What is a tax refund?

A tax refund refers to the return of excess tax payments made by a taxpayer to the government. This typically occurs when an individual or business has paid more in taxes throughout the year than they actually owe based on their total taxable income and deductions. When the IRS determines that the taxpayer has overpaid, they process a refund to return the excess amount.

This concept is fundamental to understanding tax liabilities and the process of annual tax filings. Taxpayers may overpay their taxes through various means, such as withholding too much from their paychecks or making estimated tax payments that exceed their actual tax liability. As such, once their return is processed, if it is established that they have contributed more than required, they are entitled to receive that surplus back.

The other options discuss different aspects of taxation but do not accurately define what a tax refund is. The amount owed to the IRS, penalties for late filing, and interest on prior payments do not pertain to the concept of a refund, which is solely related to the return of money that taxpayers are entitled to receive due to overpayment.