Is it possible to get a bigger refund than you pay in taxes?

[disney junky]

I've always wondered this because I know people who get huge refunds.

 

[soccerdad72]

Yes, due to credits such as Earned Income Credit.

 

[DopeyDame]

Yup. There are a few "fully refundable" credits, which means that you get the full value of the credit even if you paid less than that in taxes.

ETA: The people who get huge refunds could also just have their deductions set way too high. I have a friend who uses her tax refund to pay for a vacation ever year. She knows she doesn't need to be paying that high of taxes throughout the year, but she chooses to use it as sort of a savings account. Whatever works for her!

 

[rwdavis2]

Only if you have a low income and qualify, as mentioned, for the Earned Income Tax Credit.

 

[Gumbo4x4]

Yup, although a "huge" refund isn't necessarily an indication that this is what took place.

 

[DopeyDame]

Only if you have a low income and qualify, as mentioned, for the Earned Income Tax Credit.

EITC isn't the only one. For a few years the adoption tax credit worked the same way. And I'm sure there are a few others.

 

[disney junky]

Huge is relative to their income. Someone who earns $60,000 and gets back $4500. That's huge to me. You hear percentages of people who pay nothing, and I've always been curious how that happens. The tax code is ridiculously complicated.

 

[Gumbo4x4]

Huge is relative to their income. Someone who earns $60,000 and gets back $4500. That's huge to me. You hear percentages of people who pay nothing, and I've always been curious how that happens. The tax code is ridiculously complicated.

I wouldn't call that "huge". That's probably pretty average for someone who has their deductions set up deliberately to maximize their refund (which a lot of people do).

 

[disney junky]

I wouldn't call that "huge". That's probably pretty average for someone who has their deductions set up deliberately to maximize their refund (which a lot of people do).

I rarely get anything back; usually I pay in, so I define huge as pretty much anything. My example is nearly a month's income.

 

[Gumbo4x4]

I rarely get anything back; usually I pay in, so I define huge as pretty much anything. My example is nearly a month's income.

Not unusual either. Too many possible variables to make a direct comparison.

 

[DLgal]

Huge is relative to their income. Someone who earns $60,000 and gets back $4500. That's huge to me. You hear percentages of people who pay nothing, and I've always been curious how that happens. The tax code is ridiculously complicated.

There are a few ways people end up exempt from paying taxes. One of them is military deployed to a combat zone. Those earnings are tax exempt, but often military members are not gone the whole year, so the portion of their income that is taxable usually falls into the range that makes them eligible for the EITC,so they get back the amount withheld for the months they were stateside PLUS the EITC credit which can be several thousands of dollars.

One year we got back around $8000 because my husband spent 10 months in Afghanistan. That year, he only paid in about $1200 before he deployed.

 

[tvguy]

I wouldn't call that "huge". That's probably pretty average for someone who has their deductions set up deliberately to maximize their refund (which a lot of people do).

I wouldn't either, especially if that person had kids. I used to have my withholding within $100 of my final tax bill. I opted to have a specific percentage that my CPA calculated withheld, and it was right on. They don't allow that anymore. With the withholding tables, if I withhold one way I owe $1,000, if I withhold to the next step, I get $1,000 back. The withholding tables don't even come close to predicting my actual tax liability. But I am at a point of my life where have have almost no deductions.

 

[soccerdad72]

I rarely get anything back; usually I pay in, so I define huge as pretty much anything. My example is nearly a month's income.

In most cases, though, anyone could make it so they get a "huge" refund. Simply withhold more from paychecks during the year and you'd get a lot of it back with your tax return.

But all that really means is that money that you could have had during the year was held onto by the IRS and then given back at the end of the year.

EITC and other refundable credits is a different story, however - as they don't have anything to do with withholdings.

 

[aprilgail]

Huge is relative to their income. Someone who earns $60,000 and gets back $4500. That's huge to me. You hear percentages of people who pay nothing, and I've always been curious how that happens. The tax code is ridiculously complicated.

That seems pretty standard to me not huge. Last year I ended up having to pay 7,000 (in addition to the 7,000 they already withheld) so this year I increased my withholding, I was always single zero but now I went single 0 with 100.00 extra in federal tax- so I get my taxes done this year and I am getting back 6,000- now I just stopped that extra 100 taken out for this year- hopefully it will come out alright now. I never had an issue until I retired, when I had it coming out of my paycheck it was always getting back 4,000 or so- since I retired it got a little wacky for a year or two but hopefully settles down now- plus I have a kid going to college this year!

 

[Vijoge]

Is it possible to get a bigger refund than you pay in taxes?
I've always wondered this because I know people who get huge refunds.

I just quickly completed a tax return using the information for someone I know well enough to know how many dependents she has and her approximate income. I entered $0 as her withholding, meaning she has had no money taken out of her check for income taxes. Her refund would be $7,143.

 

[Gracie09]

I wouldn't either, especially if that person had kids. I used to have my withholding within $100 of my final tax bill. I opted to have a specific percentage that my CPA calculated withheld, and it was right on. They don't allow that anymore. With the withholding tables, if I withhold one way I owe $1,000, if I withhold to the next step, I get $1,000 back. The withholding tables don't even come close to predicting my actual tax liability. But I am at a point of my life where have have almost no deductions.

you can have them withhold a specific additional dollar amount. We do that and this year we are getting back about $150 total between federal and two states.

 

[wvjules]

Yes. I used to get back more than I paid in due to EITC. Luckily, I have improved my situation greatly have to pay taxes now. I get a $92 refund this year but I still paid quite a bit. If I had the choice of making so little money that I got EITC and making what I make now and have to pay taxes, I choose now. Being poor and barely making ends meet Is no fun.

 

[tvguy]

you can have them withhold a specific additional dollar amount. We do that and this year we are getting back about $150 total between federal and two states.

I'd have to adjust that dollar amount depending on how much overtime DW and I get. The percentage was spot on.

 

[OhMari]

It amazes me how much in taxes we pay in and it drives me crazy when people boast how much they are getting back in a return.
We are both working long hard hours, so we both have a lot of over time and we are really saving now for our retirement, which is in 15 years.
This year, we both paid into the Federal government, $32,000. Our state we paid in $15,000, I think SS and Medicare was around $20,000. Over 1/2 of our paychecks go into taxes. There is something seriously wrong with our tax system. We are receiving a refund of $4,000, between our state and Federal returns, big deal, look at how much we have paid in.

 

[smiths02]

About 30 percent of workers had a negative income tax in 2011, thanks to the Earned Income Tax Credit (EITC), which gives them a big refund. But these beneficiaries tend to leave the program fairly quickly. Many low-income workers actually receive extra money through the tax code, thanks to the EITC.
Source: Washington Post

ETA: This is separate from Soc Security/Medicare tax. Only about 7.9 percent of households are not paying any federal taxes at all. That's usually because they're either unemployed or on disability or students or are very poor.