When filing your taxes, there are two separate returns that you need to fill out, federal and state. While this may seem like double the work for you it’s easier when you have everything organized and understand what you’re doing. Your federal and state tax returns are not the same thing, and here is why that is:
Two Types of Tax Refunds
Your federal taxes are imposed by the federal government and applies to everyone. The federal tax income law divides individuals into seven different tax brackets based on their income. The lowest bracket is set at ten percent of your income while the highest bracket is around 39 percent. As soon as you’ve claimed your deductions and personal exemptions, you will be put into a tax bracket that determines your taxable income.
Your state taxes are set by your state’s government and are determined by each state. While some states have a high state tax, others have none or close to none. These states are considered “tax-friendly”. A majority of your state taxes go towards paying for public education, grades K-12, and healthcare, specifically Medicaid and the Children’s Health Insurance Program (CHIP). The rest of your money goes towards public higher education, transportation, maintaining or building new roads and bridges.
Understanding the Tax Refund
For those who receive a tax refund, it usually means you have overpaid on your taxes for the previous year. For things such as the birth of a child or buying a house, your taxes can change and if you do not update your forms to reflect your change of circumstances you may be overpaying. Many taxpayers are eligible for refundable tax credits which can reduce the amount in taxes they pay every year.
Your tax refund can come in the form of a direct deposit or a check mailed to your home. It should be issued to you a few weeks after you file your taxes, if it is not, double check your tax forms and make sure nothing was filed incorrectly or any changes need to be made.
Due to the coronavirus, the deadline to file your taxes has been pushed back to July 15, so some tax returns may be delayed.