Behind on taxes? You may owe less than you think...

That dreaded little envelope arrives in the mail from the I.R.S. (gasp!) The bill within has more tax owed listed there than you earned in a year. But this situation is much easier to resolve than you think. You may still file tax returns for the past years the IRS has billed you for, reporting business expenses against that income to dramatically reduce taxes owed!

More about 1099 income...

But I'm not self-employed?

If you really don't believe you are self-employed and your employer is acting fishy, you can pay only half of the SE tax (the same that would have been withheld from your paycheck as an employee) and attach a statement to the effect that your employer is improperly treating you as an independent contractor when in fact you are an employee. This usually is decided in your favor and results in the employer being subject to the other half of the tax. Just make sure you don't need a glowing reference from your previous employer before doing this!

How do I report my expenses?

Income and expenses are reported on Schedule C that is attached to your tax return. Certain expenses such as business use of home or auto expenses requre additional forms. If you made payments to others of an amount over $600 you were supposed to have filed 1099 forms showing that expense as income for them.

What if I just ignore the letter?

There is a timeline within which you can respond by filing returns, if you wait too long you will lose this ability and be stuck with the bill- penalties and all. Then the IRS can obtain a judgement against you, going after bank accounts, siezing assets, placing leins on property and garnishing your wages. Please contact us as soon as possible so we may help you minimize the tax you owe and create a plan that will allow you to pay it off and be clear.

Do I need reciepts for everything?

You probably have a lot more receipts than you realize. If you paid for expenses with checks or credit cards there is record of all those payments. Many purchases, such as computers, are recorded under your name and you can get receipts if you call or go to the store you purchased it at. Notes on a calendar or in a notebook are all considered admissible. You may not have a convenient quickbooks file, but it's likely you have a lot more written down than you remember.

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