Why Do I Owe State Taxes But Not Federal

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What Happens If You Dont File Taxes

Why Do I Owe on My Tax Return? TurboTax Tax Tip Video

First, theres no such thing as getting away with not filing taxes. The IRS knows how much youve earned in a given year, even if you havent reported your income. Thats because the IRS uses sophisticated referencing software that looks at the amounts other people and businesses reported paying to you. If you dont file, the IRS will begin tacking on penalties, fees, and interest to what you owe.

If you avoid filing for a long enough time, the IRS will likely file something called a Substitute For Return for you. Unfortunately, the SFR often results in a tax bill thats higher than what youd owe if you filed on your own, because the IRS gives you the worst deal by not factoring in all your tax credits and breaks.

Withdrawing Social Security For The First Time

Social security is a government-sponsored form of funding granted to elderly citizens. While the purpose of this money is to financially assist people when they are older, people sometimes are able to borrow from their social security fund early. Borrowers are then required to pay taxes on the funds they request.

How To File State Taxes

Now that weâve gone over why do I owe so much in state taxes, you might be wondering how you pay them. First, your state income tax return must be filed alongside your Federal tax return. Both tax returns can be e-filed together. Itâs no longer possible to e-file your state tax return before your Federal return. Filing is relatively simple as most of the same information you entered onto your Federal return will also need to be copied over onto your state tax return.

This is where you should hire a specialized tax accountant who understands the tax code of your state. You may be wondering, âWhy do I owe state taxes every year?â but with a smart accountant, you may be able to avoid paying anything at all.

Like with your Federal return, be mindful of the deadlines. If you fail to file or pay up on time, your stateâs tax agency can levy penalties and interest. But what happens if youâre stunned by the amount, and youâre asking. âWhy do I owe so much in state taxes?â The answer is to pay anyway, and you can always file a dispute later if you believe youâve overpaid.

Also Check: How To Protest Property Taxes In Collin County

What Is The Difference Between Federal And State Income Taxes

Federal income taxes are collected by the federal government, while state income taxes are collected by the individual state where a taxpayer lives and earns income. There are seven federal tax brackets, ranging from 10% to 37%, depending on your income and filing status. At the state level, some states use a flat-rate tax, while others impose a progressive system or have no state income tax at all.

Notice Of Income Tax Assessment

What Do I Do If I Owe Taxes

A Notice of Income Tax Assessment is issued when there is no response to an initial notice or when a tax liability is not resolved or paid within the time indicated on the initial notice. The NITA includes updated interest and a penalty of up to 25% based on the unpaid tax. Appeal rights are provided on this notice.

The Compliance Program Section conducts numerous audits to ensure that tax returns filed with the State of Maryland are in compliance with federal and Maryland income tax laws. Listed below are some of our most common audit programs. You may have received a notice if one of our programs indicated that we need more information, made an adjustment, or an assessment. Look up your notice under “I Received a Notice” to learn more about a notice you may have received.

Statute of Limitations

Generally the Comptroller’s Office has three years to audit a tax return from the due date of the return or the date the return was filed, whichever is later. However, there is no statue of limitations when there has been a change made to the federal return by the IRS and the taxpayer fails to notify the Comptroller’s Office within ninety days of the final determination by the IRS. If the Comptroller’s Office is notified within the ninety days, the Comptroller’s Office has one year to assess the deficiency.

If you have question regarding any of our audit programs, you may call 767-1966 or toll free at 1 648-9638.

If you need additional help, please contact us to Get Help!

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Why Do I Owe State Taxes An Overview Of Your Tax Obligations

When it comes to taxes, there are many questions that people have. One of the most common questions is, why do I owe state taxes, which many people dont understand because they think that their federal tax obligations cover them for all taxes owed. Unfortunately, this isnt the case. Each state has its own set of tax laws, and you may be responsible for paying state taxes even if you dont live in that state. In this blog post, we will give you an overview of your tax obligations regarding state taxes.

State Vs Federal Taxes

Both state and federal income taxes are collected to pay the costs of providing government and public services, but they are both calculated differently. Federal taxes are paid by almost every American adult that earns more than the standard deduction, but state income taxes are often only paid by individuals with higher incomes. The allowances and deductions that can be used to calculate the amount of tax owed also vary from state to state. The federal government has a fairly generous standard deduction. It also allows taxpayers to itemize their returns instead and subtract expenses like mortgage and student loan interest, childcare expenses and even gambling losses.

State authorities also have tax brackets, credits and deductions, which are often quite different from the federal rules. When people owe income tax to the state they live in, but not the federal government, it is usually because the rules in their state do not work as well for them as the federal tax brackets and deductions.

Recommended Reading: Highest Sales Tax By State

Consult A Tax Accountant

It likely seems intimidating to consider the various deductions and credits, as well as how your filing status affects the state taxes you owe. A simple solution is to hire a tax accountant instead of filing your taxes yourself.

They will be familiar with all the credits and deductions. This saves you the hassle of having to research them yourself. Simply put, hiring a tax accountant is the best way to minimize the amount of taxes you owe or maximize your refund. Yes, you will have to spend a little bit of money to pay them, but your potential savings are likely worth it.

At least, that is the case for most people. It is smart to at least have a tax accountant do your taxes one year, so you can get an idea of the deductions you are eligible for. Then, if nothing major changes, you will know what you are eligible for the next year.

More like this: What is Federal Income Tax Liabilities?

Need A Loan Get One In 3 Simple Steps

How Americans Avoid Taxes

If you are considering applying for a personal loan, just follow these 3 simple steps.

Apply

Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.

Accept

If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon youll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.

Repay

The loan then gets disbursed into your U.S. bank account within a reasonable number of days . Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.

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Why Do I Owe If I Didnt Owe Last Year

If you owe taxes that you didnt owe last year, it may be due to some changes in your life, such as:

Older Children A change that was made in the tax reform was the Child Tax Credit increase. It is $2,000 for children who qualify. Nevertheless, only children who were less than 17 years old at the end of the year will be able to claim the credit. Otherwise, you can only claim a $500 credit for the other dependents.

Job Changes Has there been any job change for you or your spouse? If so, a new Form W-4 should have been completed. If you made some changes in how you filed it, it may be why it affected your situation.

Side Job If you are a contract worker or freelancer, then you will have to pay quarterly taxes too. You will be responsible for keeping up with payments since you have no paycheck withholding. You may owe taxes to the IRS if you are a freelancer and you havent been paying the estimated quarterly taxes.

Income changes or students who were previously able to claim the American Opportunity Credit, yet became ineligible due to an enrollment status change may also affect the tax situation.

Filling Changes If you went through a divorce, marriage or you got a dependent, the filing status for which you are eligible and the way youre taxed can change. This might affect your tax bracket thats why you might owe taxes now.

What Happens To My Refund Or Credit If It’s Held To Pay A Delinquent Tax Or State Agency Debt

If you have unpaid past-due taxes or a state agency debt, the Michigan Department of Treasury is authorized by Michigan law to offset your income tax refund or credit to apply to the debt until the debt is paid in full. This includes debt currently on a payment plan. Read more about Income Allocation for Delinquent Accounts.

If all or part of your income tax refund was taken to pay a debt that you owe the State of Michigan, you will receive a Notice of Adjustment to Income Tax Refund letter that provides you with detailed information about your refund. If your refund is more than the amount you owe, Treasury will refund the difference to you.

In the event that only one spouse is liable for the debt and you filed a joint income tax return you will receive a Notice of Hold on Income Tax Refund or Credit letter with an Income Allocation for Non-Obligated Spouse form to complete and return within 30 days from the date on the accompanying letter to the Michigan Department of Treasury. Read more about Non-Obligated Spouse.

Updates may be obtained by using the Check My Income Tax Info site.

For specific information about your account and the debt owed, contact the Office of Collections at 517-636-5265.

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The Different Types Of Taxes You Could Be Paying

Some states have a flat tax rate on incomes, also known as the fair tax. In Pennsylvania, the flat tax rate in 2020 was 3.07%, meaning that someone who earns $100,000 would only pay $3,070 in state income tax. There are only 8 states that have a flat tax rate in income, respectively Michigan, Utah, Indiana, Colorado, Illinois, Pennsylvania, North Carolina, and Massachusetts.

Other states have no income tax, but that doesnt mean there are no taxes paid to the state. For example, these states may still have to deal with other taxes, including gasoline tax, property taxes, cigarette tax, and sales tax. The seven states with no income tax are Florida, South Dakota, Texas, Wyoming, Washington, Nevada, and Alaska.

There are also some graduated tax rates that the remaining 36 states and the District of Columbia use. This framework is similar to the one used by the federal government. Under this type of tax, a person would have their income taxed in different brackets at different rates, which increase when the annual income also grows. However, there are fewer brackets compared to the federal tax code, and also lower tax rates.

State income tax can also be individual or corporate.

Retirement Information Ira Topics Pension Exclusions Social Security Benefits

Owe Taxes: Why Do I Owe Taxes

Q. Im planning to move to Delaware within the next year. I am retired. I am receiving a pension and also withdrawing income from a 401K. My spouse receives social security. What personal income taxes will I be required to pay as a resident of Delaware? I also would like information on real estate property taxes.

A. As a resident of Delaware, the amount of your pension and 401K income that is taxable for federal purposes is also taxable in Delaware. However, persons 60 years of age or older are entitled to a pension exclusion of up to $12,500 or the amount of the pension and eligible retirement income . Eligible retirement income includes dividends, interest, capital gains, net rental income from real property and qualified retirement plans , such as IRA, 401 , and Keough plans, and government deferred compensation plans . The combined total of pension and eligible retirement income may not exceed $12,500 per person age 60 or over. If you are under age 60 and receiving a pension, the exclusion amount is limited to $2,000.

Social Security and Railroad Retirement benefits are not taxable in Delaware and should not be included in taxable income.

Also, Delaware has a graduated tax rate ranging from 2.2% to 5.55% for income under $60,000, and 6.60% for income of $60,000 or over.

For information regarding property taxes you may contact the Property Tax office for the county you plan to live in.

Also Check: What Is The Tax Rate On 401k Withdrawals

Filing An Amended Return

If you file your income tax return and later become aware of any changes you must make to income, deductions, or credits, you must file an amended Louisiana return. To file a paper amended return:

  • UseForm IT-540, Resident Return, orForm IT-540B, Nonresident and Part-year Resident Return, whichever is applicable. Louisiana does not have a separate form for amending a return.
  • Use the correct form for the tax year you are amending.
  • File the amended return as if the original return was not filed. Do not make any adjustments for refunds previously received or for payments previously made.
  • The return should be clearly marked with an “X” in the “Amended Return” box.
  • The amended return should be submitted along with an explanation of the change and a copy of the federal amended return, Form 1040X, if one was filed.
    • Mail an amended return that includes a payment to the following address: Louisiana Department of Revenue
    • Mail all others to the following address: Louisiana Department of Revenue

    Can I Get A Refund If No Federal Taxes Were Withheld

    Filing for refunds If you don’t owe tax at the end of the year, but had taxes withheld from paychecks or other paymentsfiling a return may allow you to obtain a tax refund. You may also be eligible for certain refundable tax credits, like the Earned Income Tax Credit , which could generate a refund for you.

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    Why Does My W2 Have No Federal Tax Withheld

    One reason why no federal taxes were taken from your W2 is due to the details you listed on your W-4. Line 7 of your W-4 form allows you to file exempt by writing EXEMPT in the space provided. If you chose to file exempt, no federal income tax will be taken out of your Leave and Earning Statement.

    Do I Have To Pay Taxes On My Income If I Dont Live In That State

    Investopedia Video: Calculating How Much Tax You Owe

    It depends on the state. In most states, you must file an income tax return and pay taxes on your income even if you dont live in that state. However, a few states dont require you to file an income tax return if you dont live in the state. You should check with your states Department of Revenue to see if you must pay taxes on your income.

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    Refigure Your Paycheck Withholding

    If youre simply having too little withheld from your paycheck, you can create a new Form W-4 by going through the Form W-4 section under the Next Year main tab in TaxAct.

    If you have simple changes to your return, such as fewer dependents, you can enter the changes in this section and TaxAct will determine how you should file.

    Take the new Form W-4 to your employers payroll department. Do not send it to the IRS.

    State Income Tax Vs Federal Income Tax: An Overview

    The U.S. has a multitiered income tax system under which taxes are imposed by federal, state, and sometimes local governments. Federal and state income taxes are similar in that they apply a percentage rate to taxable incomes. However, they differ considerably regarding those rates and how they’re appliedand by the type of income that is taxable and the deductions and tax credits allowed.

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    Why A Refund Was Intercepted

    If a taxpayer owes a past debt to an agency of the State of Colorado, the income tax refund or PTC Rebate could be intercepted to satisfy the debt. When a refund is intercepted, the Department of Revenue will send a letter explaining which agency initiated the intercept, the amount of the refund intercepted and whom to contact for further information. If the debt is smaller than the refund, the taxpayer will receive the difference. If a taxpayer believes the refund has been intercepted in error, the taxpayer must contact the agency initiating the interception in order to resolve the intercept.

    Instances in which a refund could be intercepted include : debts for child or spousal support overpaid Aid to the Needy Disabled due to overpayment of unemployment benefits unpaid student loans judicial fines judicial restitution unpaid parking tickets any unpaid interest, fees, or surcharges owed to the Department or any other government agency or any other unpaid debt to a government agency.

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