can you tell me all the reasons why a person would owe taxes, or have to pay instead of recieving a tax return

Answer 1

OK, let's clear up some terminology first.

You don't "receive" a tax return. You FILE a tax return. It's the piece of paper -- real or electronic -- that lists your income, exemptions, deductions, credits, taxes paid, etc., and calculates your tax liability and determine whether you get a REFUND or have a tax BALANCE DUE. You file your tax return with the IRS. If your state has an income tax, you'll file a State tax return with your state.

If you have a balance due when you prepare your tax return, it simply means that you did not have enough tax withheld during the tax year. There are many possible reasons for that and it's not possible to say why YOU have a balance due without knowing all of the details of YOUR tax situation.

Some common reasons that lead to a balance due when you file your tax return include:

1. Claiming too many withholding exemptions on Form W4 at your work.

2. Working as an independent contractor and not making quarterly estimated tax payments using Form 1040ES.

3. Working 2 or more jobs and not filling out the worksheet on page 2 of Form W4 for all of your jobs and calculating the additional tax that needs to be withheld.

4. Being married and having widely differing incomes with your spouse, and failing to fill out the worksheets on Forms W4 with all of your employers and calculating the additional tax that needs to be withheld.

5. Taking an early distribution from a retirement plan and not paying in enough extra tax to cover the 10% penalty tax.

6. Having substantial income not subject to withholding such as dividends and interest income and failing to pay in enough tax to cover the tax liability for those earnings.

7. Filing separate returns when married and not having extra tax withheld from you pay to cover the additional tax due to that filing status.

Those are just a few things that can trigger a balance due at tax time. You, as the taxpayer, are SOLELY responsible for ensuring that enough tax is paid in during the year, from withholding from your pay or with Form 1040ES or both.

Answer 2

Here is the short answer: If you get a refund, you loaned the gov't. money interest-free during the year. That is a BAD thing, no matter who you are.

Here is the longer answer:

Even if you perfectly calculated your withholdings, changes in your circumstances during the year can cause you to owe money. Examples: divorce, making more $$ than you expected, selling a house for which you must pay capital gains, failure to properly execute a 1031 exchange, w/d $$ from a retirement plan or failing to repay a loan from one, ... Sorry, I probably don't even know ALL the reasons, but that gives you an idea.

Basically, if you ARE being taxed (& a shocking number of people pay little or NO income taxes), your ideal situation is to pay what you owe as the year progresses & come out w/in a few 100 bucks either way. For instance, we had to pay an add'l $200 this year w/our personal return, last year we got back $400.

Use the withholding calculator on the IRS website to help plan your withholdings w/ at least relative accuracy.

Answer 3

They claimed the wrong amount of dependents or got a raise sometime in the year and did not change dependents. To avoid paying next year check your tax table or call your accountant for advice as to the coming year.

Answer 4

There's only one reason - you paid in less than you owe.

Taxes are calculated based on your income and eligible deductions and credits. The individual determines how much is paid in through the year. If the taxes are larger than what's paid in, then you owe. If you paid in more than you owe, then you get it back as a refund.

Answer 5

If they declared more than a few dependents on their W-4 (didn't have a lot withheld), and only claimed themselves on the return.

If they had a lot of 1099 income.