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官方开奖结果体彩网:reset your budget🎉 if a surprisingly large tax bill has tampered with your financial health. 

Tip 1: Pause and Reset

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

“Start 澳洲幸运5官方开奖结果体彩网:trimming non-essential expenses for the next few m🐠onths ♐to free up funds,” Dennis said. 

Other ways to avoid cash flow shortages include pausing new investments and postponing ಞlarge purchases, said Cindy Kumar, C༒hartered 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官方开奖结果体彩网:emergency savings. If your nest egg i✤s now below that level, set up or increase direct deposits from your paychecks to a dedicated savings account. Alternatively, con🃏sider upping automatic recurring transfers between your checking and savings accounts.    

“Even saving $200 to $300 a week adds up quickly💞 when it’s consistent,” Kumar said. That’s true ꦡfor smaller amounts, too.

Tip 3: Determine Why You Owed 

Understanding why you received a big tax bill i🍌s critical if you hope to avoid one in the future. 

“A big issue I see ꦏis when both spouses are working, or some🎐one has multiple 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 divor💧ce, are also factors.

“I always do a full review with 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官方开奖结果体彩网:tax withholdings to correct this.

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

Self-employed individuals must make quarterly payments if they expect to ow🍒e $1,000 or more when they file their return. Otherwise, they face a p☂enalty.  

“I suggest setting aside money monthly, so they’re ready when those quarterly deadlines hit,” said Mai Young, certified 🔥ꦬfinancial 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官方开奖结果体彩网:Top budgeting apps like You Need a Budget (YNAB), PocketGuard, or Monarch Money sync with your financial accounts, track your speಞnding, 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官方开奖结果体彩网:zero-based budgeting. This sys🔥tem forces you to justify all spending by allocating each and every dollar of 𒈔your take-home pay, giving every dollar a job.

Tip 6: Incorporate Your Payment Plan

The IRS offers payment plans that allow individuals to pay outstanding taxes over 180 days to 72 months. 🧸If you’ve set up a payment 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, prioritize a debt repayment strategy with a focus on paying down high-interest deওbt first,” Hunter Lord, CFP and investment advisor representativeꦦ with Essential Planning, said. 

That describes a common debt payoff strategy called the 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网:debt snowball method, where you put extra fund꧅s toward the 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官方开奖结果体彩网:rebuilding your emergency fund, an𝓡d committing to a better budget. Prepare for next year by reviewing tax obligations, understanding why you received a bill, setting extra funds aside, and adjusting tax withholding as needed. 

“Make it part of your financial routine to project out your tax mid-way into the ye💧ar to get a sense [whether]▨ you are paying enough,” Lord said.