Will You Owe? 3 Signs You Might

Getting a tax refund is one of the best parts of the new year; likewise, getting slammed with an unexpected tax bill when you thought you’d get a refund is one of the worst feelings. Owing taxes when you didn’t plan for it means lots of stress on you and your family, so let’s explore a few ways to plan in advance for your taxes so this surprise doesn’t happen to you.

Three signs you’ll owe taxes:

1. You had to pay last year: If you owed last year and didn’t change any withholding, you’ll most likely owe again this year.

2. There’s been a change in your income: This could be a new job, switching your income from wages to retirement, receiving an inheritance, or adding freelance income to your wages.

3. You’ve moved or your job has moved: Living or working in a different municipality than last year might change your taxes.

It’s easy to get surprised with a tax bill thanks to these events, but you can plan for these changes in income by following just a few steps.

If you owed a balance on last year's taxes and haven't made any adjustments to your withholding or paid quarterly estimated taxes to the IRS, you'll likely see a similar bill again this year.

Changes to your income can also bump you into a higher tax bracket. This will usually be accounted for by your employer with adjustments to your withholding, but it's a good idea to keep tabs on your bracket if you have additional income streams that don't adequately withhold (such as contract or freelance work).

If you owed a balance to the IRS last year, you can adjust your withholding to avoid underpayment in the future. There are various online calculators to help you figure out your ideal withholding, or we'll walk you through it with a W-4 Consultation so you don't have to worry about it!

For a deeper dive into progressive tax rates and tax brackets, you're welcome to read our article about it here.

If you've made a change to the location where you live or work, your State and Local Taxes (SALT) may change. Depending on the tax rates, this could work in your favor... or end up with a large tax bill if you're unprepared.

There are twelve US states that require a municipal tax return, so this topic may not apply to you.

Tree City Tax Service LLC is based in Kent, Ohio, so we’ll usually default to Ohio as an example. (Note: We can do taxes for anyone in the United States, with the exception of California, Maryland, and Oregon–but we plan to serve these states in 2027!)

If you're craving an article about the intricacies of municipal tax rates, we've got that. But for the purposes of this post, we're going to give you one piece of advice to avoid a surprise city tax bill:

Make sure the local tax withholding on your paychecks adequately covers what you'll owe to all relevant municipalities.

For wage earners, pay close attention to taxes taken from your paycheck if you move and make sure they’re adequately taken out, either for your work or residence municipality, whichever is higher.

We know that tax bills aren't the most exciting topic in the world, but we're here to make things simple for you all year long. Our tax clients can check in with us throughout the year to update W-4 withholdings, adjust quarterly estimates when your income changes, and get strategic support with all your tax needs.

Book a free consultation here!