Owe more than you expected? We'll find out why and fix next year.
Why do you owe so much in taxes?
Answer four quick questions. Then we find out why on a free call.
Your refund turned into a bill.
Owe more than you expected? We'll find out why and fix next year.
Answer four quick questions. Then we find out why on a free call.
Your refund turned into a bill.
Owing more than you expected is stressful, and it happens to a lot of careful people. Most surprise bills come from a few common reasons, and each one can be checked and fixed. Here they are, with what to look at, how to pay if you can't pay it all, and how to keep next year from surprising you.
Too little tax was paid in during the year. Your return adds up the tax for the whole year, then subtracts what you already paid through paycheck withholding and estimated payments. What's left is the bill.
So when you owe a lot, one of two things happened. You had income that your withholding wasn't set up for, or less tax went in during the year than the year needed. The eight reasons below are the most common ways that happens.
Your employer withholds tax based on the Form W-4 you gave them. If you haven't updated it since your life changed, it may be set too low. Two jobs at once, or a spouse who also works, are the most common cases. Each employer withholds as if its paycheck were your only income, so together they take out too little.
What to check: Compare the federal tax withheld on your W-2s (box 2) with last year's. Then look at your W-4. If you have two jobs or a working spouse, Step 2 of the W-4 is the part that fixes this.
Freelance work, gig apps, a side business, rent, interest and dividends usually come with no withholding. That income is taxable even when no 1099 arrives, and the tax on it shows up all at once when you file.
What to check: Add up your 1099-NEC, 1099-K, 1099-MISC, 1099-INT and 1099-DIV forms, plus any side income that came without a form. If that total is new, or larger than last year, it's likely a big part of your bill.
Selling stock, crypto or property can create a large gain, and usually nothing is withheld when you sell. A gain on something you held more than one year is taxed at 0%, 15% or 20%, depending on your income. A gain on something held one year or less is taxed like your other income. Retirement withdrawals count as income too. Payers usually withhold 10% from an IRA withdrawal and 20% from a workplace plan payout that could have been rolled over, and that can be less than the tax due. Before age 59 and a half, a 10% additional tax can apply unless an exception fits.
What to check: Look for Form 1099-B for sales of stock or crypto and Form 1099-R for retirement payouts. Box 4 of the 1099-R shows what was withheld. Make sure the cost of what you sold made it onto the return, because a missing cost can make the gain look much bigger than it was.
If you work for yourself, you pay your own Social Security and Medicare tax on your profit. The self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net earnings once they reach $400, and it comes on top of regular income tax. An employee splits these taxes with an employer, while a self-employed person pays both halves.
What to check: Find Schedule SE on your return. Self-employment tax is its own line, separate from income tax. Half of it is deducted when your adjusted gross income is figured. Our self-employed tax bill page walks through an example.
A credit cuts your tax dollar for dollar, so losing one can change the bill a lot. The child tax credit is worth up to $2,200 for each qualifying child, and the child must be under 17 at the end of the year. So the year a child turns 17, that credit ends. A child who moved out, a change from head of household to single, or income that rose past a credit's limit can have the same effect.
What to check: Compare the credits section and your filing status with last year's return. If a credit disappeared, it may explain most of the difference.
Unemployment benefits are taxable income. Withholding on them is optional, so many people have none taken out. You can ask for 10% federal withholding by giving the agency Form W-4V.
What to check: Look at Form 1099-G from your state. Box 1 shows the benefits, and box 4 shows any federal tax withheld. If box 4 is empty, the tax on those benefits is part of your bill.
Employers often withhold a flat 22% of federal income tax from a bonus, and 37% on the part of a year's bonuses and other extra pay over $1 million. A bonus isn't taxed at a special rate. It's added to your income like any other pay. But if your top bracket is above 22%, the flat 22% can come up short.
What to check: Look at the pay stub for the bonus. For example, 22% of a $10,000 bonus is $2,200. If that bonus falls in the 24% bracket, the tax on it is $2,400, so $200 is still owed.
The IRS expects tax to be paid during the year, through withholding or quarterly estimated payments. If too little went in, a penalty can be added, figured on Form 2210. You usually avoid it if you owe less than $1,000 after withholding and refundable credits, or if you paid in at least 90% of this year's tax or 100% of last year's, whichever is smaller. If last year's adjusted gross income was over $150,000 ($75,000 if married filing separately), the last-year test is 110%.
What to check: Look for the estimated tax penalty line on your return. It's usually much smaller than the tax itself. Our underpayment penalty page explains how to avoid it next year.
Here's how a bill like this builds up. Maria is single. Her job pays $70,000, and her W-4 is set for that job alone, so her withholding covers the tax on her pay. In 2026 she also makes $20,000 of profit from freelance design, with no tax taken out.
If Maria had set aside about $510 a month, or made four estimated payments of about $1,525, the bill would have been close to zero. Next year, one of those two habits fixes it.
This is a made-up example with rounded numbers. It uses the 2026 standard deduction of $16,100 and the 2026 tax brackets for a single filer, and it leaves out state tax and other deductions. Your own numbers will differ. On the free call, we run them with you.
You have more options than it may feel like right now. Here's the order that keeps the cost lowest.
One thing to know: an extension gives you more time to file, but not more time to pay. Tax that isn't paid by the April due date still builds interest and penalties.
Our page on fixing next year has the full plan, step by step.
If you'd rather not work through this alone, we'll do it with you. On the call, we look at your return together and find out why you owe. Then we set up next year: your W-4, your estimated payments, or both, so the next bill is one you already expected.
We'll go through your bill with you for 30 minutes, at no cost. Bring this year's return, last year's return if you have it, and any letter from the IRS.
We find out why you owe, check the withholding and estimates with you, keep the books for a business, prepare the next return, and plan the year so April brings no surprise. Steven Palmieri holds no CPA license, and for a surprise tax bill the practice is the Tax CFO alternative.
Two kinds of work need a license of their own. An audit or review report on financial statements is signed by a CPA firm, and speaking for you in an IRS exam or collection case takes an enrolled agent or an attorney. If you need either one, we'll tell you on the first call and point you to someone who does that work. Payroll is setup only: we set it up with the provider you pick, and you run each payday. You can read more about this on our disclosures page.
Usually not. Most of the time the return is right, and too little was paid in during the year. It's still worth checking that every W-2 and 1099 was entered with its withholding, and that the cost of anything you sold was reported. We can check that with you on the call.
Something changed between the two years: your withholding, your income, a credit or your filing status. Our refund turned into a bill page has the checks to run.
Sometimes. If a deduction, a credit, some withholding or the cost of something you sold was left off, an amended return on Form 1040-X can fix it. More often the bill is right, and the useful work is next year. On the call, we'll tell you which one applies to you.
Yes. The late-filing penalty is ten times the late-payment penalty each month. File on time, pay what you can, and set up a payment plan for the rest.
It depends on your profit, your other income and your bracket. In the example above, the extra tax came to about 30% of Maria's $20,000 of side profit. On the call, we work out the number that fits your year.
Texas has no personal income tax, so a state bill usually comes from another state where you worked, lived part of the year or had business income. Our state tax page shows how to trace it.
We help you understand the bill, choose a payment plan you can keep, and set up next year. If the IRS has started collection and you want someone to represent you, we'll point you to an enrolled agent or an attorney who does that work.
This year's return, last year's return, and your W-2s and 1099s. If you got a letter from the IRS, bring that too. A return or a notice by itself is enough to start.
Steven Palmieri, a Tax CFO and the Entrepreneur's CFO. A Tax CFO keeps the books, prepares the return and plans the year for an owner or a household, all in one place. So the person who explains this year's bill is the same person who helps make sure next year's is no surprise. More about Steven and the practice.
Tell us a little about the bill, and we'll reply to set up your free 30-minute call. We'll find out why you owe and set up next year so it doesn't happen again.
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