Self Employment and IRS Collections
These days, there are a lot of people who are finding themselves self-employed in some way. There’s about 10 million self-employed workers in the United States alone and the number continues to grow every year. After all, with the job market the way it is, it’s a lot easier to try to work out your own business plan or do freelance work within your field. But when it comes to IRS collections, self employment can be a little tricky come tax time.
First you need to determine whether your status is self-employment. You are self-employed if you carry on a business as a independent contractor or a sole proprietor, if you are part of a partnership that carries on a trade or business, or you are just in business for yourself. Part-time work is included in this.
What falls into these lines of work can be a little confusing. While some things are straight forward, like if you write articles freelance for various publications; others can be tricky. Some internships that pay a stipend instead of giving credit will often give a 1040 form that has you down as self-employed. If taxes weren’t taken out of the stipend, you will have to pay them. Before taking on any job or internship, you should inquire as to what it is considered in case it isn’t obvious. There’s also some confusion over husband and wife joint businesses, depending on whether you are partners or one is an employee of another.
You must file an income tax return if your yearly earnings as a self-employed individual are more than $400. If you are running your own business where you are paying yourself, subtract your business expenses from your business income to figure out your end of the year earnings. The self-employment tax in the United States is currently set at 15.30% so you can get an idea of what IRS collections will be.
If you find yourself in need of tax debt relief after figuring out what you owe, you may want to look into getting help dealing with a payment arrangement. It’s also good to have a professional look over your papers before filing, because filing as a self-employed person can be very confusing if it’s not something you are used to. You don’t want to be taken advantage of in any way or lose out on deductions that can help you in the long run, or even turn you around from owing to getting a refund.