Why Do People End Up Owing The IRS?

Why Do People End Up Owing The IRS?

The IRS is often misunderstood - especially when it comes to taxes. For example, many people believe that if they don't make a lot of money, they won't owe the IRS anything. However, that's not always the case. There are several reasons why someone might end up owing money to the IRS - even if they don't make a lot of income. Let's take a look at some of the most common reasons why taxpayers end up owing money to the IRS:

If you find yourself behind on your taxes for any reason, you must take a step back and revise your tax payment strategy. The cost of inattention is severe; the IRS will put all of its resources towards making you pay what you owe.

People miss out on paying their taxes for many reasons. Some might be more obvious than others, but that doesn't make them any less valid.

Oversight Filing

Failing to file a tax return is one of the most common mistakes taxpayers make. If you live in and earn income from the United States above a certain amount during any given year, though, you are required to both pay taxes on that income and report it by filing a federal tax return.

There are three primary criteria the IRS uses to determine whether or not you have to file a return: your income, filing status, and age. If you reach a specific income level as dictated by law, then it is generally required that you file. The amounts let you know how much money one needs before having to file taxes and adjust each year to accommodate inflation.


Many people are unaware that if their employer doesn't withhold enough taxes from their paycheck throughout the year, they will more than likely owe money to the IRS during tax season. This is called "under-withholding."

The underpayment of taxes generally happens when an employee fills out an IRS Form W-4 (completed once hired) and claims too many tax exemptions. Exemptions allow employees to have less income withheld from their paychecks for taxes throughout the year.

You're able to file a new W-4 at any time. If you discover that you've given the government too much money, don't worry! You'll receive the money back when you file your income taxes.

Income Has Increase

To put it simply, the more money you make, the higher taxes you'll likely owe- especially from income sources that don't withhold taxes like freelance work or selling stocks.

Furthermore, you might have to pay self-employment taxes. Since no one is taking out the IRS's withholding taxes from your income each month, you will only owe taxes during tax season - unless you make your quarterly tax payments.

Failing to Pay Estimated Tax

If you're a business owner or entrepreneur, another way you might fall behind on taxes is.

Depending on their income and estimated tax payments, most self-employed people pay taxes quarterly.

Self-employed people do not have an employer to withhold taxes from their paycheck, which is usually a good reminder for those who might forget to file their yearly taxes. However, if you're self-employed and don't make estimated tax payments throughout the year, you will end up owing a large amount in taxes at the end of the year.

Older Children

Looking for ways to cope with your children leaving the nest? The Child Tax Credit can be a great way to ease the financial burden. But once your children turn 18 and leave home, you no longer qualify for this credit.

If your child is over 17 but in college or living at home, you can still file them as a dependent on your taxes. Keep the IRS updated on any changes to your children's situation so that you can be sure to file correctly.

What Is Tax Withholding?

What Is Tax Withholding?

Tax withholding is the process of taking a portion of an employee's wages each payday and sending it directly to the IRS. This money goes towards your yearly tax bill, reducing or eliminating any payments you’ll have to make when you file your taxes.

When you start a new job, you'll fill out an IRS Form W-4, which is used to determine how much money should be withheld from your paycheck. This form requires you to give information about your filing status, allowances, and other deductions that should be taken into account when calculating your withholding amount.

If more money than necessary is being withheld from your wages, you may receive a large refund at tax time. However, if your withholding is too low and you don't owe a lot in taxes, you may be responsible for paying the difference when you file.

Why Do People End Up Owing The IRS?

How To File Your Taxes Correctly To Avoid Any Issues

If you make any mistakes on your tax return, it might cost you money in the form of a smaller refund than what you originally claimed. In addition, owing more taxes with associated interest and penalties or an audit from the IRS are also possible consequences. The best way to prevent these negative outcomes is by avoiding errors on your return altogether.

1. Know the deadlines- Keep an eye on the tax filing deadline so that you can file your taxes before it passes and avoid late fees.

2. Have all of your documents ready- Make sure you have all of the necessary information such as income statements, receipts, and other financial documents related to deductions or credits.

3. Double-check your information- Check for typos, incorrect dates, and other potential errors before submitting your return.

4. Use tax software or a professional- If you’re not comfortable doing taxes yourself, there are several online tax preparation services and professionals who can help guide you through the process.

By following these simple tips and understanding the various tax rules and regulations, you can ensure that your return is filed correctly and that you’re not missing out on any potential deductions or credits. With the right information and preparation, filing taxes doesn't have to be a hassle!

Lastly, if you are ever in doubt about how to file your taxes or which forms to use, consult with a qualified tax professional or accountant for assistance. They can provide advice and help you make sure your taxes are filed correctly and on time. With the right guidance, you can rest easy knowing that your taxes have been taken care of.

How To File Your Taxes Correctly To Avoid Any Issues

How Do I Know Why I Owe Taxes?

The best way to stay on top of your tax refund or bill and understand the itemized reasons for any changes in the amount you're receiving is by working with a financial professional or service company.

You have the option of filing your taxes online or, if you would prefer, meeting with a tax professional who can help walk you through the process.

What Happens If You Don't Pay Your Taxes?

If you don't pay your taxes, the IRS may take action such as levying your bank account or issuing a lien against your property. The IRS can garnish a portion of your wages from payroll withholdings, and if you fail to respond to the collection efforts of the IRS, they may even choose to pursue criminal charges.

It's important to keep in mind that the IRS is obligated to collect taxes when they are due and will take action if you don't comply. Filing your taxes on time and paying any amount owed is the best way to avoid potentially steep fees or serious legal trouble.

Taxes may be intimidating, but with the right preparation and guidance, you can file your taxes correctly and avoid any issues or penalties. Understanding the various forms, deductions, rules, and regulations can help ensure that you don't owe anything come tax time. If in doubt, always consult a professional for advice.

The Bottom Line:

The IRS requires money from people when they have low withholding, fail to claim enough deductions or make errors on their tax returns. Furthermore, if you don't respond to the IRS's collection attempts, you will still owe taxes. To avoid this financial burden altogether, be sure to prepare your return correctly and gather all required documents beforehand. If you're unsure about anything related to taxes, consider working with a professional for help.

By following these tips, you can prevent yourself from owing the IRS and avoid any potential fees or penalties. With the right preparation and understanding of the rules and regulations of taxes, you can rest easy knowing that your taxes have been taken care of.

Thank you for reading this article! We hope it was informative and helped provide some insight into why people end up owing the IRS. Remember, taxes don't have to be a stressful experience when you are organized and informed.