The word "taxes" generally has a fairly negative connotation. However, there may be a case where it briefly takes on a positive meaning: when you become entitled to a refund of overpaid income tax. How to handle it effectively? This article will give you a comprehensive view of how you can make the best use of this unexpected financial injection.
What is a tax refund?
An income-tax refund is the amount the tax office returns to you if you paid more in taxes (or advance payments) during the year than was necessary. An overpayment often arises due to incorrectly calculated tax advances or the application of various allowances and deductions that you're entitled to.
How to find out whether you have an overpayment?
First, it's important to file a tax return, where you state all your income and apply any deductions.
Requesting a refund of the overpayment
You have to request the refund in the tax return itself, on its last page. In the request you also choose one of the methods of refunding the overpayment:
- to the taxpayer's address (only for non-business individuals),
- to an account.
However, if the tax office has a refundable tax overpayment on record for you and you're interested in having it returned and want to have it refunded (and you didn't do so via the tax return), you have to fill out a request. It is sent to the tax office that has the overpayment on record. You can fill out and submit the request electronically, or submit it in person.
1. In electronic form:
Go to the Public Administration Portal, where you can use the Online Tax Office application, or Electronic Submissions for the Financial Administration (EPO) on the Moje daně (My Taxes) portal. You log into both applications using Citizen Identity, a data box, or the access credentials assigned by the Financial Administration of the Czech Republic.
In the applications you'll then find a template called Request for refund of overpayment. You fill it out and sign it either with a recognized electronic signature, Citizen Identity, or the login credentials for your data box, and then submit it.
2. In person:
You can fill out the request electronically (see above), but instead of submitting it electronically, print it, sign it, and send it to the relevant tax office by post, or bring it there in person.
You can also write the request as plain text on a blank sheet of paper. For example, "I request a refund of overpaid personal income tax." Then you clearly identify yourself as both the applicant and the signatory, and you sign the request.
The last method is to request the refund of the overpayment verbally, in person during a visit to the tax office where the overpayment is on record.
How to handle the refunded money?
Having a tax refund in hand can be a great opportunity to improve your financial situation. How to use this money?
Saving
Putting money into a savings account is a simple and safe way to ensure your money grows. Savings accounts usually offer higher interest than current accounts, which means you'll earn more money over time.
Repaying debts
If you have any debts, for example credit cards, personal loans, or a mortgage, it can be sensible to use the overpayment to pay them off. Reducing or completely eliminating debts can save you considerable money on interest.
Investing
Investing your tax refund can be another great way. Investments can offer higher returns than savings accounts, but they can also carry higher risk.
Are you interested in why, how, and what to invest in?
Where to invest your tax refund?
There are many ways to invest your tax refund. We've written an extensive article about it: How and where to invest small amounts? Here we'll mention just 3 of the most popular options:
Stocks or funds
Consider investing in stock markets, ETFs, or mutual funds. Even a smaller amount can grow over the long term thanks to compound interest. Regularly investing smaller amounts can be an advantage.
Investing in real estate
Investing in real estate can be a great way to grow your wealth and gain passive income. Real estate tends to grow in value and can provide stable rental income.
Tip: Also find out all about investing in real-estate funds.
Micro-investments in real estate
For those who want to invest smaller amounts, micro-investments are a great option. Thanks to InvestBay, you can invest in real estate with smaller amounts and receive a share of the returns both from rental and from the sale.
This is ideal for investors who don't have enough capital to buy a whole property.
The advantages of micro-investments compared to other forms of investing
Micro-investments and co-ownership (crowd-owning) offer high flexibility and lower risk compared to traditional investments. Investors can diversify their investments and minimize the risk of loss. You can also travel more cheaply to our locations.
How does InvestBay let you grow your tax refund?
At InvestBay we offer the option to invest small as well as larger amounts in attractive properties all over Europe – see for yourself and take a look at which properties we currently offer for investment. You can thus diversify your investments and receive a share of the returns from the rental and sale of properties.
Do you have to invest with InvestBay every month? You don't. With InvestBay you can invest just once-off as well – for example in this case, when a certain sum of money arrives all at once that you want to grow.
Of course, it still holds that: the more you invest altogether, the better.
How does investing through InvestBay work?
Investing through InvestBay is simple and transparent. Investors can track their investments online and receive regular updates on returns. Read about how it works with us.
What is certain, though, is that you'll get stable income from renting out the property as well as profit from the sale of the property. We always offer clear information about the expected returns and the risks associated with the investments.
Tip: Calculate the return on your investment, the appreciation, and the yields with our investment calculator. Quickly and easily.
Invest smartly
A tax refund can be a great way to grow your wealth and secure your financial future – if you invest it correctly. Start today and discover the options for growing your wealth and securing financial stability.
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