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Surprised by your tax refund? Join Ralph Estep, Jr., to learn steps to take when the IRS hits you with a surprise. Plus, hear an insane real client story! Clear ways to deal with tax refund troubles.
In this episode of the Ask Ralph Podcast, host Ralph Estep Jr. discusses the common issue of receiving a lower-than-expected tax refund or even owing taxes. Drawing from over 30 years of financial expertise, Ralph explains potential causes like unreported income, ineligible deductions, and life changes impacting tax liability. He provides a step-by-step guide for addressing such situations, including reviewing tax returns, adjusting withholdings, and making estimated tax payments. The episode also features a cautionary real-life story illustrating the importance of accurate tax filing and ends with practical advice on budgeting and resolving tax liabilities, all delivered from a Christian perspective.
00:00 Introduction: Tax Filing Surprises
00:22 Welcome to Ask Ralph Podcast
01:16 Understanding Tax Refund Discrepancies
02:39 Proactive Steps to Address Tax Issues
02:57 Common Tax Filing Mistakes
03:42 Handling Unexpected Tax Bills
04:44 Adjusting Withholdings and Payments
07:19 Real Client Story: Tax Filing Error
08:25 Recap and Final Advice
09:58 Conclusion and Next Steps
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Ralph:
Have you ever filed your taxes?
Ralph:
Excited to get a nice refund.
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Only to find that the amount was much lower than you expected.
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Or maybe you even got a bill in the mail from the IRS.
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Well today, we're going to talk about what steps you can take when this happens.
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I'm also going to share a completely insane story about some clients who had to face this head on.
Ralph:
We'll handle that later in the show.
Intro:
Welcome to the Ask Ralph Podcast, where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines, and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting.
Intro:
Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.
Intro:
Now here's your host, Ralph Estep, Jr.
Ralph:
Well, welcome to our tax talk Thursday.
Ralph:
I'm so glad you chose to join us.
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I just want to thank you for listening and supporting the program.
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I'm coming to you from the Estep step farm and the Saggio accounting studio.
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Let me put on my podcaster hat put down those overalls.
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And slide that adding machine to the side, let's get into some financial wisdom from a Christian perspective.
Ralph:
Today, we're talking about an unpleasant tax time surprise that unfortunately many people have experienced and that's getting a smaller refund than anticipated.
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Or even owing taxes when you expected to get a refund.
Ralph:
don't forget to subscribe to the show and join our email list.
Ralph:
You do that at askralphpodcast.com . So you don't miss tomorrow show tomorrow.
Ralph:
We're gonna be talking about annuities.
Ralph:
We're going to talk about what is an annuity and is it a good investment for your particular financial situation?
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So you don't want to miss tomorrow show.
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I want to remind all of our listeners.
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Also, we just launched an insider's group on Facebook.
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We're seeing a lot of people out there encouraging.
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Each other and sharing information on there.
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And I encourage each of you to join the Facebook group, to continue the conversation from the show.
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It's a great place to share ideas for the show.
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You can discuss your triumphs and also talk about your challenges.
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I'll put a link to the Facebook private group in the show notes day.
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You just click on that and there you go.
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Let's start off with Proverbs chapter 14, verse 23, which reminds us.
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In all labor, there is profit, but mere talk leads only to poverty.
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As we labor to file accurate tax returns.
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We hope to profit from our refunds.
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But sometimes talk of big refunds is not matched to reality.
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Once those tax returns are filed.
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The first thing I'm going to tell you when this happens, first of all, don't panic.
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Stay tuned as we explore reasons for you, why your refund may be differ from expectations.
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And some proactive steps you can take.
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If this happens to you.
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So let's address the first question.
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Ralph, how does this situation occur?
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Well, there are a few common culprits.
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Did you receive income?
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You forgot to report.
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Or underestimate earnings when you prepared your return.
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Any unreported or under-reported income means taxes were not fully withheld to cover what you now owe.
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Another cause could be claiming deductions or credits.
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You're not actually eligible for.
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Leading to an inflated refund projection.
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There's also life changes like increases in pay.
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A new job, unemployment benefits, retirement draws, or social security benefits received could also impact your tax liability.
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Speaking of retirement.
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This is one a lot of people miss.
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Did you pull funds from an IRA or 401k account?
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Remember, those retirement plan withdrawals, count as taxable income.
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Okay.
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So now you've got that lower than expected refund or that shocker tax bill in the mail.
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What do I do now?
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Ralph?
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What's next.
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Well first take a deep breath.
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And like I said earlier, don't panic.
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This is a time to pray for wisdom and guidance.
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The book of Philippians chapter four, verse six tells us do not be anxious about anything.
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But in everything by prayer and petition with Thanksgiving, present your request to God.
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Ask him to clarify on next steps, reach out to your tax preparer, your accountant, or the consulting firms like ours over at Saggio accounting for an audit of your tax return.
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We can help you pinpoint where the mismatch occurred.
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Doing a thorough review while the facts are still clean and fresh can aid correction request in case of errors or catch other credits or deductions you might qualify for, but neglected to include.
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I've seen this many times when a new client will come in, they've got a letter from the IRS.
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They've made a correction to their return and the client thinks, oh my gosh.
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Now I owe all this money.
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And I actually find where they missed some credits, so they are able to offset some of those issues, another smart step is checking your payroll, withholding amounts and adjusting allowances claimed if your life situation has changed.
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This is when you want to update your W-4 form, whenever you have major adjustments to income, maybe your family size changed.
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Maybe you got a divorce.
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Maybe you got married, maybe had a child, maybe a child left the nest.
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So that adequate taxes are paid in during the year.
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So you don't have that surprise at the end of the year when you're doing your tax return.
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And another thing I'm going to stress.
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Don't rely on getting that big refund next April, if you receive other income like retirement account withdrawals or freelance work, make quarterly estimated payments to stay ahead.
Ralph:
I did a episode on that just a few days ago.
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You want your tax payments and installments across the year, rather than one lump sum, a tax time to avoid those penalties.
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As we talked about.
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Well suppose your review confirms your refund amount is indeed accurate.
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What do I do then?
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Ralph?
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Well, an unfortunate, but good lesson is learned.
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To budget on your actual typical refund amount, rather than some inflated projection.
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Make adjustments for next year by updating your withholdings and your estimated tax payments.
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The key is continuing to keep accurate records and track your income, track your deductions and credits.
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Consider meeting with a financial advisor.
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To determine the best savings and wealth creation vehicles for tax optimization based on your situation.
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This is where I'm going to tell you to get with somebody like myself, a tax pro.
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We're going to look at your particular situation.
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And figure out what's best to optimize your situation.
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Proverbs 21 verse five tells us the plans of the diligent lead only to plenty.
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But those of everyone who is hasty lead only to poverty.
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So make diligent planning your ally.
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As for this year's budget, look for areas to trim excess spending and redirect those funds toward debt, payments, or savings goals.
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The book of Ephesians chapter five, verse 16 reminds us to make the most of our time and resources.
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Making the best use of the time, because the days are evil.
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This is why creating and sticking to a budget is so key.
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And if you end up owing the IRS this year, contact them or your state tax office to set up a reasonable payment plan.
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They offer options, tailor made to fit different financial situations.
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The truth is folks with God's help.
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You can turn what seems like a setback into an opportunity for growth.
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And now about that story.
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It's about 10 years ago, I had a client come in.
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They had received a notice from the IRS.
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And the notice said they actually owed.
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About $8,000 in tax.
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And they looked at me and they said, Ralph, how was this possible?
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So I looked at a notice and I looked at their tax return.
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Well, guess what?
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They had made a huge mistake.
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I don't want to bore you with the details of basically what they had done.
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Is, they had taken both itemized deductions and the standard deduction.
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So they got this $2,000 refund and they were surprised, but they said, oh wow, this is fantastic.
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Well turns out when I looked at their tax return.
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Not only were they not do that $2,000 refund, they actually owed the IRS.
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$8,000.
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So think about that folks, they got to 2000 back, but now they actually owed 8,000.
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And that was all because of a simple mistake on their tax return.
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But they came to me, we fixed it.
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We figured it out.
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We set them up with a payment plan.
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So there are always ways to resolve these issues.
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You just can't pretend like it's going to go away.
Ralph:
So let's recap what we've shared today.
Ralph:
If you receive a smaller than anticipated tax refund, or even getting hit with taxes, owed that dreaded notice that says you owe the IRS.
Ralph:
The first thing is to remain calm and take these steps.
Ralph:
Number one.
Ralph:
Review your return thoroughly for any errors or missed deductions.
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Contact that person who prepared your taxes, or if you did it yourself, you might want to reach out to somebody like me for assistance.
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Number two.
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Double check your withholding amounts and adjust as needed based on any life income changes.
Ralph:
It's more of a preventive step to make sure you don't owe at the end of the year.
Ralph:
Number three, make quarterly estimated payments for any side work or non wage income you rely on.
Ralph:
That could be things like a side hustle, or maybe you have interest or dividends or stock sales.
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You've got to be planning for that tax burden.
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At the end of the year,
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number four, redirect excess spending towards savings goals or debt payments.
Ralph:
This is where I'm going to tell you to stick tight to your budget.
Ralph:
You know, I harp about this all the time.
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But this is a great time to revisit that.
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Number five, for any taxes now owed contact, federal state agencies promptly.
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Don't let this go away.
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Don't hide it on the place where you store your mail or say, oh, you know what?
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I'm just going to let this sit for a while.
Ralph:
You got to act properly.
Ralph:
What I have found is both the federal and the states will work with you to set up a reasonable payment plan that works for your situation.
Ralph:
As Romans chapter eight, verse 28 says.
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God works all things together for the good of those who love him.
Ralph:
So you've got to be patient.
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And let him guide the process.
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And as I always say, stay savvy with those taxes and God bless you.
Ralph:
My friends.
Outro:
Thank you for joining us on the AskRalph podcast.
Outro:
And with a simple click to subscribe, we'll invite you back to our next episode.
Outro:
And remember, financial issues don't have to be complicated.
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Just AskRalph.
Outro:
The information contained in this episode of AskRalph is based on data available as of the date of its release.
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Sagio Accounting Plus and AskRalph Media Inc.
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is under no obligation to update this content if changes occur.
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Applying this information to your specific situation requires careful consideration of all facts and circumstances, and any information provided is not to be considered as financial, tax, or legal advice.
Outro:
Please consult your tax advisor or attorney before acting on any material covered.
