In this article, we will learn how to calculate your tax refund using Form 1040. We will clarify the steps, tables, and line numbers that apply to the 2022 Form 1040, which is filed in April 2023. This information will help you understand how much you owe to the Internal Revenue Service (IRS), or rather, the amount you will receive as a refund.
How can I calculate my tax refund?
Your tax refund amount generally depends on Line 24 (Total Tax Due) and Line 33 (Total Tax Paid). Subtract Line 24 from Line 33. If the amount on Line 33 is greater than the amount on Line 24, it means you have paid more than you should have. In theory, you should receive this amount as a refund. Enter this excess amount on Line 34.
If your total tax due (Line 24) is greater than the tax you paid (Line 33), you will owe taxes. Subtract Line 33 from Line 24 to find out how much you owe. Place this amount on Line 37. This is the amount you owe.
Note: Enter “0” on Lines 34 and 35a if the result equals zero exactly, although this situation is rare. This means that your payments cover your tax liability exactly. You have no refund and there is no outstanding balance.
Should I receive a tax refund or make an estimated payment?
If you have paid more than you should have, you can apply this amount to next year’s tax liability on Line 36 of the 2022 Form 1040. You may want to consider that if you expect your tax obligations to be higher next year.
But you do not have to make it all or nothing. You can split your refund between Line 35a (the amount you want to receive) and Line 36. For example, if you are getting a refund of $1,000, you may want to allocate half of that amount to taxes for the next year. You can enter $500 on Line 35a (“Amount from Line 34 you want refunded to you”) and $500 on Line 36 (“Amount from Line 34 you want applied to your estimated tax for 2023”).
Note: You may need to make estimated tax payments if you are self-employed or have other income that is not subject to withholding.
Enter the full refund amount on Line 35a if you do not want to make any prepayments.
How can I claim tax credits?
Tax credits reduce the amount you owe to the Internal Revenue Service. They can be refundable or non-refundable. If the refundable credit amount is greater than the tax you owe, the IRS will send you the difference. If the credits you are claiming are non-refundable, the government will not send you the excess amount if the credits you are claiming exceed the amount you owe.
You can claim most tax credits on Schedule 3 of the 2022 Form 1040. These credits include:
- Foreign Tax Credit (Line 1)
- Child and Dependent Care Expenses Credit (Line 2)
- Education Credits (Line 3)
- Retirement Savings Contributions Credit (Line 4)
- Residential Energy Credits (Line 5)
- Health Insurance Premium Tax Credit (Line 9)
Some of these credits require additional forms. Each line indicates which form should be used.
Some credits are claimed directly on Form 1040 instead of a separate schedule or worksheet. These credits include:
- Child Tax Credit and Other Dependents Credit (Line 19)
- Credit
- Earned income (line 27a)
- Additional Child Tax Credit (line 28)
- American Opportunity Credit (line 29)
Can I get a tax refund with direct deposit?
You can have the amount shown on line 35a of your Form 1040 deposited directly into your checking or savings account. Direct deposit is often faster and more secure than receiving a paper refund check in the mail.
To set up direct deposit, you will need the routing and account numbers for the bank account you want to have the refund deposited into. You can find these numbers by logging into your online banking account or through your mobile banking app.
The account and routing numbers are also printed on any check you can use with that account. If you look at the bottom of the check, you will see two sets of numbers. The first series of numbers should be a 9-digit bank code. This is your bank’s routing number. Copy your bank’s routing number to line 35b of your Form 1040.
Now check the appropriate box on line 35c, depending on whether you want to deposit the refund into a checking or savings account. Locate your account number on the check and enter it on line 35d.
Note: Double-check your bank numbers, and contact your bank to verify the numbers if you are unsure. You may not be able to recover your funds if they are deposited into the wrong account.
How can I pay my tax balance?
If you have a balance due on line 37, you have several options to pay the amount owed.
Paying taxes by check: You can write a check for the amount owed to the U.S. Treasury and send it to the Internal Revenue Service. On the line provided, write your Social Security number followed by the four-digit tax year and “1040”. The IRS will know exactly where to apply your payment with this notation. Mail the check with your tax return.
You can also send the check with a payment voucher 1040-V. If you filed electronically, it should be printed with your tax return.
Note: Your check should be payable to “U.S. Treasury” instead of “IRS” or “Internal Revenue Service”.
Paying taxes online: You can also make payments online by enrolling in the Electronic Federal Tax Payment System (EFTPS). You can schedule due payments or make estimated tax payments here. You can also set up monthly installment payments. EFTPS is free.
IRS DirectPay is another free option. You do not need to register and sign up on this website. Instead, you will need to re-enter your banking and identification information each time you want to make a payment. The site will not save information on your behalf.
If you are using tax preparation software, you will be able to schedule an electronic withdrawal from your checking account. You can choose a convenient day for you, even the tax deadline for this year. For example, you can file your return today and schedule a future payment when you receive your next paycheck.
Paying taxes by credit or debit card: You can also pay your taxes using a credit or debit card. The IRS provides links to three payment processors on its website. There is a processing fee for making credit card payments to the IRS.
If you use a credit card to pay your taxes, be sure to pay off your balance as soon as possible to avoid costly interest charges.
Source: https://www.thebalancemoney.com/refund-or-amount-you-owe-3193140
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