Friday, May 1, 2009

Self Employment Taxes

Seldom a week goes by where I don’t speak with someone who is self employed, is great at doing what they do, but have a tax problem that is putting the business in serious jeopardy. As the conversation unfolds it becomes clear that the lack of knowledge of how to pay taxes as a self employed person as well as a proper record keeping system lies at the root of the problem.

In its most simplified for the self employed person is the only person working for the business. In the more complicated situations the self employed person has or did have employees who were paid in cash and were not issued 1099s. Sometimes the tax liability comes about as a matter of improper withholding. Other situations are due to simply not filing the tax returns.

In either event as time rolls on the IRS eventually catches up with them and the day of reckoning arrives like a very unwelcome guest that is here to stay and is not going away. Once this happens the self employed person is forced to deal with the issue head on. Sometimes things can be worked out with the IRS and the business can continue operations. There are also times when this is not possible and the business is forced to close. Every case is unique. My strong recommendation to anyone facing such a situation would be to get a professional involved. This can and usually does make a world of difference for the better.

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