As a freelancer, you take great pride in the fact that you’re running your own business. Although you spend most your time servicing clients and seeking new opportunities, this doesn’t mean you should turn your back on your financial obligations.
For example, it’s imperative that you have a firm grasp on your tax situation. From when to pay taxes to how much, you should never let a single detail slip through the cracks. If you do, it could cost you time and money in the future.
Tax mistakes vs. tax fraud
The Internal Revenue Service (IRS) is well aware of the fact that the tax code is extremely complicated. For this reason, they more or less expect people to make mistakes from time to time.
Even though you want to avoid mistakes at all costs, you never know when something could pop up that causes you a bit of a problem. As frustrating as this may be, it’s not considered a crime. Instead, you made an honest mistake and you have the opportunity to make it right.
On the other side of things, there are serious tax crimes that can land you in hot water with the authorities.
A tax mistake is not the same as a tax crime, such as evasion. Tax evasion, for example, is when a person knowingly underreports income so that he or she does not have to pay as much in taxes. Another example would be a person who does not report cash income, but instead hides this from the IRS.
Freelance workers need to know the differences between tax mistakes and tax fraud. Furthermore, you need to know how to remedy a mistake to ensure that it doesn’t turn into something more serious.
The problem that many people face is this: There is gray area when comparing tax mistakes and tax crimes. For this reason, you may make an honest mistake as a freelancer, just to find that the IRS thinks you committed a crime.
If the IRS has contacted you with regard to a serious concern, don’t wait a single day to learn more about your legal right. You must know exactly what’s going on, what you should and shouldn’t say, and how to move forward in the future.