Independent Contractors Greatly Need Your Skills From Enrolled Agent CPE
Preparation of tax forms for businesses usually require some special knowledge, such as the details covered in an enrolled agent course. Individuals who unexpectedly find themselves earning income as independent contractors are often unprepared for the income tax calculations of their business activities.
By having maintained sloppy record keeping, independent contractors face a variety of adverse tax consequences. They need help from enrolled agents like you in order to prevent their tax situations from worsening.
The primary problem for inexperienced independent contractors is avoiding inaccuracies on their tax returns. Because of the potential for costly penalties, these taxpayers should know about the importance of professional tax return preparation. Your ongoing tax training from completing annual enrolled agent CPE allows you to help independent contractors avoid accuracy related penalties.
Taxpayers who convert haphazard business figures onto tax returns can incur a 20 percent IRS penalty for negligent reporting of income or substantial understatement of taxes owed. In addition, the IRS imposes a 75 percent penalty on taxpayers who are believed to have fraudulently intended to understate income.
Procrastination is the biggest enemy of self-employed independent contractors. They tend to take extra time to determine their correct amount of income and deductible expenses as well as how to report them. You eliminate delay in preparation of accurate tax forms by deploying knowledge from your EA continuing education.
Taxpayers will find the value in this when they discover that the IRS penalty for late payment of tax is 0.5 percent to 1.0 percent per month. This is automatically assessed when tax is paid after the due date – even if the date for filing the tax return is extended. Tax returns that are filed late without first obtaining an extension can incur extra penalties of up to 25 percent of any tax due.
Another important component of your tax CPE to use for enlightening new independent contractors concerns estimated tax payments. The IRS hits the self-employed with a separate penalty for underpayment of estimated taxes.
But independent contractors who establish contact with enrolled agents obtain professional advice about paying safe harbor amounts of estimated taxes. This involves paying at least 90 percent of the current year tax or 100 percent of last year’s tax. If you’re dealing with a taxpayer whose income exceeds $150,000 then the payment using the previous year tax is 110 percent.
The IRS imposes many types of penalties and independent contractors are vulnerable to all of them. Consequently, these self-employed individuals gain considerably from discovering the tax services of enrolled agents.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.