Thursday, October 25, 2018

REASONS WHY SELF- EMPLOYED TAXPAYERS SHOULD PREPARE AND FILE THEIR CURRENT AND BACK TAX RETURNS.

Self-employed people and independent contractors have more complicated tax obligations than people who earn wages as employees. Self-employed people have to account for and report their own self-employment income on their tax returns.

And more importantly, they have to pay estimated tax payments throughout the year. That’s because independent contractors don’t have taxes withheld from their paychecks like employees.

You can get expert help filing back tax returns with the IRS.

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Some independent contractors don’t know they need to make estimated tax payments – which can mean a tax bill in April. If you deal with this issue by ignoring it and not filing a return, your problem will only snowball, with IRS penalties and interest piling up.

If you’re an independent contractor or self-employed and need to file back tax returns, you need to know about five consequences if you don’t file.

1) If you don’t file your tax returns, the IRS can prepare a return for you.
This may sound kind of nice, but it’s not.

An IRS-prepared return is called a substitute for return. The problem with substitute returns is that the IRS won’t prepare them with any benefits for you. So, for example, if you’re self-employed and need to deduct business expenses, the IRS won’t include those deductions on your substitute return.

In most cases, you’ll owe a lot less in taxes on the return you file than the one the IRS files – so file as soon as possible.

NOT FILING A TAX RETURN CAN MAKE MATTERS WORSE

2) A common mistake for many independent contractors who owe taxes is to just not file – hoping they can catch up later, when they’re in a better financial position to pay the taxes. This strategy only makes matters worse.

Here’s how not filing a return grows into more problems:

First, it can lead to unpleasant IRS enforcement. When you don’t file, the IRS starts sending notices asking you to file. If the IRS thinks that you owe significant amounts, the IRS can send an agent to visit you (called a revenue officer).

Second, if you owe, filing late can mean significant penalties to your tax bill. The penalty for not filing a tax return is basically 5% per month of the tax balance you owe, up to 25% of the balance you owe. If the IRS says that you fraudulently failed to file (meaning you knew you needed to file but intentionally didn’t), the penalty increases to 15% per month, up to 75% of the taxes you owe.

The best move: File your return on time to avoid these penalties, and file back tax returns as soon as possible to minimize the penalties.

Be sure to include all the expenses, deductions, and credits you qualify for. If you owe and can’t pay, the IRS will work with you on payment plans or other alternatives. But don’t add to the problem by not filing and running up additional tax balances. Also, to avoid filing and owing in the future, set aside funds and start making estimated tax payments.

Learn how to file back tax returns.

3) If you owe and don’t make arrangements to pay the IRS, the IRS can take all your self-employment income to pay back taxes.
There’s an entire IRS department dedicated to people who make their living in ways other than earning wages as an employee: the IRS Small Business/Self-Employed department. This department has a collection function with the power to enforce return filing, levy your income or assets, or file a tax lien on your property.

Self-employed people are more likely to owe taxes than wage earners. Because of that, the IRS is more likely to enforce the filing of a late return for self-employed people.

If you make wages, like an employee, the IRS can take (or, “garnish”) up to 85% of your paycheck (which is a lot!). But, if you earn self-employment income, the IRS can garnish (or, “levy”) the entire amount. And — the IRS could keep taking your earnings until you file your back tax returns and pay the taxes you owe.

Once you file your return, know that the IRS offers several payment options for people who can’t pay all their taxes at once, including monthly payment plans.

4) Unfiled returns can lower your future Social Security benefits.
Self-employed people (including independent contractors) must pay their own self-employment tax. This tax consists of Social Security and Medicare tax. So, to be eligible for Social Security benefits when you retire, you must have worked and paid Social Security taxes for a certain amount of time.

If you haven’t filed returns and paid self-employment tax, your earnings for those years won’t get counted toward your future Social Security benefits. This can have a huge impact on your future income and quality of life.

5) You may need tax returns for other financial or personal reasons.
If you’re applying for a personal or mortgage loan, chances are you could be asked to provide copies of tax returns as proof of your income.

Self-employed people and independent contractors often have to provide this information because they don’t have Forms W-2 or Paystubs to verify their income. In other examples, you may need to provide a copy of your return for divorce or child support hearings – not an ideal time to point out that you have not filed your returns.

Get back on track

Any taxpayers with back tax returns will be better off filing them as soon as possible. That can limit penalties, interest, and other IRS problems.

To get back on track, you’ll need to gather your tax information, including all your self-employment income and expenses, to file your return. Also, if you owe taxes or you’re facing IRS scrutiny, you’ll need to make plans to pay your tax bill by setting up a payment plan or other alternative with the IRS. You’ll also need to deal with the IRS directly to avoid additional enforcement, like liens and levies.

If you have trouble getting your old Forms 1099 and other tax documents, the IRS can help by providing you the information statements (Forms W-2, 1099, etc.) under your taxpayer identification number. This list is called a wage and income transcript.

You may also qualify for penalty relief through special IRS waivers such as first-time abatement, which can remove penalties for filing and paying late if it’s your first offense. Other penalty-relief options may also be available based on your special circumstances.

You may want to use a tax professional to file back returns and deal with the IRS. Tax professionals can file an authorization to deal with the IRS directly on your behalf, file your back tax returns, and resolve any related issues.

If you don’t have any or any documents, we can still help you, Call (713)300-3965

GET TAX RELIEF HELP TODAY
If you think that you may need help filing your 2017 tax return and past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
Advance Tax Relief is rated one of the best tax relief companies nationwide.
Call our team today at 713-300-3965 for more information. For a free consultation, schedule an appointment with us online. Feel free to also learn about us and contact us via www.advancetaxrelief.com. However, it doesn’t matter where you live, we service taxpayers nationwide. We have settled millions in back tax penalties and interest for our clients nationwide.


Advance Tax Relief is a Professional Tax Relief Organization

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