It’s not fun to fill out your taxes expecting a refund, only to discover you actually owe money.
Or maybe you were expecting to owe a little, but you end up having to payback a lot.
How did this happen, you think, racking your brain over every financial decision you and/or your business have made in the past 365 days.
Unfortunately, it’s probably not a clerical error. Life changes, and when life changes, taxes change. The truth is, there are a number of reasons why your taxes may be greater than you were expecting.
Here are a few possibilities.
You Didn’t Withhold Enough
When starting a new job, one of the first things you typically do is fill out a W-4 (ie: the form with all of the boxes that no one really understands). The boxes you fill in affect your tax withholdings. If you don’t take any allowances, you may end up paying extra in taxes, which will result in a bigger refund at the end of the year.
On the other hand, if find yourself owing money at the end of the year, you may be taking too many allowances. If you’re not having enough of your earnings taken out, tell your employer you want to adjust your W-4.
You Didn’t Pay Estimated Quarterly Taxes
Of course, you only have a W-4 form and taxes withheld if you’re a traditional employee. If you’re self-employed or working as an independent contractor, it’s up to you to handle your tax payments.
These are meant to be paid four times throughout the year, hence the reason they’re called estimated quarterly taxes. If you didn’t pay enough throughout the year, you’ll end up owing the rest.
Skip your quarterly taxes altogether, and you could face penalties from the IRS. That, of course, is in addition to the taxes you till owe.
You’re Making More Money
You owe money on every dollar you make. Earn more dollars, and you’ll owe more taxes. That’s basic math. But there’s another factor at work when it comes to your earnings: the tax bracket.
Once you start earning a certain amount of money, you start paying a higher tax percentage on some of your income.
Other Status Changes
A lot of factors can affect the amount of taxes you pay. This can include marriage status, the number of children you have, whether or not you have a mortgage, business expenses, and more.
Let’s say you have children, and one of them becomes independent. Your taxes will likely go up.
You’re Missing Out on Deductions and Tax Breaks
If you still feel like you’re paying too much in taxes, it’s possible you’re missing out on deductions. Or maybe you’re making mistakes in your accounting and finances.
The best way to ensure your taxes and finances are in order is with the assistance of an accounting professional. At LWS, we provide a wide range of accounting services, from personal taxes to full financial controllership.
Whether you need a basic tax guy or a payroll services company in Springfield, Ohio, LWS has you covered. Contact us today and make sure you’re not paying too much on your taxes.