| Nobody wants to owe the government money, any | | | | the correct amount of taxes and other contributions |
| kind of money. But owing back taxes to the IRS will | | | | each pay period. |
| eventually result in the dreaded "tax lien" being filing | | | | The truth is though that many of the self employed |
| against you. Then there are the garnishments and | | | | either can't afford to set up a corporate entity and hire |
| levies and, if you owe a lot, asset seizures. So being in | | | | a decent accountant, don't know that they should, or |
| debt to the IRS is probably something we all should | | | | don't do it willingly even though they could and should. |
| avoid. | | | | These are the people most apt to have an IRS tax |
| Of course, for many people they will never have this | | | | line placed against them. |
| problem, because the vast majority of people have | | | | SO why is a tax lien such a bad thing? Well, first there |
| their taxes taken out of their paychecks in the form of | | | | is the interest which can run as high as 24%. But that's |
| withholdings. That's why your gross pay is bigger than | | | | not the kicker, no the real problem are the penalties. |
| what you actually end up getting. | | | | They can run as high as 4% a month, which gets |
| Those most vulnerable to owing back taxes are small | | | | added to you original debt and then begins to incur |
| business owners and self employ independent | | | | interest. So you really end up paying a triple penalty; |
| contractors. Many of these people don't have anything | | | | the interest on the tax you, the penalties imposed each |
| withheld from their pay because they have different | | | | month, and the interest on the penalties, it's not a pretty |
| clients or customers paying them for outsourced | | | | picture. |
| products or services. | | | | For example, $5,000 in back taxes, can easily become |
| Still, if a small business owner wants to stay on the | | | | $10,000 - $15,000 after neglecting it for a few years. |
| right side of a tax lien, he/she could incorporate their | | | | Unfortunately, a lot of people in these situations just |
| business and pay themselves salary from the | | | | hope it'll just go away. Bad news! the IRS never goes |
| company and have the company withhold and remit | | | | away. |