Do you need help with tax debt and want to pay as little as possible? You may be able to get tax debt relief by working directly with the Internal Revenue Service (IRS). The IRS has many debt solutions, like an “offer in compromise” that reduces the amount you have to pay.
Your business may need back taxes help if it is a separate entity. Businesses have tax responsibilities just like individuals, and your business could be on the hook to pay the debt if you do not have legal protection. Check out helpful information about tax relief services and learn tips that could have you paying less money than you owe.
Individuals and businesses must typically pay taxes on income they earn. The five common types of federal taxes include income, estimated, self-employed, employment, and excise tax. You may also owe estate or gift taxes if you inherit or receive a large chunk of money.
Even if you have a simple tax return, you could incur tax debt from a clerical error or forgetfulness. You may owe back taxes because you:
- Made a miscalculation.
- Incorrectly filed your income tax return.
- Filed after the Tax Day deadline, usually April 15.
- Did not know you needed to file.
- Forgot to file an income return.
- Did not pay enough throughout the year.
- Won the lottery or prizes, like from a game show.
The IRS may charge you fees for underpaying or paying late. It also adds daily interest charges on your tax debt and any fees you owe, which increase the total amount you would need to pay.
If you are an employee, your employer generally withholds a portion of your paycheck to cover your income tax responsibility. Your employer estimates how much taxes you will owe based on the information you submitted on a W-4 tax document when you started working for your employer, such as:
- Your filing status of single, head of household, and married filing jointly or separately.
- Your dependents, like children and spouse.
- Additional withholdings.
Your job might have withheld less money than necessary if you filled out the form incorrectly. For instance, your tax status, number of dependents, and spouse can influence the amount you owe. So, it is important to verify and update your W-4 annually.
If you are self-employed, you must usually pay estimated taxes quarterly. The deadlines for self-employment (SE) tax are:
- April 15 for earnings from January 1 to March 31.
- June 15 for earnings from April 1 to May 31.
- September 15 for earnings from June 1 to August 31.
- January 15 (of the next year) for earnings from September 1 to December 31.
If you are a business owner, your business entity influences your related legal and tax responsibility. The following are business entities and tax considerations:
- If you solely own an unincorporated business, it is a Sole Proprietorship. You are generally responsible for income, self-employment, Social Security, Medicare, federal unemployment, and excise taxes.
- If you and at least one other person own a business, it is a Partnership. You and your partners must generally each report their percentage of business profits or losses on personal tax returns, also called a “pass through.”
- Corporations (or C-Corps) are separate taxpaying entities. The corporation must typically pay income, estimated, excise, and employment taxes. The corporation’s profits and losses are not part of your individual return as an owner or shareholder. However, you are generally responsible for the taxes on distributed dividends.
- S Corporations choose to pass corporate deductions, credits, income, and losses through shareholders, like a Partnership.
- The IRS may treat a Limited Liability Company (LLC) like a sole proprietorship, partnership, or corporation, depending on the number of owners or shareholders. However, it is a business entity that can protect you – and other owners – from liability for debts and other obligations.
