Self-Employed and Behind on Taxes
No employer was withholding taxes. Now you owe more than you expected. This is the most common tax problem I see.
When you're self-employed, nobody withholds taxes from your income. You're responsible for quarterly estimated tax payments, plus the full 15.3% self-employment tax (the employer and employee share of Social Security and Medicare combined). Most self-employed people underestimate what they owe.
The result: a surprise tax bill every April, compounded by penalties for not making estimated payments. After a few years, the balance can be staggering.
The Fix
First, get current. Set up estimated payments going forward. Second, address the back balance: a payment plan, an Offer in Compromise, or CNC status depending on the numbers. Third, get the penalties removed. Self-employed taxpayers who didn't know about estimated tax requirements often qualify for reasonable cause penalty abatement.