Definition
Money the IRS or your state sends back when you paid more tax during the year than you owed, or have refundable credits.
What it means
A tax refund happens when your withholding, estimated tax payments and refundable credits add up to more than your total tax. It is not a bonus; it is your own money returned, or a credit paid out. The IRS says most refunds for e-filed returns with direct deposit are issued in less than 21 days, though returns with errors or certain credits take longer, and refunds claiming the EITC or additional child tax credit cannot be issued before mid-February. You can track your refund with the IRS Where's My Refund tool. A large refund may mean too much was withheld from each paycheck; adjusting Form W-4 changes that balance. Refunds can be reduced to pay past-due federal debts, child support or certain state debts.
Example
If $6,500 of federal tax was withheld from your pay and your total tax for the year is $5,200, your refund is $1,300, or about $108 a month you could have kept in your paychecks.
Illustrative numbers only. Your situation will differ.