Self-employment has never been easier than it is today, with the wealth of online resources available to allow for the creation of a home-based business. There are also companies eager to hire all sorts of independent contractors. Unfortunately, the freedom you feel when you escape a traditional job can quickly feel like a new kind of cage when the unique independent contractor tax obligations arise. Fear not; you can catch up — and get prepared for the years ahead.
Working with tax professionals can be the key to learning about eligibility for several types of potential tax relief. These options may include:
- Offer in compromise
- Installment payments
- Penalty relief for first-time abatement
- A currently not collectible tax burden
You may also take advantage of an array of credits, deductions, and unclaimed relief options that you may have missed over the past few years. What is most important, however, is that you start today.
Contact our experienced Houston tax attorneys to learn about the complexities of self-employment tax laws and to find help getting organized to escape the pressure of independent tax burdens. Call (888) 921-3781 or contact us online to learn more about your options for relief today!
Houston Independent Contractor Tax Relief
It has become easier than ever to follow the dream of being your own boss, with web-based technologies for project management, workflows, payroll, and more. More workers than ever before are receiving 1099 income statements annually due to rideshare apps, freelance opportunities, and other options in the “gig economy.” According to the National Bureau of Economic Research, recent evidence shows that about 15% of all workers in the United States are self-employed.
Those who engage in self-employment are often shocked by the unique tax obligations that go along with this status. These include the “self-employment tax,” which really just means that as an independent contractor, you have to pay the social security and income tax portions that your employer would normally contribute. This additional burden means that your tax rate will be quite a bit higher than a traditionally employed worker in your same tax bracket.
Another thing that catches many independent contractors off guard is the requirement for quarterly tax filings based on your estimated income for the end of the year. It is easy to miss these quarterly filings. Worse, those who do not set aside expected contributions might not have the money to pay down their prior-year tax obligations when the new year’s obligations roll around. This can create a vicious cycle from which escape may seem impossible.
In truth, it is easier than it seems to get caught up. First, you must commit to taking the first step and reach out to tax professionals who can help you explore options for making repayment as easy as possible. These professionals can also help you explore the potential for tax relief, which can include special incentives and IRS programs created just for small business owners.
Options for relief can also include collection freezes, extensions, or payment programs you work out with the IRS for your “offer in compromise.” Many of these require extenuating circumstances or a demonstrated lack of funds.
The longer you let tax concerns go, the worse they will get. It is vital that you commit to a plan for relief now and pay down any way you can. This will allow you to look forward to all of the opportunities your business offers rather than facing every tax season with dread.
What Types of Houston 1099 Tax Relief Services Are Available?
The types of 1099 tax relief services you may seek will depend on what type of company you have, your gross annual revenue, what industry you occupy, the number of employees you have (if any), and several other important factors.
A few of the types of independent contractor tax relief available in Texas for paying the state and the IRS may include the following.
Offer in Compromise (Texas State Settlement Offer)
An offer in compromise means that you have more debt than you could possibly hope to pay, so the IRS is willing to settle your tax debt for less than you technically owe. To seek this type of debt relief, the petitioner (you) must make it clear that you either cannot pay in full, or that if you did pay in full, it would create an undue hardship for you.
In addition, you must be current with your tax returns. You must also have made the expected estimated quarterly tax payments for the filing year for which you seek an offer in compromise. If you are eligible, you may receive a significant discount on what they owe. If you do receive such a discount, however, you must pay on time. Failure to pay your installments on time may mean the IRS invalidates your arrangement and you owe the full amount again, minus any payments you have already made.
It is important to note, however, that while the IRS offers an offer in compromise for Federal taxes, the state of Texas does not have a similar program for state taxes. You may, however, request a waiver of penalties and late fees. To request such a waiver, your business must meet certain specific qualifications according to the state’s Rule 3.5. While you will still be subject to your state tax obligations, you can in this case remove the extra burden that such non-payment penalties can represent.
Despite being difficult for which to qualify, an offer in compromise settlement can be a solid way to help you get caught up on obligations. This can give you a fresh start moving forward.
Installment Agreements
Installment plans are exactly what they sound like — a means for you to repay the back taxes you owe on a schedule of affordable payments. These payments will coincide with your normal quarterly tax payments, meaning you will need to plan for both your current year’s obligations and your back payments.
Still, installment programs are among the most common means of getting caught up on back taxes. They also help you to plan for the obligations you have and better budget for your overall future financial outlook.
Penalty Abatement
In some cases, the IRS may, through penalty abatement, waive some of the penalties and fees that were issued for non-payment of back taxes. This can provide relief from fines, percentage-based penalties, levies on your accounts, liens on assets, and wage garnishment.
Currently Not Collectible
Some of those who owe back taxes do so because they simply cannot pay in full. In such cases, if you can demonstrate true financial hardship and inability to pay taxes, the IRS may grant an extension and provide some relief from collection actions. This can allow you to get your feet back under you, financially speaking.
Filing an Amended Return
In some cases, you may have missed credits, deductions, available incentives, and programs that could have reduced your tax burden for that year. If so, you can work with an experienced tax professional to file an amended return up to three years from the original filing date. The reductions in taxes from that year can then be applied to the balance for your current year’s tax obligation.
What Common Deductions Are Used for Houston 1099 Tax Help?
The IRS permits independent contractors and business owners to deduct “ordinary and necessary” expenses required to continue operating your business. These expenses must be related directly to the business; any that also apply to personal use should be pro-rated based on the percentage of business use. More costly assets may be deducted more than once, depreciating over subsequent years.
Some common deductions include the following:
- Wages paid
- Business use of equipment
- Home office deductions
- Vehicle or milage value
- Costs of business meetings and travel, up to 50% of costs
- Utilities not covered by home office deductions
- Some office furniture and fixtures
- Fees and expenses related to services and finances
Just about any expense that explicitly supports the business can be considered a deductible expense—the IRS wats you to ensure that these expenses are not lavish, extravagant, or extraordinary.
Also, take care that you do not regularly show zero profit from your business; this carries the risk of having the IRS declare your work as a “hobby business,” robbing you of many available deductions and benefits.
Get Houston Independent Contractor Tax Help for Instant Tax Solutions
If you are overwhelmed by the burden of back taxes, as well as the high tax obligations you owe for the current year, you are not alone. Many have embarked on the journey towards being their own boss, only to find themselves facing unexpectedly high responsibilities for their new self-employment or gig work.
While you may not have considered 1099 work as a small business, it is important to begin thinking that way. Doing so will help you to improve your bookkeeping and track available deductions.
The good news is that help is available! At Instant Tax Solutions, we are ready to provide experienced independent contractor tax help to allow you to get ahead of your debt once more. There is no time to start like the present. Reach out to us at (888) 921-3781 or contact us online today to set up an appointment and explore the options for 1099 tax relief.
