Unexpected IRS refund? What you should do now and smart ways to spend it

Ralph
00:00:00

Have you ever received an unexpected check from the IRS and wondered what do I do with this? Or perhaps you're debating whether breaking even on your taxes is the way to go. Well today, we're diving deep into the world of tax refunds from multiple angles. We're going to explore why you might receive an unexpected refund.

I'm going to expose some common scams, and I'm going to share some smart strategies to make the most of that extra cash. Plus, we'll discuss the great debate between breaking even and receiving a refund. My goal today is to arm you with real knowledge to better manage your taxes and your overall financial condition.

If you're struggling financially, this episode is a must listen. Stay tuned as we empower you to take control of your money and live out your faith.

Podcast Announcer
00:00:44

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph
00:01:21

Well, thank you for joining me on today's show. Yesterday, we talked about filing without all your tax documents and why that can be a risky proposition.
So if you missed it, make sure to check it out and all of our previous episodes at askralph.com. Now today, we're tackling an emotional question from Rachel about managing an unexpected tax refund. Now, before we dive into Rachel's question though, we're going to explore tax refunds from various perspectives to help you make informed decisions about your finances.

So let's get this party started.

Well, let's get to Rachel's question. This is what she wrote. She said,
"Hi Ralph, I recently received an unexpected tax refund because I set my withholding too high during the year. I'm a single mom, and this money could make a huge difference in my life. I'm overwhelmed and not sure what to do. Can you help me make the best decision for my family's future?"

Well Rachel, let me just tell you this. I feel your struggle and you're not alone in this struggle. Many people receive unexpected refunds and they feel overwhelmed. They're not, you know, not sure what to do about it or how to maximize this opportunity.

So today, I'm going to explore the reasons behind these refunds, I'm going to tell you about some potential scams and Rachel, I don't think that's your situation because you understand why you got to where you are, and I'm also going to discuss smart ways to spend that money, Rachel, which is right up your alley, but I'm not going to stop just there.
I'm also going to get into the debate between breaking even on your taxes and receiving a refund. I'm going to tell you about the battles I've had with clients over the years, but here's the truth. By the end of this episode, you're going to have a clear plan for your refund, and feel confident in your financial decisions.

So let's turn that overwhelm Rachel into empowerment and let me help you take control of your money. Now before we get to the question at hand, I always like to start with some scripture. So let's look at a Bible verse that relates to our discussion today. And this one comes to us from the book of Luke chapter 16 verse 10 and it says this. "Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much." I'm going to tell you right now, that verse will cut you, but it reminds us that being faithful, being wise with our finances includes these unexpected gains. It's a testament to our character and our stewardship.
And that's exactly what today's show is all about. Our character and our stewardship.

So let me get right to it. Today, I am grateful for the opportunity to help you, Rachel and others like you make the most of these unexpected refunds. And truly my goal is to help you better understand your taxes because this is a chance to align your finances with God's plan.

It's a chance to make intentional choices about how to use your resources. And I am so grateful that I'm able to help people who are struggling, find hope and financial freedom. So that is the goal of today's show.

Well, let's start by understanding tax refunds at their very core.
This is what I call tax refund season. A lot of people who are filing their tax returns now, are those happy people that are getting those refunds. And I've been doing this for a long time, over 30 years. And I always tell the people that work with me, my staff people, we can always tell the beginning of tax season.

Oh, people don't really like to do taxes, but they're generally pretty happy. They're coming in because they're used to getting refunds. A lot of people consider that. Their savings account, I'll talk about that in a few minutes, but there's a point usually about the end of February, middle of March, where the whole table turns.

And then we get those people who know they owe and they've putting it off to the last minute. But I really want to talk about what triggers those refunds.
The first one and Rachel, this is exactly your situation. That's what I call overpayment of taxes. You set your W-4, the W-4 is what you tell your employer to do as it relates to withholding taxes.

You set it too high and therefore you had too much tax withheld from your paycheck throughout the year. Now I did a show yesterday about this. Make sure you're looking at your pay stub throughout the year. You don't want to surprise at the end of the year, either having too much taken out or not having enough.

I actually had a situation like I talked about on yesterday. So I encourage you to check it out, where a person actually didn't have enough withheld from their tax or from their payroll, at the end of the year they owed money. But Rachel, this is exactly your situation. You pay too much to it, in throughout the year.

So now you've got this refund. Now, there's another way you can get a refund. And this happens mostly with self employed individuals. And that's if you overpay your estimated taxes, if you make quarterly payments. This happens a lot of time, like I said, with self employed people or people who work in the gig economy, freelancers, because they may overestimate their tax liability.

They may make those quarterly payments and they just made them too high. That's why I always say tax planning is the key. You don't want to just set it and forget it. Now, another way you can trigger a refund is tax credits. There are certain tax credits that are refundable such as the earned income tax credit or the additional child tax credit.

You might have a situation also, maybe you adopted a child this year. There's an adoption credit. Maybe you bought an electronic vehicle. There's an EV credit. There are some other credits related to improvements with as relates to energy efficient products and all that sort of thing. So it could be you're getting a refund because of these tax credits.

Now, an interesting one that's going out right now, if you look at the news, I hear a lot of talk about this and this is the recovery rebate credit. Now this goes back, believe it or not to 2021. There were some people that never received that recovery rebate credit. So now what the IRS is doing, because maybe they didn't claim it on their tax return, the IRS is going back through their records and they're actually issuing these 1,400 payments to people who should have received them.

Now, I will tell you in my practice, mostly everybody I know received them. If they didn't get them, when they came in to get their taxes done, we were able to give it to them at that time. But there are many people, I don't know the exact number. I heard over a million people that are going to get this $1,400 recovery rebate credit.
So that's a big one. Now, one of the other places could happen is an IRS error. And this is why I'm very cautious when I talk to people about their refunds. It's not very common, but there are situations when the IRS makes an error. Maybe it's an error in the tax calculations or in a processing issue
and all of a sudden, you get this check that you weren't expecting here. Like, Hey, wait a minute, dude, I wasn't expecting this refund.

We'll talk about that in a little bit, because we'll talk about how that happens and what the IRS can do. There are also situations with penalty abatement. Maybe you paid your taxes and when you did your taxes, you figured you were going to have what they call an underpayment penalty.

So you paid a little extra because your tax software or your tax preparer said to you, Hey, yeah, you should have been making estimated tax payments throughout the year. You didn't do that so now you owe money. And sometimes when the IRS figures out the penalty, here's a great example. Let's say that most people's tax software figures out that penalty, assuming you're going to file your tax return on April the 15th.

Well, let's say you pay it a month or two ahead. Well then the IRS oftentimes will send you a letter and says, Hey, guess what? You paid us too much. Yes. The IRS actually sends letters that say you paid us too much. Now, usually what they'll do is they'll send you a letter explaining why they won't send you the check right away.

They'll say to you, what would you like us to do? Would you like to apply this to next year's taxes? Would you like us to issue a refund? And as I recall, most of the time, it'll say, if we don't hear from you in 90 days, we'll go ahead and issue your refund. So it could be that. Now, another way, and people don't like this word that said dirty audit word, but sometimes I've handled situations like this.

Audits can result in a refund. Maybe the IRS decided to audit you. I talk about this the other day. You're the unlucky winner of the audit lottery, but guess what? It's like you hit the jackpot because when they did the audit, they found out that you actually made a mistake where they owe you money. I've had a situation like that.

I had a client, this is many years ago, probably 25 years ago, this guy was a painter. And I mentioned this on other shows and he had a tough time. He got involved with drugs. But the thing that this painter did was he always made his estimated tax payments.     So even though, he was struggling and he didn't file his tax returns for a couple of  years. So he gets audited because the IRS says wait a second, we're getting reports that you're making money but you're not filing any tax returns.  So, and it was back when I work for another  firm  
We represent this guy. The IRS audits him,  I'm looking at his books and I'm saying, wait a second, this guy overpaid his taxes.
I mean, a lot of overpayment because he was so addicted to drugs that his business had really fallen off. But he was making those payments, assuming his business was going to be what it was in prior years. So all of a sudden turn around the IRS agent does this audit and says, well, I've got good news for you, Harry.

And I remember the guy's name would just say, Harry, we actually owe you money. Now here's the problem. I want to go on a big tangent here, but because he hadn't filed for several years, the IRS only has to give him those refunds for three years. So in this particular case, the guy lost tens of thousands of dollars because he hadn't been filing his tax returns.

But for those last three years, the IRS actually owed him money. So that's really the typical ways that you get a refund that you weren't expecting. Now, a lot of people build their refund into their payroll and into their tax withholding because they know, Hey, I got about clients every year that'll say to me, Ralph, you know, we want to make sure we're getting around $2,000 or $3,000.

So they kind of build their withholding. So for them, when they come in at tax time, they're kind of expecting that. Of course, it's a big. Oh my God moment when they don't get that. And that's a discussion for a whole another show. But while we're here, let's talk about some IRS refund scams because maybe none of these things fit into the, that the situation you're in, you know, your withholding was correct.

You didn't have an audit. You didn't have an overpayment. You didn't have a credit, but all of a sudden you, you get this email or something like that that says, Hey, you're entitled to an IRS refund. So let me tell you about this guy, Brent. Now, Brent was one of my clients. Again, that's not his real name, but he received this fake email and it looked like it was from the IRS.

He actually sent me a copy of it after the fact, when I started working with him. When you looked at this email, it looked like it came right from the IRS's website. And what it says was, we found a problem. This was supposedly from the IRS. They claimed that there was a problem with his refund and they directed him to a fraudulent website.

I mean, click here and go tell us your information and we're going to send you this money. Now, Brent was having tough times. Like a lot of people are just like all of us. And he saw this and he goes, wow, this is a great opportunity. He thought it was legitimate. So we clicked on the link, took him to what he thought was the IRS website.

I mean, it looks super professional. He entered his bank information. Now, of course I would have told him at the time not to do that. And within hours, and like I said, I found about this after the fact, his account was drained. I mean, they took every dime he had in his account. A horrible story.

Because he went out there to this fake, he got this fake email. He went to this fake IRS website, put in his real bank information and these scoundrels, these scammers, and I believe they were from the Ivory coast or something like this. I mean, it was a whole racket of these people. And the IRS is kind of aware of these people, but Brent was, he was financially devastated by this.

He was emotionally devastated by this. And let me just tell you, that pain was immense. If you've ever been through that type of situation, I mean, Brent felt violated and he was really anxious about his financial future. And that law set him back significantly. It took him several years to recover because they took his emergency fund.
He took all of his savings. And there really wasn't much he could do. I mean, he did file a police report, but these dudes were gone. And it affected his ability to pay his bills and it affected his ability to provide for his family. So be real cautious about that. So let me talk about some of the most common IRS scams.

Number one thing, fake checks. A lot of times, scammers will send out fake refund checks and then demand extra money be sent back to them. And it's a crazy situation. I've only seen a couple of these, but they'll send out a check and they'll say to you, Hey, go ahead and cash this check.

And then once you cash this check, send us part of that money back. Now the scam there is that the check is a bogus check to begin with, and then you send them money back. Usually they want you to wire them the money or they want you to go onto a website and do an electronic transfer. So guess what? Now you've got this check that you sign as bogus.
You don't know about it at the time. And you sent money that you don't even have to the scammer. So be careful of that. The next one is exactly what Brent ran into. And that's these phishing scams. And these aren't the kind where you bait a hook. I mean, this is phishing P H I S H I N G. That's where they go into your email or they send you these phone calls, just like Brent experience.

These scammers pretend to be from the IRS and they ask you for personal information to "fix a problem with your refund". If you see that, or you hear that, man, I'm telling you what, that is a, that is an absolute scam because the IRS doesn't operate like that. Now that said, like I said, the IRS might send you a notice that says, Hey, Ralph, guess what?
We process your return and you forgot to tell us, or you forgot to include on your tax return that you made this quarterly estimated payment. You didn't put it on your return. So we owe you money. That's legitimate. But these emails, these phone calls that they say they're from the IRS and they just want to get your information, big problem. And the other thing that Brent ran into as these fake online portals. See these people have gotten really sophisticated. They can spoof telephone numbers. They can spoof websites and they create these fake IRS websites to trick people into entering their personal information.
Think about it. They ask you to enter your name, your address, your date of birth, your social security number, your bank account information, maybe all your children's names social security number. I think about the amount of information that is now exposed on that dark web. So you got to be really careful about that.

So let's talk about how can you avoid these scams. You know, you get the point. They're scary.

First thing, be suspicious. The IRS generally initiates contact through regular mail. They don't send out emails. You know, you're not going to get an email in your inbox.
Hey, this is Mr. Smith from the IRS and I'm just having fun today, so I'm sending emails out to taxpayers. It doesn't work that way. The IRS generally does not communicate by email. Number two thing, very careful this in general, but especially as it relates to this situation. Don't click on any links, never click on links and suspicious emails or even text message.

You gotta be really careful about those two. Now there's a lot of people that are doing these spoofs and these scams through text messages. You get this. I got one the other day. It was hilarious. I was in the middle of working on a client's tax return and they weren't in the office. So I look over at my phone and I see this text message and it said, a package is trying to be delivered to you, but we can't seem to find your address.
Click here to give us that information. And I did a double take and I'm thinking, wait a second. I didn't order anything again, scam. And the final thing here to avoid these. Verify information. If you get an unexpected refund or communication from someone IRS. This is where that having that irs.gov account.

I preach about this all the time, get an account with the IRS, go to irs.gov. And then you can check because anytime the IRS does anything on your account, you're going to see it on IRS.gov. And if you don't have that, you get that refund check, call them. Yes. You might be on hold for a while. Think about, have you received any notices?

Now you may have very well received the notice. Like I said, 90 days prior to this saying that you overpaid and we're going to send you a refund, totally legitimate. I think that's a very fair thing. Well now let's talk about the tax implications of that unexpected refund. And what I'm specifically talking about here is if the IRS makes an error, The thing you need to understand right away, and clients will call me.

Sometimes they'll say, Ralph, I got this check from the IRS. It looks like a legitimate check. And usually it is a legitimate check. It's what anybody who's seen a government check will know what this looks like. And they'll say, but, but Ralph, it just doesn't make sense. I shouldn't have gotten this refund.

So here's the thing you need to understand. The IRS when they figure it out, and most of the time, I've not seen a situation where they don't, when they figure it out, they're going to come back after you for that refund. And here's the best part. This is the gift that keeps giving, then they're going to charge you interest from when they sent you the erroneous refund in the first place.

And you really, they really have a three step process for recovering these erroneous refunds. The first thing they identify the category. The IRS categorizes these erroneous refunds based on the type of error that caused them. Whether you maybe you were put into a credit that you didn't deserve.

Maybe someone else filed information under your social security number. That's where it starts. They do an investigation. You know, I'm not sure exactly how they do it. I never worked for the IRS, but there's some mechanism within the IRS to where they get to the point of, Hey, we made a mistake. So then the IRS gets serious.

They, they take actions to correct the error. If that led to that refund, guess what? They're going to reach out to you and they're going to reassess your tax liability and say, Hey, guess what? Uncle Joe, we sent you this refund, but you didn't deserve it.
So guess what? Give us the money back. And Hey, because you used our money for the past three months, we're also going to charge you interest. So if you get one of these and you're not sure about it, because of course the next step is the IRS going to recover that refund. They're going to issue collection notices.

I went through those the other day, those whole series, there's a litany of notices. Because they want their money back. So if you get one of these checks and you can't explain it, like I said, the first thing to do, go to irs.gov and take a look at what's going on. Second thing that you want to reach out to them. If you can't get in contact with them, here's the best advice I can give you. Take that money, deposit it into a savings account. Sit on it. I mean just sit on it for six months, 9 months, 12 months. And then after 12 months goes by, you haven't gotten any additional notices, then maybe just go move forward and use the money.

But those are really the things that you gotta work. You gotta watch out for. Now let's get into a little bit more Rachel, what you're talking about. And that's I've got this refund windfall. So we've talked about the scams, we've talked about how did you get that refund in those legitimate ways and the illegitimate ways.

But let's talk about smart ways to spend an unexpected refund, because this can be a great opportunity to improve your financial situation and align your finances with those biblical principles of stewardship we talk about on the show all the time. So here are some smart ways to spend your refund.

Number one thing. If you've got high interest debt. Listen to me. Pay down high interest debt. Use that refund to pay down, to eliminate high interest debt, like credit card debt or personal loan debt. Make that your, put that in the bullseye and go after those things first.

That's the first thing. Number two thing. It's a great opportunity to build that emergency fund. You know, I talk about on this show all the time, build that three to six months of living expenses. Well, this could be a good way to springboard that, to start that process.
Put those things in that, that emergency savings fund.
Sometimes it's easy to access. You don't want to lock it up into a CD or something like that, but this could very well be that seed money to start that emergency fund. This isn't the time to go spend money on some luxury and, you know, want that you have. Pay off that debt,
build an emergency fund, the next thing I'm going to encourage you to do is use that money to invest in your retirement. Maybe you use that money contribute to a Roth IRA.

That's an after tax IRA, or maybe you use that money to fund a traditional IRA for the current year. Now it depends on your tax situation. So talk to your tax person. You're welcome to schedule a call with me and I'll talk to you later in the show about how to do that.

But this could be a great way to jumpstart an investment, to help put money away for retirement. Another great thing you can do is invest in your education or invest in your career. You know, maybe use that money to pursue further education. Listen, we all need to continue education. I'm 52 years old and I have a goal in my life to learn something new every day.

Maybe it's just a little kernel or something. This windfall of money could very well be a way for you to springboard into additional education. Maybe you gain some new skills. Maybe, you know, look for a certification program. Maybe you weren't expecting to get this money. And there's this certification process you'd always wanted to do, but you've always been afraid to save the money or spend the money to do it.

So that's another option. Invest in your education, a career. This is another great time to invest in your children's future. Maybe you use that money to create a 529 college savings plan, or maybe just start a simple savings account for your children. You know, start to teach them the financial skills, and this could be a, a great way to do that.
Another thing you might want to do, and a lot of people do this with their refund, maybe you need to make a necessary purchase. Maybe we've been putting off this significant purchase and your refund could help you. Maybe you've got that hole in the roof and you've been worrying about, you know, water coming in at night and ruining the rafters and all this kind of, I'm not a contractor obviously, but you've got these home improvements you've been putting off and you've got this windfall.

Well, maybe that's a great way to spend your money because you've been putting it off and this would be a great way to make those, and I use the word necessary on purpose,. This isn't the time to spend on your wants. This is a time to spend on those necessities. And the final thing, you know this is a Christian show so, you know I'm not going to let you go without talking about giving to charity.

I will always tell you, consider to donate a portion of your refund to the church or a charitable organization that aligns with your values. You know, we had a whole discussion a couple of weeks ago. Are you supposed to tithe on your tax refunds. And you can go back and revisit that. But this is an opportunity.

Once you've paid off your debts, you know, you've put some money away into retirement. You've done, you've handled those things that you needed to spend money on. Then don't forget those first fruits. Maybe you start here. Maybe you say, look, I'm going to, I'm going to take 10 percent of this refund and I'm going to give it to my church, or I'm going to give it to this missionary.

I'm going to give it to this organization that I support. It's really a way to start that first. And that's all about that biblical fellowship anyway.
Well, now let's get to the elephant in the room. And I promise you, I'd have this discussion. And this is a discussion that I have during tax season, probably three or four times a day.

And that's what I call the great debate. And whether that is as a taxpayer, is it best to break even on your taxes or is it better to get a refund? Because listen, the truth is, and I, and I used to battle this when I was early in my career. Somebody come in and I'd see they're getting a three or 4,000 refund.

And I looked across the table with them at some level of judgment. And I said, you know, you could have this money all year long, but yet you're paying extra on your withholding. And it's like a savings account, but here's the problem. The IRS isn't giving you any interest for that. And there's a lot of people, they would battle me.
They say, Ralph, wait, listen, that's the only way we can save money. Or we put that money away because we don't even notice it. You know, it's 10, or 20, 30 bucks a week. And then by the end of the year, when we go to do our taxes, we have this windfall. It helps us handle, rebuilding our emergency fund. So I used to battle people on this, but I got to the point where, okay, I understand that.

Maybe this is a way to better steward your money throughout the year. Now, I want to be honest with you. As it relates to the bait, my goal is this, you come and meet with me. My goal is to get you within 500 of either direction. And you might say, Ralph, why do you pick 500? Well, because 500 isn't going to trigger a tax penalty if you owe $500.
And the truth of the matter is, and this may be a difficult thing to say, but most people can figure out how to find 500. So I feel like that's a reasonable thing. You know, either you're going to get a refund of up to $500 or you're going to owe up to 500. That way you're not giving the government. You know, your money throughout the year, you've been put that money to work, but we also don't get hit with a large tax bill either.

And in the end, you listen to me, you know, I say this all the time. It's all about finding that balance. It's all about that tax planning because, you know, I used to hear that's where it's at. Well, tax planning is where it's at. Knowing what to expect. You know, you don't want to wait till tax time and you're sitting in front of your tax preparer, your tax professional, you know, and last week we talked about how to find that person and what that person should look like.

You don't want that surprise of, Oh, guess what, Mr. And Mrs. Roberts, you now owe $3,000. It could have all been avoided with proper tax planning. And I would argue you also don't want to have that conversation of Mr. and Mrs. Roberts, you're getting a refund of $11,000. And yes, I've had clients that have gotten refunds that much.

They didn't expect it because they didn't realize all throughout the year.
And I look at them and I'm like, do you realize that you could have had an additional thousand dollars a month in your take home pay if you hadn't have been putting so much into your withholding? So that's where spend the money on a consultation, sit down with somebody like myself. And I'll talk in a few minutes about how to do that and get a good understanding of your tax situation.

Don't wait till the end of the year like you're opening up a present. This is your money. It's a lot of people don't understand this. The money that you get back in a tax refund isn't some magical found money. This is your money. Now, of course, if you're getting a credit, some of that is not true, but for the most part, most people get a refund of their own money. So put those things to you. So let me share a couple success stories of people that I've worked with over the years who have received these unexpected refunds and how they used them to improve their overall financial condition at the same time, balance their faith. Let me tell you about Maria.

So Maria is a client just like you, Rachel, she received this unexpected refund. On her particular case, I want to say it was around $3,500. So Maria came in, she goes Ralph. I'm ecstatic. I wasn't expecting this. I did her taxes and she's like, I can't believe this. So she said, okay, Ralph, what do I do with it?

So what we did with Maria, we create a plan that allowed her to pay off her high interest credit card debt. She had started to accumulate some credit card debt. We paid off her debt. We also started an emergency fund and she was even able to have that seed money to start that 529 plan for her daughter's education.

So that $3,500, think about what it did. Paid off her credit card debt, started that emergency funding, even created that momentum, that habit of putting a money away in that 529 college savings plan. So think about it. At some point down the road, her daughter is going to benefit from a decision that Maria made sitting in my office when she got her tax return done.

Let me tell you about David. Now David was a small business owner. Now he received a $4,000 refund. Again, this was an interesting one. He was a freelance guy. He had been making estimated tax payments. He and I had worked the year before and I said to him, okay, David, what do you expect your income is going to be?

And he told me X number of dollars. I said, okay, that's fine. So in order to do that, I want you to put aside this much per month or this much per quarter for your estimated taxes. Well, turns out his business wasn't as successful as he thought it would be. So he came in and got his taxes done. And I said to him, I said, guess what, David, you're going to get a $4,000 refund.

And he's like, Ralph, how did that happen? I said, there's no magic here, David. You paid in too much throughout the year. And he says, well, you must be a terrible accountant. I said, wait a second, David. Remember the discussion we had and I take meticulous notes. I said, David, when we sat down, this was a year before this at tax time.
You told me your income. Oh yeah, Ralph. You're right. I do remember that. I told you I was going to land this big contract and I didn't get that contract. So I apologize. You're right. You're right. Now, David could have said, you know what, Ralph, I'm going to go put
the money down on that Corvette I've been thinking about.

He could have said to his wife, Hey, let's go take that vacation we haven't had in many years because we're self employed and we work hard. But David was an impulsive guy. As I recall, he was a carpenter. As I recall, you know, he was one of these guys that my grandfather used to say it all the time. Measure twice and cut once.
David was a measure twice and cut once kind of guy. When I told him to do something, he did it like those estimated taxes. He paid them. So David decided, he said, Ralph, you know, I'm going to do with this money. I'm going to invest it back in my business. I'm going to buy some new equipment. It's a particular, I think it was a saw, like a portable saw that he was going to buy.

And he was real hesitant to buy it because it costs a lot of money. And he says, but now that I've got this refund money, I'm going to put it back in my business because he realized how much efficiency and productivity he would get from that. So Rachel, I tell you these stories because I want to help you plan something for your refund.

So first thing, check your payroll stubs right now, Rachel, before you do anything else and adjust your withholding so that you're not having this big refund in the future. That's the number one thing. Once you do that, look at your next pay stub. Make sure somebody in HR doesn't make a mistake. And have an idea, you know, you might want to reach out to me or reach out to a professional in your area and set up and say, you know, what is my tax liability going to look like?

This isn't rocket science. And then you look at your pay stub and say, okay, well, Ralph said that by the end of the year, I'm going to have to pay $8,000 in federal tax. Fine. I look at my pay stub and if I take this number and multiply by the, say you're paid 52 weeks, I'll be at $8,000. Great. You're going to break even.
It's really that simple. But here's some other things you could consider.


Rachel, a good thing to do as I talked to you about my other clients is set up that emergency fund. Maybe you don't have that emergency fund, start one. Even if it's just a portion of your refund. Start that habit, build that emergency fund.
You didn't mention it, but if you've got debt, if you've got high interest debt, use a portion of your refund to pay it down. As I said, with other clients, invest in your future. Maybe you want to contribute to a retirement savings account. Maybe you want to put a Roth IRA. Maybe you want to set up that 529 plan like Maria did put away for your children's education.

And last but not least, and I probably should have put this one first. My pastor from church will get on me for not doing this first, but give back. You know, donate a portion of your refund to a charity that aligns with your values. And here's one thing that most financial experts aren't going to tell you, but I'm going to say this because I know people are human beings and we're fleshly people. Treat yourself.

Now I'm not saying take a trip that you've never taken the trip of a lifetime. Go buy the brand new Ferrari or  whatever that looks like.  But set aside a small amount for something   enjoyable. Maybe this is a great time to go do that water park with your kids or go take that overnight trip or a couple of day trips. Treat yourself, again, this isn't found money. This is your money. You've been scrimping and saving. You've been living on a budget every month. Your money has been piling up in your withholding.

So treat yourself. And for everyone else listening, remember this. Managing your finances is more about just money. Money is just a tool. That's part of it, but it's about aligning your resources with God's purpose for your life. So listen to me, do this. Seek His guidance in your financial decisions, be faithful in your stewardship, and use those resources to bless others and further His kingdom.

So here's my action steps. Check your payroll stubs. Like I said, make sure your withholding is accurate and avoid overpaying taxes and create a plan. Listen. Make an intentional plan of how you're going to allocate your refund. If you come in and get your taxes done, and I say to you, Mrs. Jones, guess what?
You're getting a $4,000 refund. The next thing should go through your mind is, Oh, that's great. I'm going to come see Ralph again next year. Just being funny, but have a plan.

Here's what I'm going to do. I'm going to send X number of dollars to the church. I'm going to put this much in the emergency fund.

I'm going to do this. I'm going to do that, but have a plan. And then the final thing, plans are great. You listen to me, you know I say this all the time. But you got to take action. Implement that plan, make the most of your unexpected refund.

Let's get to our reflection questions, you know, at the end of the show, towards the end, I always like to talk about, let's reflect on what we talk about.

So let me get right to them. I got three of them today. Number one thing. What steps can you take to ensure your withholding is accurate in the future? I've given you some tools.
Look at those pay stubs. Don't wait till the end of the year. You will be surprised. I was talking to my, one of my employees here yesterday.

You'd be surprised how many people come in and get their taxes done. They've never even opened up the envelopes with their tax documents. They don't look at their pay stubs. They have no clue. Well, that, if you don't do that, you're not going to be able to ensure your withholding is accurate. So that's my first reflection question.

Number two, How can you align your financial decisions with biblical principles of stewardship? This is a great time to do that. You know, could you do things to better steward your resources? Can you pay down that high interest debt? Can you set aside money for the future? Can you invest in your children's education?

How do you align your financial decisions with those biblical principles? And number three, what are some smart ways to spend an unexpected refund that will benefit your longterm financial goals? I'm not talking about your short term 'I want this.' I'm talking about your longterm things that we talked about.

Do you fund that Roth IRA? Do you fund that traditional IRA? Do you put that money into an education plan? Do you bolster that emergency fund?
Now, maybe you've gotten to this point and you're saying, Ralph, I'm struggling with my finances.

You have questions about managing that unexpected refund. I want to help you because I want to help you turn this into a stepping stone towards financial freedom. Because like I've said many times, tax planning is a crucial extension of tax preparation. If you're just doing tax preparation, you're not really getting to the secret sauce of this.
Tax planning is the, is where it's at. It's that special, that secret sauce. And when I work with my clients, my goal is to assist you in maximizing your overall tax situation, which leads to you mastering your finances. So you might be saying, Ralph, how does that work? Well, here's how I can help you.

Number one thing, I want to help you develop a personalized tax plan. We're going to work together. We're going to create a plan that's for you. That aligns with your values and achieves your financial goals, because there's no cookie cutter approach. There's no bowler plate. You can't go to social media and say, okay, what do I do with my tax refund?
What's the best answer? Here's the best answer. It depends. It depends on your particular situation. And that's why you want to work with me. I'm going to help you maximize your deduction. I'm going to help you maximize your credit. I'm going to identify those things that you're eligible for.

So you can keep more of your hard earned money. My goal is to help you pay as little tax as you're legally required to pay. It's not tax evasion. That's tax avoidance. That's proper planning. That's excellent planning. I'm going to help you avoid those common pitfalls. We're going to talk about those common tax mistakes, those scams, and I'm going to empower you to make informed decisions and avoid costly errors.
Because people who do their own taxes, and I hate to say this. Most of the time they make mistakes. They leave money on the table because they just don't know. This is not what they do for a living. This is what I do for a living. This is what I live in every day. And the biggest thing I'm going to help you do.

It's the difference between me and most secular people who do this. I'm going to help you align your finances with your faith, because I take my Christianity seriously. As a Christian financial advisor, I'm going to guide you in aligning your financial decision with those biblical principles of stewardship.

I want to help you honor God with your finances and your resources because here's a little truth bomb. When you do that, things will be even better. Things will multiply. Not one of these prosperity preachers. Don't misunderstand me. But when you have a stewardship focus, financial life will improve. So don't let this opportunity pass you by. Book a call with me.
Just go to askralph.com and let's work together to transform your unexpected refund into a strategic plan for your financial future. Again, that's at askralph.com and just click the button that says book a call with Ralph.

I've got another favor for you. If you found value in today's show, if it's made you think? It's made you say, Oh, you know what? I never thought about that. Ralph, I'm going to, I'm going to work on that. I'm going to work towards that. I want to ask you to consider supporting us. Now, this isn't a charitable organization.
You can buy us a virtual cup of coffee because your support is going to help us reach more people. That's the goal of this. I'm not in this to get wealthy. My goal is to help reach people with a message of hope, with a message of, yes, you can do this. That's my target audience. A lot of times in the podcasting and the creative sphere, we always look at, okay, what's our why?

Well, my why is to help people find that hope to build those financial, a future that's strong. So you can do that by going to askralphpodcast.com/support. And you can do buy a virtual coffee. Nobody's going to knock at the door here at the office and say, here, Ralph, here's your coffee. I don't even like coffee.

It's a virtual coffee. You can make a one time support. You can make a recurring support, but please consider that. If this show is impacting you, then consider doing that. Again, that's at askralphpodcast.com/support. So just to recap today, we discussed that unexpected IRS refund from multiple angles.

I promised you we would. We talked about the legitimate ones, the scam ones that what to do with it. Once we talked about smart ways to spend that extra cash. We talked about stories who people who had turned their refunds into financial victories. And we talked about that great debate. Yes, we had that debate about breaking even on your taxes or receiving money.
It's even that big refund. And my goal was to empower you with real knowledge to better manage your taxes and your overall financial condition. And I feel like, I hope we've done that for you. So tomorrow we're going to be talking about something completely different. Tomorrow, we're going to talk about long term care without insurance.

And I'm going to ask you a real pointed question. Can you afford to skip it? So make sure to tune in for that important discussion. And remember, my passion is to help you achieve financial success. I want to see you live out your dreams and I want to see you grow in your faith. So thanks for joining me today.

If you like what you heard, be sure to share the show with somebody to say, Hey, listen, you got to listen to this show about taxes. Ralph nailed it today. Talked all about refunds and what I can do to get a better refund and how to spend my money. So do me a favor and
just share the show with them.

All you've got to do is send them an email, send them a text and say, Hey, just go to this website, askralph.com. And another thing I want to bring up here as we close. Every day, when I record the show, I also write a blog post. It goes a little deeper. I put all my research in there. I put some references in there.
You can catch that by going to askralphpodcast.com/blog. I go a little deeper. I get into some deeper insights into today's topic. So as I close until next time, as I always say, stay financially savvy out there and may God bless you abundantly.

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