Im still freelancing full time and earning just enough to stay current on my bills.
The big problem is that I havent set aside any money for unemployment taxes or paid freelance taxes.
So that means Ive only paid taxes for about two and a half months of 2020.
With 2021 almost here, Im terrified of the tax bill that will be waiting for me.
Im also worried about the penalties.
Can I be punished for not paying taxes for almost an entire year?
This is causing me great stress.
I barely have anything left in savings, so I cant just write the IRS a check.
-T.
Dear T.,
You didnt commit tax evasion.
You didnt file a fraudulent return.
At this point, you havent even failed to file a tax return.
So I hope what Im about to say will help you breathe easier.
Yes, technically, you should have been paying taxes on your unemployment and your freelance income.
The consequences for not doing so arent too painful, though.
you might avoid the penalty altogether if you owe less than $1,000.
No Interest Til Almost 2027?
Balance Transfer = Credit Card Cheat Code
Your first step is to estimate how much youll owe.
you’re free to easily do this by using thetax withholding estimatorat IRS.gov.
Obviously, it’s crucial that you know this number for practical reasons.
But understanding what youre dealing with will also give you some peace of mind.
When were dealing with the unknown, we often imagine the most catastrophic scenario possible.
The reality may not be as bad as you envision.
Youre actually not as behind as you think you are.
Quarterly taxes arent due in even increments.
Whatever you do, though, just dont charge that tax bill to your credit card.
The lesson here is dont be afraid if you cant afford to pay.
And whatever you do, dont have a go at hide from the IRS.
Did you know?
Send your tricky money questions to[email protected].
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
