Expecting a tax refund? You could actually owe money

Families banking on a big tax refund are finding out they are the one expected to come up with cash.

Last year's tax reform promised to put more money in people's pockets, but many did not realize they would need to adjust their withholdings. Now instead of receiving a refund, some are finding out they must pay the IRS.

“It’s very scary. Because if you owe two, three, four thousand dollars and you don’t have that in savings, it’s a big bill to have to pay all of a sudden by April 15,” says Carolina Aponte, founder of Indian Trail-based Caja Holdings, an accounting and bookkeeping firm. 

Aponte says it is time to do two things.

“If you are really strapped for cash, just negotiate with the IRS and do a payment plan. That’s one thing you can do right away. The other is, take a look at your withholdings statement which is your W4 from your employer and make changes. Withhold as much as possible so you don’t end up owing if that is your true fear and you want to be able to get some money back at the end of the year. If you are ok with saving on your own, then withhold the least amount of money.”

As for families who depend on their refund to pay down debt, do home improvements, or pad their savings, Aponte says reality is not on their side.

“If you are looking for that large influx of cash coming in, this new tax reform is not going to help you with those dreams, you have to be the master of your own money.”

Aponte says don't wait to take action.

"Procrastination actually builds up the anxiety so I say contact your accountant, talk about it. Doesn’t mean you have to file the taxes right now but at least you have a plan into place."