Tips for Dealing With the IRS When You're Self-employed

Dealing with the Internal Revenue Service can be difficult, but only as difficult as you make it. For years I made it that way! Then I learned something interesting.

Being self-employed

Over the years of being self-employed I have had more than my share of dealings with the Internal Revenue Service. Most of it was painful. The Internal Revenue Service dislikes the construction industry, with good reason. I dreaded going to the mailbox, afraid of getting a notice from the Post Office that there was a certified letter that I needed to sign. This happened on a regular basis. Always they wanted money which I did not have. And, there was a deadline. of course.

Wishing they would go away

I would receive the letter, read it, put it away to be lost in the stack of papers on the desk. Out of sight, out of mind. Right? No, not really. It haunted me day and night. I just wished they would go away. Maybe if I just ignored them long enough, they would forget about me. I was such a small fish anyway, surely they had bigger fish to fry. Besides, they would just waste it. I needed every penny and more just to feed the family and pay a few necessary bills, on and on.....

Day of reckoning

The day of reckoning would always come. I would have to sign for that last letter, the one that said I had 30 days or else they would levy my bank account, my assets. (Meaning the house) I had an Internal Revenue Service Collection Agent show up at the house once to collect. He had just come from the court house where he had filed a lien against our home!

The teacher appears

One day as I took a letter from the mailbox from the Internal Revenue Service (this one happened not to be certified) I had a thought....I am tired of living this way. It was just a thought.

Within a few weeks we had begun to be friends with a very interesting man. We learned he was an Accountant and had worked for the Internal Revenue Service collection agency. After only a brief discussion (I was whining a lot) he began to tell me where I was wrong. Fortunately, I listened:

My biggest mistake was thinking it would go away if I ignored it.

It's their money, pay it. Matthew 22:21 - Render unto Caesar.....

They have deadlines and are serious about them. Respond in time.

Always respond by certified letter with copies of any documentation or past correspondence attached. (The right hand does not know what the left hand is doing)

You are not really dealing with a person, you are dealing with a computer. Thus the importance of the deadline dates.

Set up payments, annually, quarterly, monthly or weekly, but pay on time.

Always file on time, with or without the money.

Letters are better than a phone call - it is in writing. (If you write it you must follow through)

They will happily set up a payment schedule with you.

Keeping records

I was never "generous" with Uncle Sam. I did not agree to giving him more that he required, thus, I stayed informed and kept very good records. I saved every receipt and accounted for all expenditures. The IRS website has valuable information and easily navigated. Ignorance of the law today is certainly no excuse for mistakes. I am not a Certified Public Accountant, nor do I wish to be one. I retain a CPA for the year end, however, it is not his job to see that I supply all the necessary information for my tax deductions and he gives me good directions. I have even (on occasion) printed a copy from the IRS site to justify some of my deductions. He accepted that graciously.

40 years of hindsight and now freedom

Freedom is a wonderful thing. I am so glad I listened to Jerry that day. We were friends until he died a few years ago. I am still resentful about him leaving, but he left me with a wonderful legacy. Because of his wisdom and knowledge I am free. Oh yes, I did the things he suggested. I even won a few arguments with the IRS along the way. Jerry told me that they have rules and you must make them play by their own rules, otherwise, they might not. They quickly conceded when they were wrong and it was pointed out to them!

I gave Caesar his money for years and saved by not having to pay penalties and interest. Its a lot cheaper that way and might I mention, a lot less stressful.