There are many misconceptions amongst freelance workers when it comes to paying taxes. One of the most common misconceptions is that they do not need to pay quarterly estimates.
But, buying into this myth can have serious consequences. That’s because, all money that is made by workers should be declared, monitored and submitted to the government. Otherwise, you could be at risk of encountering one of the circumstances below.
Added Fees and Interest
If you do not file, or pay your taxes you could incur added fee’s and high interest rates on the remaining balance owed. This means that the higher the amount is that you haven’t paid, the more you will be owe in penalty fee’s.
Plus, if you fail to pay your taxes altogether you will be charged interest on top of the penalty fees which can result in even more expenses.
Unbalanced Budgets
Freelancers who are unable to keep track of their funds are at risk of mismanaging their money.
Maintaining a proper budget is vital as a freelancer. If you struggle to do this, you should consider consulting with a licensed financial planner or adviser who can help you budget a portion of your earning to go towards quarterly estimates.
In addition to the immediate financial burden that missing quarterly estimates can have, freelancers who will likely have an unbalanced budget for the remainder of the year.
Notices
An unpleasant consequence of missing quarterly estimates is obtaining notices and updates from the IRS. These notices will likely appear in the mail advising you of immediate payment. Rather than subject yourself to this stressful situation, it is best to pay your quarterly estimates and avoid these consequences.
Forfeited Refunds
When you file your taxes on time, any money you are owed back from your taxes can go directly into your wallet. Missing the quarterly tax dates means you are forfeiting money that is owed to you by having to pay costly interest fee’s.
Seized Property
If you haven’t paid your quarterly taxes, your property may be sized. In these cases, the government has a right to place a lien on your property and seize it if you avoid payment. Rather than risk this, you should ensure your quarterly taxes are paid on time.
Summons Notices
If you’ve avoided paying taxes for quite some time, the IRS may have difficulty figuring out how much you owe. When this happens, you may be requested to appear in front of a representative with a summons notice.
This notice may request for you to meet with an official and present the appropriate records, documents or addition material to assist with the matter. Or, if you have a financial institution assist with your matters, they can testify on your behalf to resolve the amount owed.
Jail Time
Failing to pay the taxes you owe to the IRS is a serious matter. Although jail time for unpaid taxes is highly unlikely, it has been known to happen. If the government determines that you failed to file willfully or filed fraudulently, you can be at risk of a jail sentence.
Frequent Audits
If you’ve failed to pay taxes on a regular basis, you will likely be subjected to frequent audits. When this happens, the government will flag your account and subject you to audits for years to come as a way to make sure you are filing correctly.
Conclusion
Rather than suffer the consequences of missing your quarterly tax estimates, freelances should pay on time. To do this, you may need the assistance of a register tax office. If you’re a freelancer and are worried about filing your tax estimates, feel free to get in touch with a representative at our office today.
