Why Do I Owe Taxes This Year? 7 Common Reasons
All taxpayers share the same obligation: to file your taxes before the given deadline. But what happens when you file your taxes and find out that you owe a large amount of money to the IRS? You may be asking yourself: Why do I owe taxes this year?
Why Do I Owe Taxes This Year?
The easiest way to explain why you owe money to the IRS is the fact that you owe more taxes than you paid throughout the year. That usually means you didn’t have enough money withheld from your paycheck to cover taxes.
Here are seven reasons why you might owe taxes:
1. Your Tax Withholding Is Off
The most common form that employees fill out when they start a new job is a W-4 form. This form determines how much money your employer will withhold. If you report details correctly on your W-4 as soon as you start a new job, your tax withholding will most likely be accurate and you won’t owe a large sum of money to the IRS after you file your taxes.
2. You Owe Taxes on Self-Employment Income
If you have a side hustle, such as driving for Uber or picking up freelance jobs, you’ll have to pay taxes on the money that you earned. When you work for yourself, the IRS considers you a self-employed independent contractor. Having a side hustle is great because it brings in extra income but it can be an issue when taxes are filed because you don’t have an employer withholding taxes from your paycheck.
3. The Child Tax Credit Changed
Are you a parent? And do you claim your child or children? If so, You most likely received monthly checks from the IRS in 2021 as part of the expanded child tax credit. This changed for the 2022 tax year, and the tax credit dropped for each qualifying kid under 17. This means the child tax credit will not lower your tax bill as it did in 2021.
4. You Went Through Some Life Changes
If you get married you may begin to file as married filing jointly. This will change your tax situation. Another thing that will change your tax situation is when your dependents aren’t your dependents anymore and you can’t claim the child tax credit.
5. You Qualify for Fewer Tax Deductions
Tax deductions lower your taxable income and that means a lower tax bill. Nearly 90% of taxpayers use the standard deduction instead of itemizing deductions. As life situations change you may not qualify for the same deductions as you did for the year prior.
6. You’re in a Higher Tax Bracket
Tax brackets are income ranges taxed at specific rates. The more you make, the higher you are taxed.
7. You Owe Capital Gains Taxes
If you bought and sold investments for a profit or loss—and that can include anything from cryptocurrency and single stocks to exchange-traded funds (ETFs) and real estate—you’ll have to report those gains (or losses) on your tax return. Cryptocurrency, single stocks or any other investments may create huge tax headaches.
What to Do if You Owe Taxes
At CuraDebt Tax, we have a team of tax professionals who are able to find the best IRS resolution available to you. Contact us to better understand your tax problems and to choose the best IRS resolution option. CuraDebt has been helping individuals and small businesses for over 22 years nationwide. As of May 2023 CuraDebt received a score of 5 out of 5 on CustomerLobby for a total of 1179 customer views. CuraDebt is an Accredited Member of the American Fair Credit Council. Contact us for a free consultation. 1-877-999-0486. Take advantage of exploring another option for free. Not only do we handle tax relief, we also offer debt relief.
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