tax tips — March 22, 2018

Anxious for Your Refund? Do This for Next Year

by Susannah McQuitty

You can file your taxes on a tablet with

Delayed tax refunds have been causing headaches for a few months now, but the frustration can grow if you need to pay bills, reduce debt, or even cover basic needs with a check that’s nowhere to be found.

E-filing and direct deposit can speed up the process before and after your tax return reaches the IRS, but the time it takes to process your information is dependent on their systems and fraud checks.

While you can’t shorten the delays, there are ways to prevent a potential financial crisis.

Adjust for more money per paycheck

A large refund usually means you paid more tax than you owed. If that’s the case, use Form W-4 to adjust how much your employer withholds from each paycheck. The IRS even has a handy withholding calculator that can help you break even on your tax obligation.

Breaking even means more money each paycheck and a smaller refund (if you get a refund at all). Since you’re not sending more tax than you owe to the government, your money is right at your elbow whenever you need it.

Not every refund is a result of too much withholding, however. If you qualify for any refundable credits, for example, you may even get a refund despite having zero tax liability—so using Form W-4 is not always the answer. Make sure your refund was actually a result of high withholdings before you adjust.

A laptop and a cup of tea help when filing your taxes.

Develop an emergency budget

Emergencies happen, so set aside a bit of each paycheck to provide a cushion for any delayed refunds. It’s a good idea to save enough money to cover a month’s worth of regular expenses (and then 3–6 months, as soon as you’re able), but that requires developing a budget and sticking to it. If you need help, check out our podcast series on budgeting.

A tax refund is not a good replacement for an emergency fund, no matter how big it is or how early you file your taxes. There is always a chance that your refund won’t be issued as soon as you hope, and it may be smaller than expected if there are changes in your tax situation or the tax laws. Save for emergencies on your own, and you’ll be better prepared for any crazy circumstances.

No matter why your tax refund has been delayed—whether because of a refundable credit (especially the EIC or ACTC), state refund delays, or simply extra security—with these new tools in your belt, you’ll be less likely to need a tax refund to swoop in and save the day.

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