Final answer:
Nonrefundable credits are paid to the taxpayer even if the amount of the credits exceeds the taxpayer's tax liability. Refundable credits are not paid if they exceed the taxpayer's tax liability.
Step-by-step explanation:
Nonrefundable credits are paid to the taxpayer even if the amount of the credits exceeds the taxpayer's tax liability. Refundable credits are not paid if they exceed the taxpayer's tax liability. Some credits are subject to carryover provisions.
Refundable credits are paid to the taxpayer even if they exceed the tax liability, while nonrefundable credits are not. Some tax credits are carryover to future years. Tax principles include the benefit principle and the ability-to-pay principle.
Refundable credits are paid to the taxpayer even if the amount of the credits exceeds the taxpayer's tax liability. Nonrefundable credits are not paid if they exceed the taxpayer's tax liability. Some credits are subject to carryover provisions, meaning if they cannot be fully used in the current tax year, they may be used in subsequent years.
When taxpayers file their taxes before the yearly deadline, usually April 15th, they calculate the taxes owed versus what they've already paid. If their withholdings and refundable tax credits are greater than the tax owed, they may receive a tax refund.
The United States tax system incorporates two main principles: the benefit principle of taxation, suggesting that taxes should be paid in proportion to the benefits received, and the ability-to-pay principle, which argues that taxes should be levied based on one's ability to pay. Programs like the earned income tax credit and child tax credit reflect these principles by providing aid to those with lower incomes.