Question: I’m a self-employed architectural consult who, amazingly, has done well in the stock market. I cashed out a good chuck to buy some property and a new car. Capital gains tax! Ugh! To top it off, I discovered that my quarterly tax payments as an independent contractor were poorly estimated. I owe the federal government nearly $85,000 in income tax. Sure, I can pay it off eventually. But not today. What can I do?
Answer: Your problem is actually common among self-employed Americans who pay their own taxes. Many either underestimate or overestimate drastically their annual income tax and, thus, pay less or more than they should by year’s end. Obviously, that you cashed out a number of stock options doubles your current tax dilemma, but trust me, you have options.
Your best bet is to consult a qualified tax professional as quickly as possible. He or she will examine your tax filing to ensure that they are correct. Believe or not, this process often saves taxpayers thousands of dollars because it’s common for many Americans to pay the government more than should be required. They give Uncle Sam any more than he legally deserves?
Once the process is complete, a qualified tax professional will discuss your next option. This can range from an Offer in Compromise to an installment plan. In your case, since you have the potential to pay off your current tax debt over time, an Offer in Compromise most likely would not be for you. However, an installment plan may be just the thing.
Under this option, you work out an installment plan with the IRS that allows you to make monthly payments that will satisfy your debt over a period of time. This works just like a mortgage or car payment, allowing you to pay off your taxes without having to alter your lifestyle. Simple as that.