Tax Time Kickoff Series: Part III-How Can I Plan for Changes to My Refund?

As we kick off tax season, the Center and Budget and Policy Priorities’ Get It Back Campaign and the Financial Clinic have teamed up to help you sort through what tax reform might mean for your refund, and what you can do to make the most out of tax time. This the final post in this three-part series.

If your refund is higher or lower than expected:

Be sure to adjust your tax time saving and spending plans accordingly. The recent tax reform changes impact the amount of taxes that need to be withheld from paychecks over the next few years. You may want to use this tool to see if you need to change your tax withholdings to plan for next year’s tax time.

Form W-4 is used to adjust the amount of taxes withheld from your paycheck. You can adjust your Form W-4 with your employer(s) to get your refund throughout the year, or to get a larger refund at tax time. You may prefer a smaller tax refund to get more of your money throughout the year in each of your paychecks. Or, you may find a larger tax refund useful to help “automate savings” once a year.

If you owe the IRS or your state after filing your return:

If you owe unexpected tax, know that you have several options to pay it. You can pay at the time of filing and up to the April 15 filing deadline. If you cannot pay the full amount, pay what you can to minimize interest and penalty charges. Let your tax preparer know that you would like to set up a payment plan. They can help you complete Form 9465, Installment Agreement Request. IRS charges interest and fees while you are on a payment plan, but tend to be very flexible about helping you with a payment amount you can afford. If a payment plan will cause financial hardship, you may be able to settle your tax debt for less than the full amount or request the IRS temporarily delay collection until your financial situation improves.

Low-Income Taxpayer Clinics (LITCs), typically help with addressing IRS-related tax disputes and can help with audits, tax collection matters, and reducing fees or penalties if you are eligible. Call your local 3-1-1 or 2-1-1 to find the nearest LITC near you. A financial coach can also help if you have questions about developing affordable payment plans or reaching out to IRS.

To avoid owing taxes next year, follow the steps above to make adjustments to your Form W-4. Increasing your withholding means each of your paychecks will be smaller; however, the amount of taxes taken from your paycheck will be greater, making it less likely you’ll owe when you file your taxes.

If your refund has changed due to recent tax law reforms:

It may be a good idea to talk to a financial coach who can help you make a spending plan and set some financial goals that take into account how recent changes may have affected you this tax season.

Many organizations across the country provide financial coaching free of charge. Call your  3-1-1 or 2-1-1 hotline if it exists in your area, or contact your local United Way or other trusted community organization to see if they can refer you to a financial coach. Your city government may even provide coaching through a Financial Empowerment Center.

In New York City? You can schedule an appointment with one of the Clinic’s expert financial coaches.

Are you a financial coach or nonprofit practitioner? Check out our Tax Time Mini-Toolkit to access tax-related coaching tools for your customers.

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Be sure to check out other helpful blog posts from both the Get It Back Campaign and The Financial Clinic.

We hope this helps you get started planning for tax time! Be sure to check out Parts I and II of the series:

Part I: What Tax Reform Changes Should I Know About?
Part II: How Can I Make the Most of My Tax Refund?

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This blog series is co-authored by The Get It Back Campaign and The Financial Clinic. Be sure to check out other helpful blog posts from The Get It Back Campaign and the Financial Clinic.

The Get It Back Campaign helps eligible workers claim tax credits and use free tax filing assistance to maximize tax time.

The Financial Clinic builds working poor people’s financial security through direct services, partnerships that embed financial security practices into nonprofits nationwide, and policy campaigns in support of working families.