Why do I owe taxes?

If you owe taxes or your refund is smaller than expected, the first thing you should do is review your tax return or review the Federal Tax Summary screen in the FreeTaxUSA software. Check to see if anything looks out of place or if you incorrectly entered any information.

If everything looks correct on your tax return, then here are some potential reasons why you might owe taxes:

• Did you have too little withheld from your wages? If so, fill out a Form W-4 with your employer to have more taxes taken out of your paycheck during the year so you don't owe taxes when you file your return.


• Do you have gig income such as working a side job at Uber where you are getting self-employment (Form 1099-NEC) income rather than wages? Unlike W-2 wages, Form 1099-NEC doesn't have any taxes withheld from it. In addition, self-employment income has self-employment taxes on it that are calculated on the tax return and added to the regular taxes on the same income.


• Did you have a significant amount of income other than wages that didn't have any taxes withheld from it? For example, if you have rental income, business income, capital gains from stock sales, unemployment income, or canceled debt income. If you are expecting to have a significant amount of income other than wages next year, you can pay quarterly estimated taxes (Form 1040-ES) to avoid owing tax on next year's return.


• Did you have a life change that affected your taxes this year such as not being able to claim a child as a dependent, not being able to claim certain credits or deduction, or getting married or divorced? If so, you should take a new Form W-4 to your employer to have more taxes withheld from your paycheck.


• If you are unable to pay the taxes you owe, you can set up a monthly payment plan with the IRS by filing an Installment Agreement with the IRS. The FreeTaxUSA software can help you do that. Just go to the Installment Agreement Request screen in the Miscellaneous Forms and Topics section of the software.