What makes you owe state taxes

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I Accept Show Purposes. Your Money. Your Practice. Popular Courses. Taxes Income Tax. Federal Withholding Tax vs. State Withholding Tax: An Overview In simplest terms, the amount of withholding from your paycheck is an estimate of how much you'll owe in taxes at year's end based upon your level of income and other factors. Key Takeaways States can only withhold amounts for their own income taxes, and not all states impose them.

Virtually all U. Social Security and Medicare taxes are only withheld at the federal level. Federal taxes have seven tax brackets based on an annual income.

You may file your taxes as single, married, or head-of-household. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. You Could Owe Tax Penalties. Partner Links. A withholding is the portion of an employee's wages that is not included in their paycheck because it is sent to federal, state, and local tax authorities.

S payroll tax deducted to fund the Social Security and Medicare programs. If you are employed by a company, the IRS requires your employer to withhold a portion of your salary to pay your federal taxes.

The amount withheld depends on a number of factors—but you do have some control over how much is taken out of your paycheck. The W-4 form you filled out when you started your job allows you to modify how much tax is withheld from your paychecks. If you are unfamiliar with the W-4 form, you should understand how allowances work before making adjustments to it.

Essentially, each allowance you report represents a reduction to your taxable income—such as for the dependent exemptions for tax years prior to you anticipate claiming on your tax return.

The more allowances you report on your W-4, the less tax that is withheld from your paycheck. If you report more allowances on your W-4 than dependents on your tax return, you could end up writing a check to the IRS come tax time. This is just one example. Self-employed taxpayers, though not subject to withholding, can face similar issues when they fail to make estimated tax payments. As a self-employed taxpayer, you have an obligation to make up to four of these estimated tax payments to the IRS throughout the year.

But you should also realize that the IRS may charge you interest and penalties for failing to make sufficient quarterly estimated payments. Whether you are expecting to pay, or get a big tax refund, TurboTax will guide you step by step to help you get all the tax breaks you have coming. Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms.

Whether you have a simple or complex tax situation, we've got you covered. While there are some exceptions, the IRS requires most people to file a tax return. The information you provide on your federal tax return is used to determine what you owe in federal income tax. So what determines if you owe federal taxes or get money back?

If you paid too much in taxes during the year through payroll withholdings, then you may get a refund. If you paid too little in withholding then you may owe additional tax. This return determines what you owe in state income taxes, based on your income and which tax deductions or credits you claim.

The tax bracket you land in at the state level can differ from your federal tax bracket, which is one reason you might owe state taxes but not federal. Again, whether you owe state taxes or get a refund can depend on how much you paid in tax throughout the year.

Getting a state tax bill may come as a surprise but there are several reasons why you may owe money, versus getting a refund. Again, the first thing to keep in mind is that state and federal tax laws and tax brackets work differently. If your income changed significantly and you earned more than in previous years, this could push you into a higher tax bracket at the state level.

That could result in owing more money in taxes. Next, consider what you withheld from your income during the year. Using an online paycheck calculator can help you get an idea of what you should be withholding. Changes in income can also affect your ability to claim certain tax credits.

If you can no longer claim that credit on your federal taxes you could lose any similar state tax benefits. The deductions you claim and whether you itemize or take the standard deduction can also affect your state tax bill.

Having fewer deductions than previous years, for example, could mean you have less to itemize. Or you might end up taking the standard deduction instead.

Either way, that could affect your state tax liability and cause you to owe more money. No longer being able to claim a child as a dependent. Taking Social Security benefits for the first time.

Keep in mind that the same things that can result in you owing more state taxes could also increase your federal tax bill as well. Otherwise, your state tax agency could charge you penalties and interest for each day your outstanding balance goes unpaid.

That could end up adding to what you owe. Your options for paying may include writing a check, paying by credit card or taking out a personal loan. A credit card that has a high APR could make paying state taxes more expensive. Just be sure you understand when the promotional period ends so you know when the regular APR kicks in. Also, consider any processing fees your state tax agency may charge for credit card payments.

If you want to avoid having to ask why do I owe state taxes next year, there are some things you can do to plan ahead. If necessary, you can fill out a new Form W-4 to update your withholding.