for.  This is money already earned on your behalf, you're just letting the government play with it.  When it comes time to filing taxes, you get to work out how much you paid the government for the year and if you overpaid the government during the year, they pay you back what's due to you.  It's not income because you had already earned it during the course of a year and therefore it's not a taxable income.  If they taxed your refund then that would be double dipping on the taxes and they only time the IRS can double dip is one prize winnings and if you do an early withdrawal on your 401k.  Becki probably knows more than me on this subject.  My mom was an accountant LOL

Heather,

If you go to http://www.irs.gov/pub/irs-pdf/i1040.pdf and then go to page 22 and look at Instructions for Line 10.  It will explain Taxable Refunds in detail for you.  In a nut shell, if you didn't receive Form 1099-G, you do not have to report your previous year refund.  As Aaron had said, that refund is money we receive for overpayment of taxes, and some individuals Earned Income Credit, Child Tax Credit, and Additional Child Tax Credit.  I hope this helped you, and if you have anymore questions or would like me to look over your taxes for you let me know.

Becki

Thanks for your help!