The Internal Revenue Services uses only a few documents when calculating your tax return. If you’re working and receiving the majority of your income from work, once your W-2 is filed by your employer, the IRS will know exactly how much you’ve earned throughout the year.
From there on, the agency will calculate your taxable income after subtracting the deductions you claim from your income. All of this will give the IRS how much taxes you need to pay.
How your tax refund is calculated
In almost all cases, how much taxes were withheld from your paycheck determines your tax refund. If you claimed multiple allowances on your W-4 form, it means less tax withheld from your paycheck throughout the year, which decreases the possibility of getting a tax refund.
You will only get a tax refund when you exceed your tax liability which is the amount of money you need to pay to the IRS. You can calculate your tax refund by figuring out how much you need to pay to the IRS in Federal Income Tax.
After you know how much your tax liability is, find if you’re eligible for any tax credit such as the Child Tax Credit and cut the amount. If the taxes that were withheld from your paycheck exceeds how much you need to pay in taxes, you will receive a tax refund. If not, you will have to pay to the IRS.
Calculate my tax refund
Your income throughout the year – deductions = your taxable income
Depending on your filing status, find the tax bracket you fall in and calculate the percentage accordingly.
Your tax amount – taxes withheld from your paycheck
If you don’t go below zero on the answer, you are going to owe money to the IRS at the end of your tax return. Any amount below zero you get is going to be your tax refund. For more tax estimators, you can visit our front page.