Every year, millions of Americans write a check to the IRS in April, then spend the next twelve months with a vague fear of it happening again.
Marcus is one of them. She’s a 31-year-old account manager who thought her taxes were on autopilot. He is imaginary, but his situation is not.
We’ll follow his story to show how an unexpected tax bill sneaks up on you, and what you can do about it before next April.
Marcus 31 years old Account Manager weekend dj
- works full-time at an insurance company
- Started DJing at weddings and private events on weekends
- Earns ~$11,000/year in gig income (none of which is withheld)
- Filed this April and due for the first time
Why you owe taxes, and what it really means
The US tax system is pay-as-you-go: You are expected to pay your taxes throughout the year as you earn income. If you are a W-2 employee, your employer withholds federal income taxes from each paycheck and remits these taxes directly to the IRS. When it comes time to file, the IRS compares the amount withheld to the amount you actually owe.
Balance due simply means the amount withheld during the year has been reduced.
How did Marcus’s tax bill end up?
Got another job > Didn’t update my W-4 > Underpaid taxes in April
For Marcus, the reason he owed taxes was simple: He got another job and never updated his W-4 to account for the additional income.
Marcus didn’t think about the fact that his W-4 still reflected his income and tax ranges from the early stage of his career, before he started his second job. This meant that his tax liability increased slightly, but he did not adjust his tax deductions to reflect it.
Each year, federal withholding should be close to your final tax liability so you don’t owe money at tax time.
when you will finish W-4 formYou allow your employer to withhold federal income taxes from your pay. Generally, if very little tax is withheld, you will pay the tax when you file your taxes. On the other hand, if too much has been withheld, you’ll likely get a refund.
Start by updating your W-4 so your employer can withhold the correct amount going forward. If you have freelance income or investment gains, set up quarterly estimated payments to cover the withheld portion.
Fix Your W-4 Before Next April
Submitting an updated W-4 means the correction will take effect with your next pay check. If you do it in May, you’ll have the right amount withheld until about seven months before the end of the tax year. This could be the difference between a comfortable April or a stressful April.
(By the way, your employer doesn’t need to know why you’re updating your W-4; they just need to know how much you want to withhold.)
TurboTax has you covered and can help you adjust your withholding allowances on your W-4 with us W-4 Withholding CalculatorWhich is updated annually to reflect any tax law changes.
This April, Marcus was due. Next April, he will be ready.
This year Marcus could not progress further. But he updated his W-4 submission immediately after filing, and made a note to revisit it in January any time something changed in his financial life. Next April, he will be ready.
Make quarterly estimated payments for income your W-4 can’t cover
If you’re self-employed or have other income on which tax is not withheld, such as rental income, investment dividends, interest, or a one-time taxable event, you’ll need to handle this separately by making quarterly estimated payments.
You estimate how much you’ll owe on that income for the year, divide it into four payments, and send them to the IRS in April, June, September, and January of the following year.
If you owe more than $1,000, the IRS may impose penalties for underpayment of estimated taxes. Making sure your tax withholdings are correct and/or making estimated quarterly payments can help avoid penalties.
Set up a sinking fund now to save on next year’s tax bill
If you owe money this year, it’s worth considering setting up a sinking fund to ensure the money is there when you need it next year, as well as removing the risk of accidentally spending it on everyday expenses.
What is sinking fund?
Sinking funds are a savings technique in which you set aside a certain amount of money each month for specific future expenses. Putting it in a dedicated high-yield savings account that’s clearly labeled something like “2026 Taxes” may also earn you interest.
What is Marcus’s sinking fund?
He opened a high-yield savings account in May and set up an automatic transfer. By the next filing season, the money will already be there.
- Due this year: $1,550
- Months remaining until next filing: 11
- Monthly Transfer: ~$141
some more thoughts
- Full-time employment means withholding is being made, but that doesn’t mean it’s accurate. If your W-4 is out of date, your employer may not be withholding enough without letting you know.
- Delinquent tax returns don’t mean you made a mistake. It may happen that your stop was not accurate. Even if it’s an error or miscalculation on your tax return, mistakes happen and are often easily fixed.
- Even if you owe this year, you can still get a refund next year. Your result is calculated annually and is independent from any other year. Adjust your withholdings now and your 2026 tax return could look very different.
How to avoid ownership taxes next year?
If you’ve just filed delinquent, take action now, you still have most of the year to make corrections before your 2026 tax return is due.
And no matter what steps you took last year, TurboTax Will give them confidence on your taxes. Whether you want to do your taxes yourself or you have TurboTax Expert File for you, we’ll make sure you get every dollar you deserve and your largest possible refund – guaranteed.