Although taxes are a huge pain for most people, they are necessary in order to keep the government running. Unfortunately, many people fall behind on their taxes, and there are certain factors that can contribute to this.
Under-withholding
Usually, when people have taxes deducted from their paychecks, they fill out a W-4 form that tells their employer how much tax to withhold. Sometimes, employees claim excessive exemptions, which can lead to them owing money come tax season.
Another reason people may under-withhold is that their income fluctuates throughout the year. This can be common for people who are self-employed or have side hustles in addition to their full-time job.
Unexpected life events
Life is unpredictable, and sometimes tax bills can be too. People who have major life changes, such as getting married, having a baby or buying a house, may find that they owe taxes because they didn’t adjust their withholding. Other unexpected expenses such as medical bills or student loans can also lead to tax issues.
Tax-deductible expenses
There are many tax-deductible expenses, such as business expenses, charitable donations and medical bills. However, people often forget to claim these deductions, which can lead to them owing money.
Refundable tax credits
There are also many tax credits that can lower your tax bill, such as the Earned Income Tax Credit and the Child Tax Credit. However, people often forget to claim these credits, which can lead to them owing money.
If you find yourself owing taxes, don’t panic. There are options available to help you pay off your tax debt. You can set up a payment plan with the IRS, make an offer in compromise or even file for bankruptcy if your tax debt is severe enough. No matter what, it’s important to take action and not let your tax debt spiral out of control.
