This Tax Expert Says More Filers Are Owing the IRS Money This Year. Here's Why

There's a really good reason for it.

Although filing taxes can be a stressful process, there's often an upside -- getting a refund. But this year, many filers aren't seeing refunds at all. If anything, they're looking at owing the IRS money for the first time in a long time, or ever. And that's creating a world of financial upheaval for a lot of people.

Why more people owe the IRS money this year

In a recent interview, Mark Steber, Chief Tax Information Officer at Jackson Hewitt, said, "We're seeing a big increase in balance due filers." But Steber isn't surprised by this trend in the slightest. In fact, he pretty much anticipated it even before the 2023 tax-filing season kicked off.

As Steber said, "We're seeing the results of the expiration of the many pandemic benefits that were put into place in 2021."

Here's what he means. In 2021, many key tax credits got a sizable boost. The Child Tax Credit, for example, saw its maximum value rise from $2,000 per child to $3,000 per child aged 6 to 17, and $3,600 per child under 6. That was a huge bump. The credit also became fully refundable so that if an eligible filer owed the IRS no money before claiming it, they could still receive its entire value.

But those enhancements went away in 2022. So did enhancements to the Child and Dependent Care Credit and the Earned Income Tax Credit. So that explains why many people are not only not seeing tax refunds this year, but also, are looking at IRS debts.

Also, in 2021, the American Rescue Plan sent $1,400 stimulus checks into recipients' bank accounts. Those who were eligible for that money but didn't receive it in 2021 were able to claim it as part of their 2022 tax returns. But at this point, there aren't really lingering stimulus funds to collect and use to offset tax liabilities, which also explains why filers are suddenly staring down IRS balances they're not sure how they'll cover.

What to do if you owe the IRS money

If you owe the IRS money but don't have it on hand to cover your tax bill, don't panic -- but also, don't ignore the problem. The good news is that the IRS will commonly let tax filers pay off their debts over time via installment arrangements. That won't stop you from accruing interest on the money you owe the agency. But if you make your payments in a timely manner under one of these arrangements, the IRS won't come after your wages to get repaid -- whereas it might if you simply neglect your overdue tax bill and don't reach out.

That said, Mark Steber noted that if you're looking at having to write the IRS a large check, and you've done your taxes yourself, it could be worth it to hire a professional for another look. They may be able to find different deductions you didn't know you were eligible for. And that could help whittle down your tax bill or even potentially eliminate it in full.