Why you may owe taxes this year, according to a tax expert

(NEXSTAR) — Tax season is already upon us, and if you’re lucky, you’ll find yourself receiving a nice refund after you’ve filed. 

It’s not luck, however, that determines whether you get a refund. In fact, there are ways to tell whether you’ll be getting a check or owing up. 

“There are a few reasons taxpayers might owe federal taxes instead of getting a refund,” Mark Steber, chief tax information officer for Jackson Hewitt Tax Services, tells Nexstar. That includes withholding too little on your W-4, your income changing, contributions to your FSA or HSA changing, or withdrawing from your retirement account. 

Here’s a look at some events that could leave you without a refund. 

Life changes

Big life changes, like getting a new job, getting married, or having a child, will undoubtedly impact your taxes. 

If you started a new job last year, you may remember filling out a Form W-4, which determines how much is withheld from your paychecks. If you forget to fill one out after a life change, you may find yourself withholding too little, as Steber notes. 

It’s also worth noting that supplemental wages you earned last year, like bonuses, severance pay, or payments for moving costs, are also subject to income taxes, the IRS explains. They are subject to different federal withholding rules, based on how much you received.

During the COVID pandemic, unemployment compensation fell within a range that wasn’t considered taxable. That’s no longer the case. Generally, states won’t withhold taxes on unemployment benefits voluntarily, according to Jackson Hewitt. This could leave you paying up during the tax season. You can, however, ask for taxes to be withheld.

HSAs and FSAs

If you aren’t familiar, an HSA, or health savings account, works like a personal savings account to cover healthcare costs. An FSA, or flexible spending account, also holds funds you can use for some out-of-pocket health care costs. In both cases, the money is tax-free, as long as it’s used for the appropriate costs. 

You could owe taxes, however, if you spend those funds on non-health care costs. 

Additionally, if you altered how much you were contributing either between 2022 and 2023, you could find yourself with a smaller or no refund. 

Social Security benefits

While millions of Social Security beneficiaries are seeing bigger monthly checks because of recent cost-of-living adjustments, many are facing a new reality: having to pay taxes on those benefits

It’ll depend on your combined income. If you’re a single-filer with a combined income between $25,000 and $34,000, you could face income tax on 50% of your benefits. Above that range and it’ll be up to 85%. If you file jointly and have a combined income between $32,000 and $44,000, you could see an income tax on up to 50% of your benefits. Above $44,000, up to 85% could be taxable. 

A survey by The Senior Citizens League found that 23% of participants who had been receiving Social Security benefits for at least three years paid federal income tax for the first time during last year’s tax season. The group expects that trend to continue this year. 

Owe taxes but can’t pay? Here’s what to know

Tax experts recommend filing your taxes early, regardless of whether or not you’ll owe money. 

The IRS can penalize you for failing to file as well as for failing to pay the taxes you owe on time. Taxes you owe are subject to interest and monthly late payment penalties, according to the IRS.

If you can’t pay the amount you owe, the IRS recommends paying what you can and exploring payment options, which include short-term and long-term payment plans.

The tax filing deadline falls on April 15 this year.

If you don’t get a refund this year, you may be in line for one next year. In November, the IRS announced inflation adjustments to the tax code, including changes to the standard deduction and individual income brackets. The standard deduction is a dollar amount that reduces the amount of income that is taxable.

Those took effect as we rang in 2024 and will apply to tax returns we file in 2025. The changes could already be reflected in your paycheck this year, though.

Powered by News Channel 9.

Related Articles

Back to top button