Unfortunately, many small business owners and independent contractors who are required to pay estimated tax payments, find themselves owing the IRS at the end of the year. When faced with these problems, the instinct is often to hide from the problem until the taxpayer has sufficient cash flow to resolve it. If this is you, read today’s newsletter to find out why that is not a good idea. There are several options available to you that will save you money and a headache over time!
File Your Return and Face the Music!
The first instinct of a taxpayer who believe they owe the IRS is to ignore the problem and not file their tax return. This is a very bad idea! Did you know that filing a return late will result in a 5% per month (up to 25%) late filing penalty on the amount owed. If you thought the $20,000 you owed on your return was a lot, how about it being $25,000 only five months later, in additional to the late payment penalties of 1/2% per month you will incur. So, file on time, and only incur the late payment penalty. Get in an installment agreement and that late payment penalty drops to ¼% per month. Doesn’t that sound much better.
Ignoring the IRS can also result in tax liens being filed, levies of your bank accounts and assets, as well as garnishments of paychecks. The problem doesn’t get better by ignoring it. There are options. Face it and choose the best option for your situation.
What Are The Options to Resolve the Amount Owed?
There are several options available that include:
- Payment plans that allow you to pay your debt over time. These can vary based on your ability to pay and can even result in a payment plan that will end up with a forgiven amount.
- Penalty Abatement may be an option for you where penalties are removed or reduced.
- Setting for the less than the full amount of the debt (Offer In Compromise Program) may be an option for you. These are based on ability to pay, not the amount owed.
- Currently Not Collectible is an IRS program that based on your inability to pay in your current financial situation, the IRS agrees not to levy your assets or garnish your wages.
- Third Party Financing and other options
Owe the IRS and Need a Tax Professional?
This is just a small listing of expenses that independent contractors may incur as part of running their business. It’s essential to maintain detailed records of expenses and keep all necessary documentation to support your deductions. Additionally, tax laws and regulations can are constantly changing, so it’s advisable to consult with a tax professional or accountant who specializes in small business taxation to ensure compliance with current tax laws and maximize eligible deductions.
At my firm, we work with small business owners, independent contractors, and other taxpayers who owe the IRS every day, helping them to resolve their IRS problems. If you’re interested in finding out if we are a good fit in working together, let’s talk. You can give me a call at (954) 715-7285 or get directly on my calendar at https://jablonskyandassociates.com/contact/.
