Many Americans look at tax time as a way to recover a little extra money. After having too much money withheld every paycheck, a nice refund check can be used to pay off bills, save, or buy something frivolous.
However, not everyone is so lucky to get a check back from the IRS. In fact, some people owe a lot of money to the IRS and to their home state. So, what do you do when you owe too much in state taxes, and how does this happen? There are some definitive warning signs to look out for during the year. Here are a few of them.
Not Enough Money Withheld by the Employer
A lot of people might not know this, but people can change their W-4 and get more money every single paycheck. If not planned properly however, those changes can end up costing a lot of money when it comes to tax time.
Eventually, everyone must pay their taxes, so many people prefer to pay them as they go. If the employer isn’t taking out the correct amount of taxes, the bill will come due at tax time.
Extra Income Changes Things
Have a side hustle, a big year on the stock market, or some other new source of income? That’s great, but taxes will need to be paid on it, eventually. In most cases, this extra money initially arrives tax-free. The state will eventually want their cut of the money, however, no matter its province.
Self-Employed? There’s a Tax for That.
More and more people are working from home these days, which frees up time, cuts down on a daily commute, and more. If you are bringing in a non-wage income, however, taxes will still need to be paid.
Those who are self-employed will have the chance to itemize a lot of things, look at potential tax write-offs, and more. A person can opt for quarterly estimated payments for self-employment taxes to stay on track a bit more easily. That way they don’t end up owing a lump sum.
Tax situations change from year to year, especially with a family. Most people end up owing state taxes that catch them by surprise when a dependent moves out of the house. Stay on top of all the changes, and there will not be any surprises!
If any of these changes put you in a pickle, the best way to tackle taxes owed is to seek professional help. A Michigan IRS attorney can help, or any IRS attorney in your own state. Since every single state has different laws and regulations as far as taxes are concerned, it is important to know exactly what to expect.