Nothing can be more shocking than realizing that you still owe Uncle Sam some serious money, especially after paying your monthly withholding tax. So what gives?

The answer may lie in your W-4 form, in your new income tax bracket, or your child’s recent birthday. Factor in th e new changes in the tax law and those reduced tax credits can mean more income. More income translates to more taxes, and thus why you still owe the Federal government in taxes.

Less Refund is Why You Owe So Much in Taxes This Year

On average, tax refunds are down by 8.4 percent and in some cases as much as 16.7 percent for the 2018 tax season. In previous income tax years, the majority of the population have received a refund from both the Federal and their state. This year, however, it seems that many are not only not getting a refund, but they actually owe money to the government.

There are several reasons why your refund has turned into you owing Federal or state income tax.

Here are 6 Reasons Why You Still Owe.

1. Have You Updated Your W-4?

People are asking “Why Do I Owe Federal Taxes” or “Why do I Owe So Much in Taxes?”. Whether you usually get a refund or you are paying more this year is partially due to the new tax laws. The most common reason for owing more is that the new tax laws have included updating the withholding tables.

You may have noticed that your paycheck has been a little larger than it has been in previous months. Your employer is now using the update withholding tables and taking out less in federal taxes. Unfortunately this increase in your paycheck means that you may not have paid enough federal and state income taxes.

There is no anticipated change in the tax rules for 2019, so now is a good time to takes steps to avoid owing taxes next year.

Talk to Your HR on How to Adjust Your W-4

Talk to your human resources representative about changing your W-4 and adjust your withholding so you will not owe money next year. If you are not sure about how much to have taken out of your paycheck, use the IRS withholding tax calculator to help you adjust your information.

In order to use the calculator, you will need recent pay stubs and current income tax return. A copy of the 2018 1040 will help you estimate your 2019 income. Once you have completed the calculator you will be able to update your W-4 and Employee’s Withholding Allowance Certificate.

2. Unreimbursed Employee Expenses Have Been Eliminated

The Tax Cuts and Job Act no longer allows a deduction for unreimbursed employee expenses for most employees.

Thus, for 2018 you could no longer take a deduction for job-related unreimbursed expenses such as; uniforms, tools, safety equipment, etc. The same is true if you had taken deductions in the past for job-related travel expenses that were not reimbursed by your employer. Also, transportation between business destinations, food, and hotel rooms while on a business trip or dry cleaning or laundry expenses can no longer be used as a deduction.

3. Are You a Working Couple?

Working couples fall into the same situation as noted above. However, now there are two wage earners who have had insufficient amounts withheld from their paychecks. Additionally, many married couples have used the itemized deductions option in the past.

This year they were affected by the $10,000 cap on itemized deductions. So if they have $27,000 in itemized deductions, this year they could only use $10,000 of those deductions.

It would be advantageous for them to use the standard deduction instead of itemizing, but at $24,000. that is still less than they have been taking in previous years. Once again, this couple would be wise to use the withholding calculator and make adjustments to their W-4.

4. You Are No Longer Head of Household

When filing as Head of Household, your standard deduction is $18,000. If you file as a single person, your standard deduction is only $12,000. Additionally, the tax rate for the Head of Household is lower than a single person.

In order to be considered Head of Household, there are certain circumstances that need to be met.

  • You must be unmarried
  • You pay for more than 50% of the household expenses
  • A qualified person must live in your home for more than 50% of the time

If your life circumstances have changed and you cannot meet all the rules for filing Head of Household, you may have owed money to the government.

5. You Lost Qualifying Widow Status

The tax rate for a Qualifying Widow is the same as the lower Married Filing Jointly rate. As with being a Head of Household, there are rules that need to be met:

  • You are only eligible for this status for two years after the death of your spouse.
  • You must have a child or stepchild that you can claim as a dependent that is living with you.
  • You pay more than 50% of the total cost of keeping up the home.
  • You have not remarried.

If any of these rules cannot be met, your filing status changes and you may have owed Federal and or State income taxes this year.

6. Smaller Tax Breaks as Children Grow Up

If you have a child that celebrated their 17th birthday, it has cost you more than the birthday celebration.

The Tax Cuts and Jobs Act eliminated some tax breaks after your child turns 17.

The child tax credit, which was $1,000., disappears when your child turns 17. A child over the age of 17 can still be claimed as a dependent, but the personal exemption of $4,050. has been eliminated. In previous years you could take the personal exemption on the child even if they were over 17 years old. If you were paying any child care expenses, your 17 year old does not qualify unless there are special circumstances.

And Now, Why Do I Owe State Taxes?

Some individuals did receive a refund from the Federal government, but had to pay more into their state tax department.

Each state has its own department of revenue and tax laws. When filing your state return, check your state’s specific tax laws or contact a tax advisor.

In order to avoid additional fines and fees, pay what you owe by the deadline date.

Get More Time – Request an Extension

If you need more time to go through your tax returns, file for an IRS extension. Filing for an extension will give you six months more to sift through your records, use more eligible deductions, and look for applicable tax credits.

However, remember that a file extension does not mean you can put off paying your taxes. Send a check based on your estimated taxes and wait for yoru refund after you have filed your tax return. Or you can apply to IRS for a payment schedule.

Lastly, be proactive and make sure that your W-4 deductions match up with your current life situation and current tax laws. Whatever situation you are in, you will benefit by using the File Taxes Online calculate your taxes for free.