Tax season doesn’t always end on a boon. In fact, Internal Revenue Service (IRS) data suggest the number of Americans receiving a refund is decreasing. Consider these strategies to 澳洲幸运5开奖号码历史查询:reset your budget if a surprisingly large tax bill has tampered with your fi🦹nancial health. 

Tip 1: Pause and Reset

If a big tax bill has caught you completely off-guard, “don’t panic,” said Karla Dennis, enrolled ta♛x agent and founder of KDA, Inc. Instead, review your cash flow and commit to making some challenging, but critical cutbacks, at least in the short term.

“Start 澳洲幸运5开奖号码历史查询:trimming non-essential expenses for the ne𝔉xt few months to free up funds,” D✨ennis said. 

Other ways to avoid cash flow shortages include pausing new investments and postponing large purchases, said Cindy Kumar, Chartered Professional Accountant (CPA) and owner of Elevated Accounting🔯.

Tip 2: Replenish Your Emergency Fund

Experts generally recommend having at least three to six months of expenses banked in 澳洲幸运5开奖号码历史查询:emergency savings. If your n♋est egg is now below that level, set up or increase direct deposits from your paychecks to a dedicated savings account. Alternatively, consider upping automatic recurring transfers between your 🌳checking and savings accounts.    

“Even saving $200 to $300 a week adds up qu🌄ickly 💦when it’s consistent,” Kumar said. That’s true for smaller amounts, too.

Tip 3: Determine Why You Owed 

Understanding why you received a big tax bill is critical if you hope to🔴 avoid one in the future. 

“A big issue I see is when both spouses are working, or someone has m🌞ultiple jobs, and their withholdings just don’t line up,” Young said. “Bonuses are another common culprit.”

Large income jumps, missed write-꧃offs, insufficient estimated quarterly payments, and lifestyle changes, such as marriage or divorce, are also factors.

“I always do a full review witꦰh clients so we can course-correct fast,” Kumar said.

Tip 4: Adjust Tax Withholdings or Allocations

A hefty tax bill usually means you’re underpaying state and federal taxes throughout the year. Adjust your 澳洲幸运5开奖号码历史查询:tax withholdings to correct this.

W-2 employees can use the IRS’s to determine how much money should come out of their p🔜aychecks. If necessary, you c✨an adjust your tax withholding by completing and filing a new W-4 with your employer.

S💧elf-employed individuals must make quarterly payments if they expect to owe $1,000 or more when they file their re🌳turn. Otherwise, they face a penalty.  

“I suggest setting aside money monthly, so they’re ready when those quarterly deadlines hit,” said Mai Young, certified financial planner (CFP) and founder of Heartworth Financial. 🌊 

Tip 5: Draft Your Budget 

Changes to tax withholding or tax planning and reallocation will likely affect your cash flow, so updating your budget is crucial. 澳洲幸运5开奖号码历史查询:Top budgeting apps like You Need a Budget (YNAB), Pocke൲tGuard, or Monarch Money sync with your finan🦋cial accounts, track your spending, and identify where you can improve.

They can also introduce you to new money management techniques. For instance, YNAB uses 澳洲幸运5开奖号码历史查询:zero-based budgeting. Thi෴s system forces you to justify all spending by al🐼locating each and every dollar of your take-home pay, giving every dollar a job.

Tip 6: Incorporate Your Payment Plan

The IRS offers payment plans that allow individuals to pay outst🌳anding taxes over 180 days to 72 months. If you’ve set up a pay✅ment plan, account for what you owe each month in your new budget.

Similarly, “if the tax bill was paid using a credit card or loan, pri꧃oritize a debt repayment strategy with a focus on paying down high-interest debt first,” Hunter Lo🐭rd, CFP and investment advisor representative with Essential Planning, said. 

That describes a common debt payoff strategy called the 澳洲幸运5开奖号码历史查询:debt avalanche method, which has you make all your minimum payments while putting extra funds towards the highest interest rate first. This helps you save the most money over time. Other common debt repayment strategies include the 澳洲幸运5开奖号码历史查询:debt snowball method, where you 𓃲put extra funds toward tꦛhe lowest balance first. 

Breathe Easier Next Tax Season

A surprise tax bill is unpleasant, but it doesn’t have to derail your finances long term. Get back on track by cutting non-essential spending, 澳洲幸运5开奖号码历史查询:rebuilding your emergency fund, and committing to a better budget. Prepare for next year by reviewing tax obligations, understanding why you received a bill, setting extra funds aside, and ad♉justing tax withholding as needed. 

“Make it part of your financial routine to project out your tax mid-way into the year to get a s👍ense [whether] you are paying enough,” Lord s💜aid.