Self-Employed Or Not Self-Employed, That Is The Question


Are You Self-Employed? You May Owe Back Taxes

We hear this all the time. Take a look at your last year’s tax returns.  If you see that you filed a Schedule C, or you had K-1’s, or you own a Sub Chapter S Corporation, a C-Corporation or a LLC/Partnership, then the IRS considers you self-employed, along with all that entails.

Entrepreneurship is highly desirable: being your own boss, calling the shots.  But what many taxpayers do not realize is that if you receive 1099-misc forms at the end of the year, you are technically “self-employed”.  True, you have worked for the same company for several years.  You may even complete applications showing your “employer” name, but in reality the vendor you contracted with, is not an employer.


Independent Contractors Owe More Taxes

For purposes of this blog, we focus on the Independent Contractor filing a Schedule C (Sole Proprietor).  As an independent contractor, taxpayers are responsible for all of their own taxes; federal, state, if applicable, local, and the full 15% of social security tax.  In our practice, the most difficult back tax cases to resolve are those of taxpayers who didn’t know they had to pay estimated federal and state taxes every quarter.  They didn’t know tax rules requires them to pay the full amount of social security tax for themselves.  Also, if they had independent contractors working for them, they didn’t know they were to file 1099 misc forms to the IRS for those people.

Preventing Back Tax Problems By Making Quarterly Payments

At a minimum, those of you reading who fall into the Schedule C category above, should download the following form from the IRS.gov website: IRS Form 1040 ESN (Non Resident Alien). This is a complete instruction booklet on how to file, when to file, along with 4 payment vouchers for staying on top of your estimated federal taxes.  States also have something similar, so you should visit those websites as well.

Not filing your quarterly taxes is most likely why you are in the back tax situation you’re in. We recommend that you stop the bleeding immediately. Begin to file your estimated taxes (based on your net income, not gross income), for the tax year 2017.  Now, when you work with a tax settlement organization, they can focus on previous years.  The IRS will also look at this favorably when reviewing your case for an IRS Payment Plan or other tax resolution.

Bottom Line

Bottom line, you do not want to owe any more than required. Continuously ignoring this will only get you further behind.  And in all cases, the IRS will not consider tax relief options if you are currently delinquent in your quarterly tax filings.

Self-Employed Unpaid Taxes

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