Generally speaking, paying your taxes on a regular basis isn’t exactly something that you can get out of. If you’re a traditional employee who receives a W-2 form at the end of each year, you are required to pay any balance due that you may have by April 15th of the following year. Even though your employer is supposed to be taking money out of your check each week to account for the money you owe, they may not have been taking out enough. Likewise, if you’re a 1099 independent contractor or freelance employee, you’re supposed to be sending a quarterly tax payment every four months to account for the money you’re liable for. If you suddenly find that a tax bill is looming and you don’t quite have the funds to cover it, the important thing to realize is that you shouldn’t panic.
When people think of the Internal Revenue Service, a popular misconception usually results in people calling to mind images of people who are just out to grab a little bit of your hard-earned cash by any means necessary. People assume that anyone who works for the IRS is scary and that they will be furious if you call and ask for assistance on a tax liability, but that really isn’t the case. These are honest, hard-working people just like everyone else. Most importantly, they’re understanding of the fact that life may occasionally throw you a curve ball and you might not be able to pay your taxes on time.
In the event that you find that you need a little more time to pay a tax bill, the first thing that you should do is contact a representative from the IRS and explain your situation. If you owe less than $10,000, you can easily set up an installment payment plan and take care of your income tax liability over time. It’s so easy that you can even do it online directly from the IRS’s website without ever picking up the phone. It’s important to realize, however, that you will be charged interest and small penalties based on the total amount of money that is still outstanding. As a general rule of thumb, you’re supposed to have your entire balance taken care of by the next time you file taxes. If you needed to file a payment plan in 2013, for example, you need to have that money paid in full by the time 2014’s tax season rolls around. You can pay as much or as little per month as you want to, though you will have to make some type of payment on a monthly basis.
You can also set up an installment agreement if you owe more than $10,000 in back taxes. You’ll need to call and speak to an IRS representative to do so, however, and the requirements for getting accepted are much more strict.
If you’re a freelancer you might find this informative. “7 Tax Tips for the Self-Employed:”