What Happened to My Tax Refund?

You finally finish your taxes expecting to get some relief, and then you see it you owe. Not a little oops, I owe. I'm talking about a real number that wasn't even in your plan at all. And in that moment, your mind starts racing.You start thinking, did I mess something up? Maybe you think, where am I supposed to get this money? And they start thinking, how do I make sure this never happens again?Well, today on the show I want to talk to you about what you can do next to keep it calm, keep it clear. And today I'm going to give you a real simple plan that you can keep. Foreign. Hey, friend, Ralph Estep Jr. Here.This is financially confident Christian. Today's topic is what do you do when you expected a refund, but guess what? You owe instead? Well, let's get right to our question from today.Ralph, I am really upset. I just finished figuring out my taxes and I owe this year.Now, I normally get a refund, but for some reason I, oh, I wasn't expecting this and I'm not sure what to do now. I need some to make sure this doesn't happen again. What can I do to fix this? Well, thank you for sending in that question.I'll talk a little bit later in the show if you're interested in sending a question in. But the big idea today is how do we handle this bill with a calm plan and then we'll build a no surprise system for next year.So here's how we're going to do that. Number one thing, you got to slow the moment down. Right now the best way to do that is to name it.Now you might be saying, Ralph, what do you mean by name it? Name something like this. This feels scary because it's unexpected. You weren't expecting this when you did your taxes. You expected to get a refund.Maybe every year you get a refund and all of a sudden you figured this up. Or maybe you went somewhere and had your taxes prepared and now you owe and you weren't expecting this.The first thing I want to remind you, owing is not a character issue. This isn't an attack on you personally. This is just the system is broken somewhere and we've got to figure out a way to fix it.We got to move from that panic to a plan. Which leads me to the second thing I really want to talk about today. And we've got to find the why.And the best way to do that, in my view, are three quick checks. These are the things that, listen, I've been doing this for 30 years. The things that I see a problem are these three things.Number one thing, this is usually what happens, your income changed. Maybe you got a new job, which is fantastic, but maybe you knew job, your withholding wasn't set correctly. Or maybe you got a raise.Hey, getting a raise is fantastic as well, but sometimes it ends up that you didn't have enough taxes come out. Or maybe you have what we call bracket creep where your tax rate actually went up a little bit.Maybe you got married, your spouse got a new job, or maybe there's more income brought into the household. Those things will affect your income tax return. Hey, maybe for you, you started a side hustle, you got some side income coming in, maybe a 1099.All of those things are the first thing we want to check. Did my income change? And if so, leads us to number two, and that is, did withholding change? This is not some big complicated calculation.To be honest with you. I say to clients all the time, this is not rocket science. The real issue is, was less taken out of your paycheck. Here's a simple way to look at that.Go look at your W2 form.Now, for those who don't know, a W2 is the form you get at the end of the year from your employer that shows what your earnings were and your withholding. The first thing I check as a professional is I go look at the W2 from the prior year and I compare numbers.Well, the first thing I'm going to look at is did income change? Well, if I see a client that had an income change and I say, okay, well, guess what, the income went up. We've got to have an adjustment here.So then I look at the withholding box and I say, okay, well, if the income went up by. Let's just use a simple example. Let's say you got a really great raise. You got a $10,000 raise. That's fantastic.And then I look at the withholding and I say, wait a minute. But in this case, the withholding actually went down. Well, we've got a problem here. Maybe you had a job change. This happens to a lot of people.They change jobs. And here's the thing a lot of people don't understand. When you change jobs, you're going from one payroll platform to another payroll platform.Sometimes those things don't sync up. So here's a big quick tip right away, if you do change jobs, big thing, go look at your pay stubs.A lot of people don't ever take a look at their pay stubs. Look at your pay stubs right away and make sure the taxes are being taken out. I've worked with clients who change jobs and.And the payroll company actually was withholding the wrong state. Like they moved from one state to the other, and the payroll company had it completely wrong.And we didn't catch that till the end of the year, which created a huge amount of issues. So first thing, check your income. Second thing, check your withholding. And third thing you want to look at, did your credits or deductions change?A lot of times this is related to childcare or having children. A lot of people don't know this, but in the US tax code, once your child turns 17, you lose that big child tax credit.It's kind of an aha moment for a lot of people. Now it can work the other way as well. Maybe you've had a new child. Now you might get a what I'll call a tax bonus.Maybe you've had education credits in the past. Maybe you had a child that was in college and every year you've been getting an education credit when all of a sudden your child has graduated.Or maybe this kind of stinks when this happens. But maybe your income went up and you no longer qualify for that education credit. Maybe your own marketplace insurance.I see this one bite people all the time. Again, this is all based on some kind of change in your situation. Or maybe there's just been a life change.Like I said, maybe you got married unfortunately, Maybe you got divorced, maybe you had a child leave the nest, or maybe you adopted a child. All these things can change. Really. What the thing is, it's happened, and I really want you to lean into this. Something changed in the math.It's just the math that changed. But here's the best part of this. This is solvable. Which leads me to step number three. We've got to decide two things in my view.We got to decide how to handle the current bill, and then we've got to decide what we do from this point forward. So let's talk about the current bill. You've got a surprise. You weren't expecting this. You got a couple options here.Option number one is you pay the IRS and be done with it. Now, I'm hoping this is what you're able to do. Maybe you've got some money set aside, You've got a little bit of a savings.You can say, okay, Ralph, here's what I can do. I can go ahead and pay that. That is the best choice. But let's say you can't afford to do that. And listen, there's no judgment from me.If you can't afford to do that, then you could go to the next best thing, and that's create what's called an IRS payment plan. It works like this. You choose a monthly amount to pay them. Now, here's the thing.You got to understand, they are going to charge you penalty and interest as you're paying them. They're sort of like the debt collector that doesn't go away.So first thing I'm going to tell you is make sure you pick a number that doesn't break your budget. You might say, ralph, I got to get this paid off right away. But look at your budget. Look at your essentials. Make sure your essentials are covered.Your housing, utilities, your food and transportation. And then come up with a number that you can afford to pay. Because the truth is, peace makes more than pride. In this case, make sure you can pay it.And because here's the thing a lot of people don't understand. If you owe again next year, it's going to default your plan.So make sure you're able to not only pay what you owe this year, but make the system changes so that you don't have this in the future. Here's my fourth step you really need to do, and this is kind of the thing we kind of alluded to a second ago.You've got to build that tax buffer so you can stop this surprise come April 15th. Here's the thing I've seen in my world, most of the time, clients who owe, owe every single year.I wish I could say it was different than that, but they usually owe every year. So one of the big takeaways from today, I'm going to really encourage you to what I call your 2026 tax buffer.And you might be saying, ralph, what are you going with this real simple thing.Create a secondary savings account or a separate checking account, whatever works for you, and start putting a little money from each paycheck into that. Hey, it could be $10, $25, $50 if you get an extra job.Maybe you put a little bit more in there, maybe you put a portion of that in that buffer, but this is a way to build that consistency. And finally, here's step number five. You got to fix the system for next year.Either you've got to change your withholding, or you've got to start setting aside more money. If you're a W2 employee, go to your HR people and say, listen, I owed money this year. How Do I add more withholding?It's what's called extra withholding. If you're self employed, you got to start thinking about paying yourself a little bit.Set aside a percentage based on your return or the amount that you're going to owe.That way you don't get yourself in trouble and keep it separate so that money doesn't disappear and you're not looking at it from year end going, hey, where did it go? Because the truth is, if you follow these things, you can turn this surprise into a structure and into a system that will really give you peace.So here is my one big takeaway for today. Here's what I want you to do.If you find yourself in this situation, you might be saying, listen, I'm not in this situation, Ralph, I've got everything set. That's fantastic. But if you're not, create the savings bucket right now.Go onto your bank account and create a new account, 20, 26 tax buffer and then start putting a little bit, I call it squirrel away a little bit of money. It's a name place for that money because it takes you away from fear into a plan. So that's my big takeaway for today.But let's get to the scripture because I always want to land some scripture on this to, to really reinforce what we're talking about today. And this comes to us from Philippians, chapter 4, verse 6. It says, do not be anxious about anything.But in every situation by prayer and petition, with thanksgiving, present your request to God and think about that today. This fits because it pulls you out of that financial panic. Listen, I get what it feels like.I remember when I was a young guy, the first time I filed taxes on my own I owed. And I'm thinking, what am I going to do? I had just enough to get by. But the Lord is saying something to us. He's saying, don't be anxious.Pray about this and go do something about it. Because you can turn this into a steady situation. But go to the Father first. How about we pray together?Lord, you see how overwhelmed we feel right now and you see that shock of owing and that fear of not knowing what to do next. And I just ask that you would give all of us wisdom today and peace for this moment.Help us take one clear step without shame and provide what we need today to handle this faithfully.Teach us to trust and to really trust you with our finances, Lord, and to build those simple structures that protect all of us from this kind of surprise and help us to walk forward calmly with courage and with clarity. And we ask this in Jesus name, Amen. Well, I just want to thank you for being here today. I just want to tell you that numbers don't define you.This can be a turning point in your life.So as I said earlier, if you want to be on the show, if you've got a question for this show, and listen, you don't have to appear live, just send me that question. You go to financiallyconfidentchristian.com/question again. That's financiallyconfidentchristian.com/question. So, again, thank you for joining me.I want you to stay financially savvy, go out there and resolve these problems so you can do this. God bless you. And you have a great day, and I'll see you on tomorrow's show.