Spokane 1099 Tax Relief

With internet-enabled workflows and all sorts of other technological supports, owning your own business has become an easier path to follow than ever. Further, between “gig work” apps like Uber and a trend in employers shifting from employees to independent contract work, a surprising amount of U.S. workers now receive a 1099 income statement each year.

According to a report from Bloomberg, independent contractors now make up an estimated 15% of the total U.S. labor force. Independent contractors have a number of tax-related obligations that can catch them off guard, especially if they haven’t regularly kept up with their accounts.

Unlike employees, they are expected to make 100% of their own contributions to social security and income taxes, leading to a self-employment tax rate that is much higher compared to someone in roughly the same earnings bracket. Further, they must file quarterly contributions based on their estimated income and year-end tax burden.

Missing quarterly filings can happen easily. Even more stressful, individuals who haven’t set aside the expected contributions may face limited funds to pay down their tax obligations from the previous year.

By the time it’s filing season, they will have a whole new set of taxes to anticipate — sometimes creating a cycle where getting out from tax debts can seem impossible. But rest assured that getting caught up is easier than one might think!

The first step is to commit to starting today. Tax professionals can help you examine your options for seeking tax relief and repaying whatever volume of back taxes you currently owe.

You may also be eligible for some forms of tax relief. These can include special programs or incentives created to benefit small business owners, or it can be an agreement between you and the IRS to pay down an “offer in compromise” amount.

You can also request extensions and collection freezes if the balance is “currently not collectible” because of a lack of funds or other extenuating circumstances.

Don’t let your tax concerns linger any longer than they have to! Commit to a plan to seek as much relief as possible and pay down the rest any way you can; that way, you can look forward to what your financial opportunities may bring rather than looking at your finances with a feeling of dread.

The types of tax relief available depend on the type of company, its yearly gross revenues, the industry it operates in, whether it has employees, and many other critical factors.

Some examples of relief available for self-employment taxes owed to the IRS and to the Washington State Department of Revenue include:

Offer in Compromise (Washington State Settlement Offer)

If you have more debt than your current income or level of appreciable assets could hope to pay, the IRS may consider an “offer in compromise.” This type of agreement effectively settles the amount owed for less than the true face value of the total debt.

It is only likely to be approved if the petitioner can make it clear that they are unable to pay in full or if paying in full would create a legitimate hardship. Note that, in order to be eligible, the filer must be current with their returns and have made the expected estimated payments up until this point for the filing year in question.

Eligible parties may receive a significant reduction in the total amount owed, but they should also expect to pay in a timely fashion. Any failure to pay on the agreed installments can mean invalidation of the arrangement and an obligation to once more pay in full, minus any contributions already made toward the debt owed.

Washington State offers a similar program, but unlike the federal government’s, it is unavailable if the sole reason claimed is an inability to pay. Instead, the filer must demonstrate that a specific error in instructions sent to them resulted in a larger tax assessment and possible penalties through no true fault of the filer.

Known as a Rule 100 Settlement, the filer must also show that the issue is non-recurring and that there is a chance that the courts would find them in error should the issue be pursued in court. Only then can a settlement offer be made and accepted where the final payment could be less than the assessed Washington State taxes.

Despite all these restrictions, an offer in compromise or settlement offer can be an excellent chance to get caught up on tax obligations while avoiding the full impact it may have on your business or personal finances.

Installment Agreements

An installment plan allows you to repay owed back taxes on a reasonable schedule. Note that these payments will coincide with any expected quarterly estimated tax payments, so you will still need to organize your finances in order to prepare for both.

Making an installment plan is one of the most common ways that individuals are able to get caught up on the taxes they owe while helping them predict their obligations to improve their financial outlook overall.

Penalty Abatement

Some penalties may be waived at the sole discretion of the IRS and DOR. This includes set-amount fines and percentage penalty charges made on the total balance owed and may also include relief from certain actions, like account levies, wage garnishment, and government liens placed on the sale of certain assets.

Currently Not Collectible

Many individuals who owe back taxes are simply not in a financial position to pay in full. If they can demonstrate financial hardship and an inability to pay, they may be granted an extension on their payment deadline as well as temporary relief from collection actions.

Filing an Amended Return

It may be possible that, in previous years, you missed certain deductions, credits, or other programs and incentives capable of reducing the amount of taxes you owe. With the help of an experienced tax relief firm, you can review your financials in search of these items in order to file an amended return up to three years from the date the return was originally filed.

Any subsequent reductions in taxes owed can potentially be used to adjust the balance for the current year’s return.

An independent contractor/business owner can deduct any and all “ordinary and necessary” expenses required for the continued operation of their own income-earning operation. These expenses should be directly related to the business itself.

Any possible personal use of an asset or service should be accompanied by an estimated percentage of business use, which should then be multiplied by the total value of the asset being deducted.

Pricier assets can also be depreciated over a certain number of years, allowing the filer to account further for the reduction in value provided to the business.

Common deductions include any:

• Employee wages
• Fees paid for services/products rendered, including the work of other contractors
• Equipment used by the business
• Mileage or vehicle value depreciation caused by necessary use of a vehicle
• Home office deduction
• Certain utilities not covered by the home office deduction, including internet and cell/telecoms usage
• Consumables, like batteries or light bulbs
• Certain office furniture and fixtures (those not covered by the home office deduction)
• 50% of unreimbursed dining expenses and other costs directly related to travel or business-building
• Expenses related to services and finances, including credit card processing fees, transaction fees, etc

Put simply, nearly any expense made explicitly to support the business and its operations can be considered a deductible expense, so long as it is not “lavish and extravagant” or out of the ordinary.

Dealing with the burden of back taxes and estimated obligations for the current year can easily be overwhelming for any individual. Many have been unexpectedly thrust into new, unfamiliar responsibilities by the transition from employee work to contractor, freelance, or “gig” work.

You may not think of your 1099 income-earning activities as a small business unto itself, but that mentality can help you transition into improved bookkeeping and better tracking of things like deductible expenses.

The good news is that you don’t have to handle any of this on your own. We at Instant Tax Solutions are experienced in tax relief, accounting, and helping individuals get on top of the debt they owe. “Today” is always the best time to start, so reach out to us at (888) 886-5526 or contact us online to set up an appointment and learn how we can help you!

• Spokane Bank Levy Release
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• Spokane IRS Notices and Letters
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• Spokane Revenue Officer
• Spokane Wage Garnishments