The sooner you file your taxes, the sooner you’ll know how much you’re getting back—or how much you owe the IRS. And since extensions only delay the inevitable, just go ahead and file.
That way, you have more time to plan how you’re going to spend your cash, or how you’re going to save up to pay what you owe.
Here’s a simple guide to working either scenario into your budget:
1. You got a refund.
If you choose direct deposit, you’ll likely get your refund within the month. That means now’s the time to plan where it’s going.
Depending on which Baby Step you’re in, apply at least a portion of the money toward your current goal, like getting out of debt or stocking your emergency fund. If you want to have a little fun with your refund, go for it! Jump-start your vacation cash, or enjoy a fancy dinner with someone you love. You can spend and save it. Whatever you choose, plan it out now, so you can feel good about where your money ends up!
2. You owe money.
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After some internal groaning, your next step is to look at your budget and see where you can free up money to pay your tax bill. Things like restaurant spending, movie money, and clothing cash can be adjusted for a month or two. If that’s still not enough, you can temporarily divert some savings (think car funds or Christmas funds). And as a last resort, you can dip into your emergency fund.
If you’re still coming up short, set up a payment plan with the IRS. Make sure to be aware of any interest and fees associated with your plan. Work those and your agreed-upon payments into your budget each month, and plan to have your tax bill knocked out as quickly as possible!
When it comes to taxes, your goal is to get as close to paying and to receiving nothing as possible. That means you’re not giving the government an interest-free loan to use all year. And you’re also not hit with penalties when you’d rather be saving for your money goals.
Go back and adjust your withholdings if you need to, and then budget the rest of your money as usual! Use EveryDollar to make Tax Day (and every day) a whole lot easier.