Why do I owe taxes at the end of the year?

It is a requirement in the U.S. to pay taxes on the income you receive during the year unless it qualifies as non-taxable. Some taxpayers may get a refund when they file a tax return because of credits and deductions that they may qualify for.  However, this is not the case for a lot of individuals who may have a tax liability at the end of the year. These are some of the reasons why you may owe money when filing an income tax return:

1.     Not withholding enough Federal/State taxes throughout the year from your paycheck.

2.     Changing jobs and not withholding the right amount of taxes for your new tax bracket.

3.     You worked as an independent contractor and didn’t pay quarterly taxes (assuming you don’t have qualifying dependents).

4.     Changing filing status (the worst filing status in most cases is Married Filing Separately; also, if you went from Head of Household or Married filing Jointly to Single).

5.     Not eligible for some credits and deductions. You must meet income eligibility and have dependent children under a certain age to qualify for certain credits such as the Earned Income Credit, The Child Tax Credit, and the Child and Dependent Care Credit.

 To avoid a tax responsibility at the end of the year it is recommended to withhold enough taxes from your paycheck. You may do that by changing your allowance amount on form W-4 from payroll. You can also calculate how much tax withholding you may need to pay in order not to owe at the end of the year, and you can withhold an additional amount from your paycheck as needed. It is really a choice you can make according to your needs. The more you withhold from your paycheck the less money you get throughout the year but the less you owe when you file.

 Would you like to know how much you are getting or if you owe money before filing your tax return? Get your FREE Federal estimate from us.

Get in touch with us! Let us fix your tax problems! You can call/text us at (347) 720-2224 or email us your concerns at contact@ztaxllc.com. Follow us on social media.