It’s all over the news every day. May 17th was Tax Day this year and unless you filed for an extension, you had to settle up with Uncle Sam or face interest and penalties on your tax bill if you didn’t. That’s bad news for millions and there’s just no way to avoid it if you failed to file on time.
But what about the situation in reverse?
The IRS is behind on processing tax returns due to staff shortages and other complications. This tax refund delay could be holding up the money you were counting on to cover your bills.
Many people were looking to their tax refunds to do some major bill paying in February. Among filers expecting a refund, a third say they planned to use it to pay down debt and about 30% planned to catch up on bills. If you were expecting and needing to have a check in hand by now, here’s some bad news.
Your refund may be late and more than just a little bit. If there’s a significant tax refund delay, how will you keep your finances together until Uncle Sam pays up? Missing your tax refund? You are not alone!
Prioritize Your Bills and Do It Now
Consider not getting you tax refund in February, March, April, or now May to be just another financial blow that you are taking to the gut. By the way, do I have to remind you? This whole thing can be avoided if you adjust your withholding from your paycheck and you don’t get a refund like the one you are now waiting for and should have received every week as part of your paycheck!
Waiting for your own money to be returned to you with no interest is just plain stu…eh, not smart.
But if you’re really strapped by the lack of refund right now, then you have to prioritize your spending, limit your discretionary spending, and focus on paying for your essentials only, like housing (mortgage or rent), groceries, and utilities.
Prioritize the expenses that enable you to get to work and earn your money such as transportation costs and child care. Everything else needs to be placed on the back burner until your finances begin to come into order. Your tax refund will eventually come through, but don’t go holding your breath.
Essential Bills Have to Be Paid
Look ahead to your June and July “must pay” bills. Check for the large upcoming ones so you can plan for them now and aren’t scrambling all over again in just a few weeks. For example, if you have an annual bill due in June, try calling the customer service number on your bill now and see if you can pay it in a monthly payment plan instead of paying just one big amount.
With all that is going on in our economy, there are many ways being offered to help with your finances right now. The old adage that “if you don’t ask, you don’t get” truly applies here. Ask. If you ask, you may be able to get off the hook and have a much lower payment next month.
It’s Not Easy But You Need to Make the Calls
Prioritizing your bills is one thing, but having the means to pay them is another. This may be your first time ever facing such a thing. If you can’t pay the rent or mortgage and other bills in full, pick up the phone.
All of this is just one more way that the pandemic may be affecting your finances. In fact, one of the main reasons that the IRS is way behind in making the refunds of your taxes is clear: They have been so extremely busy trying to get “stimulus” checks out and other programs to help that they just can’t keep up. The result is that now you may be feeling the pain of the tax refund delay because of it all.
Making a call to customer service can be an effective way to get a bill lowered or deferred, and all it costs is a bit of your time. Missing payments, on the other hand, can lead to late fees, dinged credit, and much worse.
When you are on the phone, be calm and explain the situation. The person on the other end is often willing to help, particularly in situations like this when you’re facing something outside your control.
Other Sources of Help
If your income has been affected by COVID-19, you may be eligible for payment help from your credit card issuer or personal loan lender. Once again, a call and asking for help is step number one.
As for your mortgage, look into “forbearance”, a temporary postponement of mortgage payments. It is a form of repayment relief granted by the lender or creditor in lieu of forcing a property into foreclosure. It allows you to pay lower monthly payments, or delay payments, for a certain period of time. Some lenders offer forbearance programs specifically for borrowers affected by COVID-19.
Get Some Free Advice
Your lenders and service providers are far from the only organizations that can help. The Association for Financial Counseling & Planning Education, or AFCPE currently offers a free virtual session with a financial counselor or coach.
These professionals can help you with the basics of personal finance, like which expenses to prioritize when you’re tight on cash. To register for a session, just visit the AFCPE’s website.
For Basic Needs, Try This
For help to cover basic needs, call or visit 211. They will connect you with resources and programs that may help you pay bills and rent, secure food, access internet services, and more. Your basic needs may just be temporary, but they are still real and troubling and the last thing you want is to have a tax refund delay now cause a roller coaster of even greater financial troubles as the weeks go by for you.
Prepare for next year’s taxes now. If you’re waiting on a big tax refund, it’s likely because you took advantage of a large amount of refundable tax credits or you’re withholding too much on the W-4 form you gave your employer last year. If it’s the latter, you’re basically giving the government an interest-free loan that is repaid in the spring. Reduce the withholding amount, and you’ll take home more money each paycheck and receive a smaller refund.
In other words, if you expect a $3,000 refund later, wouldn’t you prefer to get $250 per month now? That makes it available to you and not sitting at the IRS office waiting for it to be sent to you.
At least twice a year, review your withholdings to prevent a giant refund or a nasty tax bill. The goal here should be to have neither one be your reality.
As for preventing delayed refunds, filing early and electronically, rather than mailing a paper tax return, will help. Also, opt to get your refund by direct deposit, instead of a paper check. Those filers who follow these steps likely already have received their refunds for this year.
Have you filed your 2020 taxes and are still waiting for your tax refund? Are you having too much withheld every year and now are short money to pay your bills? What are you going to do now and for next time to prevent this from happening again?