Choose Your Own Adventure: Tax Day

April the 15th is known all around as Tax Day, especially for those of us that have to pay more than what we already did throughout the year.  Now, this year is a little different in a lot of ways – including an extended federal Tax Day deadline; but go with me on this, will you?

Now, don’t get me wrong – I enjoy the roads that I drive on, the parks that we play in and the public-school district that we intentionally moved into….even though we’re doing a hybrid end of school year right now.  I appreciate much of what is done with our tax dollars.  Now, do I think those folks spending our hard-earned money could use a financial coach? Yes, yes, I do!  But this blog is not about what the state or the feds are doing with our tax dollars.  It’s about what you and I, are doing with our tax dollars.

Let’s do a choose your own adventure. 

Remember those books we would read as a kid? 

If you think Jake should go into the dark cave alone, go to page 36.  If you think that Jake is a chicken &^%$ and should go back to find his friends, turn the page.  Jake always went into the cave alone when I was reading.  But to be fair, I have a bit of FOMO (fear of missing out) and would go back to read what would happen in the safer version of the story too – I liked to read all the pages.

If you have to get the old checkbook out and pay Uncle Sam soon, keep reading.

If you got a refund this year because you overpaid Uncle Sam, you can scroll down a bit.  OR keep reading because you have FOMO too.  You’re in good company friend.

Paying Uncle Sam

I’ll never forget the year that James went into business for himself full time and we put away some money for taxes each month….but really we were just trying to figure out how to live on a little bit less, new baby dynamics including daycare, and a whole different way of life.  We had a small tax bill that year, but nothing too crazy. Little did we know that the government was going to want over 1/3 of his income. Geez Louise.  The year that we got the $10k news from our accountant, plus the realization that our quarterly estimates were now going to be 3x what they had been – all due….in the next two weeks did we realize that this was some serious coin.

Working with a professional accountant is the right answer for MOST folks that are in need of paying taxes.  And, I don’t mean the H&R Block type.  Are YOU staying up on all of the tax rules as they change year after year?  I didn’t think so.  These peeps are in the thick of it and know how best to improve your tax situation. 

Last year our accountant told us that we could either pay $8k to the government or we could put an extra $10k in our retirement and pay $4k to the government.  We opted for the $10 and $4 plan.  Take that! If I didn’t have a guide to help us with that, we would have missed out on extra retirement funds and would have paid for all of the potholes to be filled on our street.

Budgeting for your taxes.

Tax budgeting through quarterly contributions is also key – again, with the help of an accountant you can get this all lined up.  AND you can break those quarterly contributions into monthly amounts and transfer them into a ‘tax savings’ account each month within your budget.

If you’re in need of an accountant, get in touch with me.  I have a couple of trusted advisors in my networking list that I’d love to pass along to you.

And, that is the end of your adventure friend. Lucky for you, if you do have to pay – you have an automatic extension this year, and your quarterly estimates get postponed too. Happy 15th day of April to you.

This next adventure is for our friends that get a refund check. BUT also, if you think you’re going to see a stimulus check, this can apply to you too. Turn the page.

Refunds from Uncle Sam…or a Stimulus Check

So, you’re one of the lucky ones that got a refund? Alright, I wholeheartedly agree that getting a refund is far superior to having to pay – again.  P.S. This also applies to those stimulus checks coming in the mail.

Whatcha going to do with it?  So often I see folks using it as a free pass spending spree for this newfound money that just came their way.

Don’t forget! That was YOUR money, that the government just gave back to you after they collected interest on it. So, be stingy with it.  Use it towards your goals, don’t use it to fund a shopping trip. 

Do you have your initial emergency fund set up of $1,000? If not, you’d better be putting it in there.  Right now! Don’t hesitate for a minute.

Do you have your debts paid off? 

Girl, if you think you’re winning because you aren’t charging this next spree because you have this refund….we need to talk.  Take that refund and go apply it to your smallest balances.  Could you pay off one entire debt?  Do it!  Don’t think twice.  Could you pay off two!?  Think about the progress you’re making.

Now, maybe you don’t have any debt and you already have a small savings account – well, no time like the present to build up your fully funded emergency savings of 3-6 months of expenses.  Transfer it, and walk away.  You’re building up security and peace of mind. Worth it.  I promise.

Now, depending on the size of your refund you may need to adjust your withholding.  Reach out to a professional for advice; but you want to get more of that in your paychecks to provide income into your monthly budget instead of saving it up for the end of the year.

Side note…if you’ve found yourself out of work, or otherwise affected by the craziness happening in our world right now and you need to use your refund or stimulus check to 1. cover your four walls (food/utilities/housing/transportation) or 2. stock pile some savings until this is past us – permission granted.

And, that my friend is the end of our Tax Day adventure.

Sarah is a Ramsey Preferred Coach
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