What Happens If You Fail to Pay Your Taxes

The Internal Revenue Service will not let you off the hook if you fail to pay your taxes! You can avoid a situation like this if you pay your taxes timely throughout the year instead of waiting for April 15. Generally, employees have taxes withheld from their salaries. However, freelancers or self-employed people can pay taxes every three months directly to the IRS.

If you need more information on income taxes, consult with the Agro Accounting CPA experts or hire our income tax services for the self-employed. Here, let’s start with the possible outcomes of not paying your taxes on time:

Pay a Penalty Fee

Are you failing to file your taxes or failing to pay your taxes? There’s a huge difference between the two.

If you fail to file your taxes by the due date, there will be a penalty of 5% of the tax owed for up to five months. If you take longer than 60 days after the due date, then you will get hit with a minimum penalty of $210 or 100% of the tax owed, whichever is lower. For example, if the tax owed is $210 or less, the penalty will be the same as the total tax amount due. If the tax amount exceeds $210, the penalty will be at least $210.

Warning Letters from the IRS

Nobody wants mail from the Internal Revenue Service. It's not like the IRS doesn't give you a chance - it gives many. But before taking any strict legal action, they send you a warning letter.

The best thing to do after getting a letter is to reach out to the IRS office. The authorities might look kindly on you as you admit your carelessness, unlike those who have been lining their cat’s litter box with the IRS’ letters. You may get a chance to negotiate a payment plan or even reduce the total tax amount due.

Can’t Apply for a Loan

If you fail to pay your income taxes, you might get into a lot of trouble. You may not be able to apply for a home loan, business loan, or vehicle loan. Banks or lenders need to see copies of your most recent tax returns before giving you a loan. Nobody gives a loan to someone who isn't consistent with filing or paying their tax returns.

The IRS Can Seize Your Property

In Publication 594, the IRS has made it clear that the agency can sell your car or property in order to clear out your outstanding tax in some scenarios. The publication also states that if there is money left after the sale of your property, you will get a refund of it.

To learn more about taxes or to obtain a tax preparation guide for artists and entrepreneurs, feel free to connect with Agro Accounting CPA.

A Guide to Tax Settlement: Benefits and Eligibility Criteria

 

A tax settlement is a discounted arrangement regarding taxes owed that is acknowledged by the IRS or the state taxing authority. It is also known as an offer in compromise. Under this settlement, a taxpayer is allowed to extinguish an outstanding tax debt for less than the actual amount owed. Some extenuating circumstances that have prevented taxpayers from paying their taxes owed are accepted by the IRS. Taxsettlement services can be best carried out through proper guidance.

 

Not every kind of situation is considered for tax settlement. Tax settlement may be based on the current circumstances of the taxpayer and applicable tax regulations. Let’s discuss tax settlement in this blog.

 

How can an IRS settlement benefit you?

 

Negotiating a tax settlement can benefit you in these ways:

 

●     Pay less: The first obvious benefit is that you will be able to pay less to the tax authority than you actually owe. Given the situation of the taxpayer, a tax settlement can be determined and presented in a short time span. Once you pay the balance on the mutual agreement, the tax account is taken to be settled in full, leaving you with no late fees and other penalties.

 

●     No need for Liens and Garnishments: The other benefit offered by a tax settlement is that the taxpayer does not need to suffer from a tax lien on his/ her home or business.

Who is eligible for a tax settlement?

 

The IRS offers the settlement option to taxpayers who have a difficult time paying off their tax debts or have a valid reason for their penalties to be abated. Not everyone is eligible for such tax settlement.

 

The main factor considered is the financial hardship of the taxpayer. Their financial situation is analyzed, and if the tax authority comes to the conclusion that the financial situation is not favorable, then the taxpayer is taken to be eligible for tax settlement. Financial hardship is a good indicator of tax settlement.

 

For more clarity, you can take the help of Tax Services for Freelance Workers to check if you are eligible and how a tax settlement could benefit you.

Tips to Help Business Continuity During a Pandemic

COVID—19 has successfully turned our lives upside down. No walk of life remains untouched by it, yet small businesses and freelance workers have been severely thrashed by the pandemic. Nonetheless, the government has made tremendous efforts to make it easier for small businesses and freelance workers to make it through the pandemic. It is up to entrepreneurs to make the best use of available assistance and resources at their disposal. The following is a list of tips by accountant consultants for freelance workers to help small scale businesses to continue as a going concern, as the pandemic pushes on. Read on, plunge into the details.

                                

Do a Business Impact Analysis

Before you can fix a problem, it is important to understand the intensity of the impact that, in this case, the COVID-19 has made on your business. Once you get the facts, you will be able to see the big picture more clearly and, after, you can start to deal with the concerns on hand.

Do Business Modeling

Business modeling is a great way to determine your plan of action in order to get yourself out of this mess. Create models of the various possible outcomes your business could consider.

                                   

Risk Analysis and Mapping

Once you are through with modeling your possible courses of action, move on to risk analysis in order to determine if your selected plan is good for your business or not.

The current times are extremely tough for freelance workers and small businesses, yet don’t have the misconception that this is “as bad as it gets.” If you do not get a hold of your business now, then things might catastrophically get out of hand sooner than later. That said, please make use of the abovementioned tips from accountant consultants for freelance workers in order to establish firm, steady ground for your business’ comeback.

Pave your Way to Business Success with an Accountant

Financial planning is one of the most critical skill-sets to possess as an entrepreneur. It’s important to know where your money is going and to find out ways to save it for rainy days.

Emphasis is always on business growth. It is also good to hire an accountant that can come up with ways to save your company money on income taxes for self-employed. Let us see how hiring an accountant will help your business flourish in the years to come:

• Get all relevant Deductions. All people in business want to save money on taxes. An accountant will identify potential applicable deductions for you and will offer advice on those deductions. Also, it is difficult for a person in business to stay up-to-date with tax laws when they are continually changing. All of these things are taken care of by a good accountant.

• Save Time, Energy and your Sanity. Entrepreneurs sometimes think that due to a tight budget, they are unable to afford an accountant. However, they actually would save a lot of money by not getting into the accounting themselves. Instead, spend all of your time and energy on your business!

• Plan for the Future. An accountant can offer you advice for future tax and financial planning. Together, you can pull your reports from past months and examine any seasonal changes in your business.

Accounting isn’t just about taking care of receipts and invoices that have piled up at the end of the year. Hiring someone who has hands-on experience in handling company income taxes of self-employed individuals can result in business success in the long run.