Guaranteed IRS Payment Plan for Freelance Gig Workers
Gig workers’ earnings are reported on Form 1099. Because there are typically no taxes withheld, it is common among these workers to have tax debt or related problems. Sometimes their IRS tax liability can be substantial, sometime incredible!
Gig workers are those individuals that consider themselves self-employed or independent contractors. They are not employees. Even if they have no store or office, no employees, no inventory, they are business owners.
This class of workers crosses all sorts of industries. Gig workers can include licensed professionals, highly-trained trades workers, and even freelance people providing services for money, but not for a boss.
Here’s a quick list, just to give a few examples:
• Real Estate Agents
• Barbers, Hairstylists and Nail Techs
• Insurance Agents
• YouTube Personalities
This list is just a tiny representation. So many more workers can be considered independent contractors or self-employed people.
Why Does This Happen?
Many freelancers, when first starting out, may not realize that their income is reported to the Federal and State government.
But those doing freelance working who later receive a Form 1099 learn that their situation is different from someone with a regular job, who receives a W-2 Form every year. These independent contractors or 1099 workers don’t have the convenience of having federal and state tax taken out of their paychecks throughout the year.
At the end of the year, they probably receive a 1099 Form, to file their taxes. when that time comes, many often learn how much they actually earned. And when they file their tax return, they also realize that possibly no taxes were paid on their gig income.
So for many, the tax bills really add up. And if the tax continues to accumulate, year after year, the IRS could become less-than-cooperative. When the tax debt becomes very old, the IRS is not always willing to allow a simplified payment plan.
However, for those with old IRS tax liability under $10,000, there is a convenient method to satisfy the tax.
Why Seek IRS’s Guaranteed Installment Agreement?
For anyone with less than $10K of old IRS tax debt, if you qualify, you have an absolute right to this Guaranteed Installment Agreement.
This guaranteed arrangement gives that gig worker a big break from IRS collection enforcement. This payment plan automatically stops IRS threat letters. For anyone having endured years of IRS collection notices, the peace of mind, no longer having to worry about “the next thing to happen”.
Again, for the person that qualifies for this guaranteed installment agreement, establishment of the plan is not discretionary for the IRS. They have to allow the plan. No personal documents must be sent. No manager approval is required.
How to Qualify for Guaranteed Installment Agreement
• You must owe income tax of $10,000 or less, not including penalties and interest. This applied even if the total liability exceeds $10,000.
• This Guaranteed Agreement is only for old debt, meaning debt older than 5 years, or from tax years filed longer than 5 years ago. All newer tax returns must have been filed, with no new debt owed from the last few years.
• During that same last 5 years, you cannot have been in another installment agreement in place. IRS will typically reject someone that has defaulted another payment agreement during the last 5 years. But not always.
• You cannot afford to pay the tax immediately.
• You agree to fully pay the old tax liability within 3 years.
• You agree to file and fully pay the next 3 tax returns on time.
Keep in mind that this guaranteed payment agreement is not limited to gig workers, freelancers, and independent contractors. Any taxpayer could actually qualify.
Also, because IRS wants to setup these payment, even if someone fails to completely meet the rules, the plan could be granted anyway.
Best Way to Setup
You do not need any professional assistance to setup this plan. It is designed to be clear, simple, and easy. Here is what must be done.
Call IRS’s Automated Collection System. The actual phone numbers change from time-to-time. The best IRS number to call for this agreement is (800) 935-2104.
Tell the IRS representative that you want a Guaranteed Installment Agreement. The rep will immediately make note in your records that you called for this. This tells IRS that you are actively attempting to resolve the tax. The rep will review your IRS accounts and explain what may be some of your options.
From that phone call, the IRS rep will setup a Form 433D. The automated system will mail that form to you for your signature.
Complete the missing or required information on that Form 433. Sign, date and return the form. Mail it back via U.S. Certified Mail, and keep the Certified receipt.
If within the following 2 weeks, should you have problems with establishing this agreement in any way, a simple follow-up call can remedy nearly any issue. Also, all collection letters should cease during that same two weeks.