Tax Debt Help for the Self-Employed
There are several ways self-employed people in Nevada might be able to settle IRS tax debt and avoid further consequences when they owe large, unexpected sums to Uncle Sam. While some people are able to take loans, withdraw from savings, or use other resources to settle up, others must make installment arrangements, make offers in compromise, or seek tax debt help from attorneys. Most self-employed people pay quarterly estimated taxes if they expect to owe more than $1,000 at the end of the year. If they do not pay quarterly estimated taxes and wait for the traditional filing deadline, they might receive tax bills for thousands of dollars and could be charged penalties from the IRS as well.
Self-employment Tax Awareness
Self-employed people do not have Social Security, or Medicare taxes withheld from their paychecks. Instead, they are responsible for making these payments through the self-employment tax. This tax is in addition to regular income tax, and it can create a substantial tax burden for people in certain tax brackets. If self-employed people do not pay quarterly estimated taxes and reserve around 30 percent of their self-employment income for taxes, they may be hit with tax bills in the thousands along with penalties and fees. Even with careful planning, self-employed people can be hit with large, unexpected tax bills.
Options for Handling Large Tax Bills
Self-employed people who receive large tax bills can handle them in a few ways. Taxpayers can request installment plans from the IRS. If they have enough in savings, they can pay the bill in full. People may also pay their tax bills with credit cards or by borrowing money from their family members.
If people are unable to pay their tax debts, they might make offers in compromise. These are offers to settle the tax debt for less than the full amounts that are owed. Some people who are not financially able to pay their tax debts may also have them declared to be currently uncollectible. When this occurs, the IRS will continue to look at their finances for 10 years to see if their financial situations have improved. If they have not, the tax debt will be forgiven.
People should not simply try to avoid the IRS when they receive large tax bills. The IRS is particularly powerful and can seize property, bank accounts, retirement accounts, and other assets to pay for the tax debts through levies.