You may owe taxes for several common reasons:
- Too little tax was withheld from your paycheck during the year, meaning not enough was paid to cover your tax liability.
- You had additional income outside of your normal paycheck, such as from freelance work, investments, unemployment benefits, or a side business that wasn't subject to withholding.
- Self-employment income requires you to pay self-employment tax, including Social Security and Medicare taxes, which might not have been fully covered through estimated tax payments.
- Life changes such as marriage, divorce, new dependents, or job changes can alter your tax situation and withholding needs.
- Changes in the tax code, deductions, and credits can affect how much tax you owe.
- Not making quarterly estimated tax payments if you have non-wage income can result in a tax bill when you file.
Overall, owing taxes often comes down to paying less tax during the year than what your total income and tax situation required, which might be due to insufficient withholding or additional income sources without withholding. Adjusting your W-4 withholding, keeping track of all income types, and making estimated tax payments if necessary can help avoid owing taxes in the future.
