Causes of Income Tax Underpayment
Most common reasons people find themselves owing extra tax:
Too little withheld from their payYou can give yourself a raise just by changing your Form W-4 with your employer. However, if you do that without careful planning, you might be setting yourself up for an unpleasant year-end tax bill.
Extra income not subject to withholdingIf you sell some stock, or take cash out of a 401(k), for example, you may have more income than usual. Many of our baby boomers are retiring with pensions and don't realize that their Social Security Income can become taxable if they have a certain amount of additional income – and are unprepared for a bigger tax bill. Even unemployment benefits can increase your tax bill.
Self-employment taxSmall business owners are usually great at what they do; however, they may have very little understanding of the type of business they own from a tax perspective. Hiring NTC will ensure not only that you are in the best possible situation to deal with back due taxes, but that you understand moving forward how to manage your business from a tax perspective to ensure that you pay the very minimum required and that what you do have to pay is a part of your company’s budget. If you have significant non-wage income, you generally make quarterly estimated payments. However, that’s easier said than done, especially when people feel like they are in financial survival mode most of the time. We here at NTC understand that for many small business owners, self-employment tax is a far bigger burden than income taxes.