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  1. #3
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: What if I Can't Afford to Pay Federal Taxes

    Quote Quoting isitlegalmk
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    I work for a website as an independent contract. I have a salary paid monthly via personal check where taxes are not withheld.
    You might be illegally classified as an independent contractor if you work for one employer and get paid a salary. But that's a problem for another day.

    Quote Quoting isitlegalmk
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    This is my first year, but I excepted I'd have to pay several thousand dollars to cover that from the year. But I just realized that I have a $9,800 tax burden I now owe the IRS on my federal return!
    Next year you'll know better than to wait for the last minute.

    Quote Quoting isitlegalmk
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    What do I do? The installment plan is only good once a year and next year I'm going to be hit with another 10k on top of this one, as I see it just mounting up. Is there any legal recourse or assistant I can get? I assume the IRS is not in the habit of just forgiving federal income tax debt. Needless to say, this will be devastating to my family to have this saddled on our back. The irony is the better job opportunity cut out a lot of tax breaks that would have helped, even though my income is not really that much different than last year (within a few grand).
    L-1 is right. You might have a bunch of business deductions available to you for which you can file an amended return as soon as you figure it out.

    Start by studying IRS Publication 334 Tax Guide for Small Businesses.

    https://www.irs.gov/pub/irs-pdf/p334.pdf

    Then look at Schedule C and it's instruction booklet:

    https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

    https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

    Self employment tax:

    https://www.irs.gov/pub/irs-pdf/f1040sse.pdf

    https://www.irs.gov/pub/irs-pdf/i1040sse.pdf

    Once you have read all that stuff you would be wise to hire a tax pro to thoroughly review your business paperwork and create your amended return. If you are lucky you might cut that tax bill in half.

    Quote Quoting isitlegalmk
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    next year I'm going to be hit with another 10k on top of this one,
    Not if you pay quarterly estimated taxes.

    https://www.irs.gov/pub/irs-pdf/f1040es.pdf

    Your first quarterly payment is due today so you're already in the penalty phase so I suggest you get to work on figuring out how much you need to send every quarter and then just bite the bullet and do it. Otherwise you'll really be in a bind next year.

    If you think your tax bill is going to be $10,000 next year then you need to send $2500 each quarter. Though I suggest doing your amended return for 2016 ASAP as it might be a lot less.

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