My husband has been a sole proprietor for the last 2 years, but probably shouldn't be. He has been really negligent with his taxes, and basically has paid next to nothing in estimated tax.=======> as your husband is filing as a sole proprietor and/or a self-employed individual, he generally has to make estimated tax payments if heexpects to owe tax of $1k or more when he filed his return.however,he does not have to pay estimated tax for the current year if he
had no tax liability for the prior year so filing;
? He was a U.S. citizen or resident for the whole year
;his prior tax year covered a 12 month period.In reality biz owners with more or less small amt of taxable income I do not know how many never pay estimated taxes and instead they just pay a certain amt of penalties or interest.
Last year, he did this and requested a payment plan, which we've been paying. But this year, he swore he wouldn't do this again, but a bunch of stuff came up, and he didn't pay enough estimated tax again. I read online that you can only have a payment plan every 5 years, so wondering if someone can provide advice on what to do?=======>> The most widely used method for paying an old IRS debt is the monthly installment agreement. aslongas you owe $10k or less and have a clean record with the IRS, you have an automatic right to the agreement. One condition is that your monthly payments must be sufficient to pay the balance in full within 36 months. If you owe less than $25k you may qualify for a streamlined installment agreement. This is an installment agreement plan that you must complete within 5 years , and can get without managerial approval. But when I you owe more than $25k, the IRS must negotiate with you in good faith. But if you have money or assets that the IRS deems unnecessary for you to live on, the IRS might not grant an IA when the balance exceeds $25k..
Also, there are definite drawbacks. For example, interest and penalties continue to accrue while you still owe. Interest is adjusted quarterly. Combined with penalties, the rate is often 13% - 15% per year. It's possible to pay for years and owe more than when you started.
He'll probably owe around $5000 if this year is anything like last year. Part of the problem, of course, is that now we're into NEXT year, so I could try to pay large payments to cover 2015, but that's going to mean continuing not to pay on 2016. What happens if you already have a payment plan, but can't afford to pay your taxes? Really really hate that he decided to be an independent contractor instead of having a "regular" job where we got a refund. But it is what it is. What can I do now? Any advice?=========>> In my opinion, youneed to contact the IRS ASAP but at least well before Apr 15 to set up the installment agreement. There should be no problem adding it to your existing plan. They do add interest and penelty charges if you contact the IRS about a payment plan and the rep at that time may encourage you to find another option I guess i.e., to borrow funds topay it off from a relative or etc and use the IRS as a last resort. So I guess it' won't be cheap, but right now you csn not see too many other options;once also you contact
them and then, they set it up over the phone and then send you a written copy of theplan.They add last years to the previous years and you needto just make a monthly payment right out of your checking account.