Always got a refund in the past but owe this year?
Due to some new 2009 tax laws more taxpayers ending up owing taxes this year.

Tax situation changes every single year. You may qualify for certain tax credits one year but not another year due to changes in your income level or other type of limitations for the credits. For the 2009 tax year, Making Credit Work Pay credit seems to create unexpected results for many taxpayers. Instead of sending out checks like they did in 2008 for the stimulus credit, this year IRS decided to adjust withholdings.

Unless you consulted with your tax preparer to decide your withholding, your total tax withheld last year maybe less than your tax liability. This is a more likely scenario if you have more than one W2 or earned more than $100K. 

California residents with dependents are affected by state tax law changes, too. California reduced the dependent exemption credit to the same amount of the personal exemption credit-a $210 difference per dependent using 2008 amounts.

For example a married filing jointly with two dependents who had a $100K taxable income in 2008 received $816 exemptions credit. The tax liability for 2008 was $3,873. Same taxpayers with same taxable income will be getting only $396 exemptions this year and pay $4,543 for the state income tax.

To prevent any surprises, you should talk to your tax preparer after April 15. This is one of the important reasons to find a tax professional who is available year around. Remember, the tax preparer can only minimize your tax liability but not eliminate it.

Rebu Financial and Tax Services
Rebu Financial and Tax Services