Being self-employed, you may think that it’s easier to do your taxes yourself. However, even though you’re excited about building your business, you should know that it’s very easy to make mistakes that could come back to haunt you later. For some people, simple mistakes could lead to tax liabilities later on.
With self-employment, there are many tax issues to consider. You may need to think about paying sales tax, self-employment taxes or employee taxes. You might have to make quarterly payments to the Internal Revenue Service, too. Missing those could make your tax-day stress much higher.
What should you do if the IRS contacts you with a problem about your self-employment taxes?
If you are contacted by the IRS about your self-employment taxes, don’t panic. If you worked with a tax preparer or attorney, it may be a good idea to reach out to them to ask what you should do before responding to the IRS. Many times, the IRS just wants to clear up some discrepancies and will ask for a document or two to do so. Make a copy of the document that was requested, nothing more or less.
If you do end up owing money to the IRS, there is a potential that you will either be able to appeal that decision or pay what you owe. Don’t automatically assume that you’ll face penalties like jail time because the likelihood is that you’ll just need to pay what the IRS says you owe. You may even have the option of using a payment plan if you don’t have enough savings to pay what you owe right away.