Independent Contractors who report income on a 1099 at tax time typically owe money to the IRS. With the October 15th tax deadline on the horizon, contractors who filed an extension may owe money to the IRS and often ask their tax specialist about the best way to handle their payment. Here is a list of tips that can help.
 
Tip #1: The Sooner the Better. The sooner you can pay your tax bill, the more likely you are to avoid interest and penalties associated with late payments. Consider a credit card or a loan. If you cannot pay the money you owe, you can request a payment plan or submit an Offer in Compromise [see Tip #5 for more information on Offer in Compromise].
 
Tip #2: Direct Pay System. From the home page of the IRS.gov website you will find the “Pay Your Tax Bill” option.  This tool offers simple steps to get started on making a payment from your checking and or savings account[s].  The tool is safe and easy to use.

Owe Money to the IRS
 
Tip #3: Monthly Payment Plan Option. For taxpayers who owe $50,000 or less, there is an option to apply for an “Online Payment Agreement” on the IRS.gov website. Using your debit card for payment will help you manage this monthly bill. Plus, there are no checks to write and payments are set-up regularly so you don’t have to worry about late payments.
 
Tip #4: Offer in Compromise. This option let’s you settle with the IRS for an amount that is less than the amount you owe.  Companies such as ATBS frequently help contractors with their Offers in Compromise. This is an important option if you have hit hard times and have had unexpected financial hardship. 
 
Tip #5: Estimated Tax. One of best ways to avoid owing the IRS at tax time is by providing an estimated tax filing each quarter. Simply set-up a calendar reminder and submit your estimated tax. Estimated tax can be calculated by dividing your prior year’s tax bill by four. This is called the Safe Harbor method.  Otherwise, find a company such as ATBS who can estimate your tax on actual earnings.
 
Contractors have more freedom than salaried employees, and with that freedom can be the increased responsibility to pay taxes at tax time. Be sure to manage this responsibility my taking the right steps to ensure the IRS gets paid.  You will be rest assured knowing the IRS will not be send letters asking about the money you owe.

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Comments (2)

Amy Nack

Ms. Nack is a dynamic and innovative marketing leader with 10+ years of broad-ranging experience in industries ranging from small consumer marketing firms to multi-billion dollar healthcare distributors. Amy is currently the VP of Sales and Marketing at ATBS. Ms. Nack graduated from West Virginia University with a degree in International Relations and earned her Masters in Business Administration with a concentration in marketing from the University of Dayton.

 
 

Always good to try and pay the correct amount. You don't want to owe money, but you also don't want to be giving the IRS a free loan.

September 18, 2014 10:22:20 AM

I pay estimated taxes throughout the year and try to pay exactly what I owe. We (my CPA and I) get pretty close. Definitely pay ASAP. I will check out the "pay your tax bill" option. Good piece!

September 18, 2014 5:45:33 AM