What causes you to owe taxes

what causes you to owe taxes

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Multiple Income Sources

If your income is not all from one employer, your withholding may not be sufficient to cover your taxes for the year. If you work for an employer and operate as an independent contractor as well, the contract work does not have taxes withheld. Jury pay counts as income and the county or state does not withhold taxes. If your spouse works, this also affects your total taxes. You may find that the combination of income from several sources changes your taxable income enough to cause you to owe taxes when you make the final calculations.

Unearned Income

If you have income from Social Security, unemployment benefits, lottery winnings or interest from a bank account, you may not have taxes withheld from these sources. Royalties are another source of unearned income that has no tax withheld. Income from unearned sources often makes a difference in the taxes owed when you file your tax return.

Changes in Status

A recent marriage or divorce will change your taxes owed. So will a child or children moving out of

the household. Your tax liability calculations relate to the number of dependents you claim, and sometimes even the activities of your dependents. When you no longer can claim deductible college expenses, your federal income taxes increase. If you no longer pay daycare, you do not have a childcare tax credit. The same is true for mortgage interest if you pay off your house. These changes in status affect the taxes owed.

Change Your Withholding or Payments

You can adjust your taxes withheld so you do not have to pay at tax time. Ask your employer for a new W-4 form and complete it with fewer allowances than you currently have. If you count yourself and your spouse as dependents, you can claim just one. Your employer will withhold more taxes each pay period. At tax time, you may get some money refunded. You can also add an amount on Line 6 of the W-4 Employee's Withholding Allowance Certificate to cover income from a source that does not withhold taxes. If you are self-employed, increase your estimated quarterly payments so you have a refund available at tax time.

Source: ehow.com

Category: Taxes

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