What happens if you get a refund or owe taxes?

It is a rare occasion that you file your federal and state taxes without either owing more or getting a refund. In either case, you need a strategy.

If You Owe

When you owe taxes, it is best to pay them right way. Use the IRS Direct Pay or Debit/Credit Pay Links to an external site. tools. There will be service charges for using a debit or credit card. The IRS lists other ways to pay Links to an external site. in addition to mailing a check with your signed tax return.

If you cannot pay on time, then you have some options:

• Pay as much as possible by the deadline. The IRS will bill you for the remainder. Interest and penalty charges will apply to the amounts you cannot pay.
• Request an extension, paying as much as possible.
• Use the Online Payment Agreement Links to an external site. application to request an installment agreement though the IRS to make payments over time.

Filing on time is critical, whether you can pay the whole amount or not. For state taxes, you will need to consult your individual state’s government website.

If You Get a Refund

If you file your tax returns and get a refund that does not mean you should go on a spending splurge. Try these ideas for using your refund wisely:

• Pay down your debt.
• Build up your emergency fund.
• Invest in your retirement savings plan.
• Prepay on loans or mortgage.
• Tune up your car or repair your home.

In either case, review your withholding for next year and submit a new W-4 if necessary.

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