Being a self-employed real estate agent comes with a ton of advantages. You are your own boss, choose your own schedule, brand and represent your business the way you want to, and get to build something that is truly yours. But on the flip-side, it causes you to take on some of the not-so-fun responsibilities of owning a business.
One of these necessary evils is taxes. Unfortunately, filing as an independent contractor can be a lot more complicated than filing with a W-2. It requires a lot of pre-planning and detailed tracking of your income and spending. The anxiety, stress, and time-suck this can cause may make you feel like running for the woods when tax season rolls around, but the consequences of avoiding filing your taxes greatly outweigh those pain points. If you fail to file your taxes on time, or at all, you may be facing:
- Failure-to-file penalties. Fail to even file your taxes this year? Failure-to-file fees can be anywhere from 5% to 25% of the total amount of taxes you owe, which adds up quick.
- Failure-to-pay penalties. If you submit your taxes but do not pay them by the deadline, the penalty is far less but still impactful. The IRS will charge 0.5% of any unpaid tax balance for each month you do not pay for up to 25%. And don’t forget that interest will also accrue!
- Forfeit of refund. Failing to file your taxes one year can have negative effects for years to come. If you have an outstanding balance with the IRS, they will withhold any future returns you may be due until that amount is settled. Additionally, if you actually are owed a refund, you will not receive it until you file.
- Impact on credit. Just like missing a payment on your student loans or credit cards, unpaid debt to the IRS will cause your credit score to take a hit and tax liens will not look good when you are looking to purchase a home or new car down the road.
- Seizure of property. If the situation escalates, the IRS can issue a lien on your property, like your house or car. The agency can also seize your bank account or income.
Although it may seem daunting, avoiding the above and reducing stress and time spent on your taxes this season is achievable. You just need a solid plan and top-of-the-line technology on your side!