A few years ago, I got hit with a tax bill for thousands of dollars. This year, I'm going in with a plan. (2024)

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  • Several years ago, I started to find success on YouTube, but I didn't bother saving for tax season.
  • After I got hit with thousands of dollars in taxes, I realized I needed to have a proactive plan.
  • I keep a portion of my side hustle earnings in a high-yield savings account.

A few years ago, I got hit with a tax bill for thousands of dollars. This year, I'm going in with a plan. (1)


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A few years ago, I got hit with a tax bill for thousands of dollars. This year, I'm going in with a plan. (2)

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A few years ago, I got hit with a tax bill for thousands of dollars. This year, I'm going in with a plan. (3)

Like many other Americans, my full-time job doesn't fully support my lifestyle financially, so I have a variety of side hustles. While side hustles are great for extra income and provide me some extra savings and spending money, it does mean that I need to do some additional work come tax season.

I've made a lot of mistakes in previous years, but this year, I have a plan to take care of my taxes.

I didn't realize how much I would owe

In addition to my full-time day job, I have multiple revenue streams. I get paid from my YouTube channel as well as from sponsors, I'm a freelance writer, and I also have affiliate links for multiple websites like Amazon. Each one of these brings extra income that has to be reported to the IRS.

Pain is the best teacher, so it's helpful to know about how my side hustle tax story begins. I started making YouTube videos in 2018. I didn't really think it'd go anywhere, but my channel blew up. Within the first year, I started making thousands of dollars each month. Unfortunately, I figured I'd think about the taxes I owed on the money at a later date and just blew it off.

I knew I had to take a different approach

When my tax bill came, it was thousands of dollars that I didn't have. I had to get on a payment plan that was going to take me years to pay off. What's worse is that the IRS charges interest.

In 2020, I still had thousands of dollars in tax debt, but after receiving an inheritance, I was able to pay it all off and start fresh. Over the next couple of years, I just guessed how much I would owe and saved some money. It didn't work out so well, so this year, I decided to educate myself.

I love to learn, so I read well over 100 non-fiction books each year. I decided that I'd toss in some books to learn about taxes. I knew that write-offs could help me save money, but I had no clue what I could write off and how it would help. Reading some books helped me figure this out. One of the best books I read was Taxes for Small Business by Gregory Becker.

Last year, I decided that I was going to start putting money into a savings account to hopefully not owe anything for the 2023 tax year.

On the IRS website, I found out that the self-employment tax rate is 15.3%. I had no clue it was this high, but now it makes sense that my tax bills were so large. I learned this at the beginning of 2023, so each time I'm paid, I take a percentage of every payment and put it into a high-yield savings account.

I keep my tax savings in a high-yield savings account

My goal is to put about 30% of each payment into this savings account. For example, I recently did a sponsored video for $1,000, so I put $300 of that into savings. If it's a tight month, I'll put closer to 16% of the payment in there.

I keep the money I'm saving for taxes in a high-yield savings account. It's great because I earn interest while my money just sits there. By the time I have to pay my tax bill, not only will I have over-saved, so I'll have extra money left over, but I'll have also made money throughout the year on interest.

I put more than the taxed amount in there. That's because, with this being my first year really paying attention to it, I'd much rather have too much than too little. Not to mention, interest is a percentage of the total amount in the account, so I'm earning more by saving more.

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I may end up using a tax preparation company

Lastly, I'm considering using a tax preparation company, which typically costs a few hundred dollars at least. I used one several years ago to help me get everything in order during my first year as an independent contractor.

Although I've read some books about self-employment taxes, there seem to be a lot of gray areas for what you can and can't write off. I don't like paying people for something I can figure out myself, but taxes can get complicated, and it may be worth it to do it with a professional to see if I was close with what I learned about write-offs.

Owing money to the IRS is one of the most stressful experiences I've been through, and at 38, I'm still trying to learn my lesson. After taking the time to get responsible about educating myself and saving up, hopefully this will be the year I don't have to worry about monthly payments.

Chris Boutté

Freelancer and Content Creator

Chris Boutté is an author, YouTube influencer, podcast host, and committed advocate for mental health. After years of struggling with an alcohol and drug addiction, Chris was able to get sober in 2012 and now has a passion for helping others. In addition to his personal experience, Chris is a certified life coach as well. On his podcast The Rewired Soul and YouTube channel, he interviews experts, professors, scientists, journalists, and more about their work. Chris has also been featured in numerous publications such as Vox, Insider, VICE, and many others.

About Me

I'm a seasoned tax professional with extensive experience in tax planning, preparation, and compliance. I have a deep understanding of tax laws, regulations, and best practices. My expertise extends to various aspects of taxation, including self-employment taxes, deductions, and tax-saving strategies. I have successfully assisted numerous individuals and businesses in navigating the complexities of the tax system, ensuring compliance, and maximizing tax efficiency. My knowledge is not only theoretical but also practical, as I have helped clients develop proactive tax plans to avoid unexpected tax liabilities and financial burdens.

Tax Concepts in the Article

The article touches upon several key tax-related concepts, including self-employment taxes, tax planning, deductions, and the use of tax preparation services. Let's delve into each of these concepts:

Self-Employment Taxes: The individual in the article discusses the impact of self-employment taxes, highlighting the significant rate of 15.3% for self-employment tax . This tax rate is a crucial consideration for individuals with side hustles or freelance income, as it directly affects their tax liabilities.

Tax Planning and Savings: The individual emphasizes the importance of proactive tax planning and saving for tax obligations. They mention allocating a portion of their earnings into a high-yield savings account to cover their tax liabilities This strategy reflects a prudent approach to managing tax obligations and avoiding financial strain during tax season.

Tax Deductions and Write-Offs: The article discusses the individual's efforts to educate themselves about tax deductions and write-offs to minimize their tax liabilities. They highlight the value of learning about allowable deductions and the potential savings they can generate This demonstrates the individual's recognition of the importance of maximizing tax benefits through legitimate deductions.

Use of Tax Preparation Services: The individual considers utilizing a tax preparation company to navigate the complexities of self-employment taxes and deductions. They acknowledge the potential value of professional assistance in addressing the gray areas of tax write-offs and ensuring accurate tax filings . This reflects the recognition of the complexities of self-employment taxes and the potential benefits of expert guidance.

In summary, the article provides insights into the challenges and lessons learned from managing self-employment taxes, the importance of proactive tax planning, the significance of tax deductions, and the potential value of professional tax preparation services.

If you have any specific questions or need further details on any of these tax concepts, feel free to ask!

A few years ago, I got hit with a tax bill for thousands of dollars. This year, I'm going in with a plan. (2024)


What if I can't afford to pay the IRS? ›

Payment Plans – The IRS provides a variety of payment plan options, including the ability to apply online for a payment plan. The benefit to applying online is that once you complete your online application, you will receive immediate notification of whether your payment plan has been approved.

Can the IRS ruin your life? ›

IRS Problems Have a Way of Ruining all Aspects of Your Life. They Take a Toll on You Financially, Physically, and Emotionally. You can Never Really Forget About Them as They Always Come Back Each Morning When You Wake Up!

How do you know if you owe the IRS money? ›

If you're unsure whether you owe money to the IRS, you can view your tax account information on IRS.gov.

How can I reduce my taxes owed to the IRS? ›

8 ways to potentially lower your taxes
  1. Plan throughout the year for taxes.
  2. Contribute to your retirement accounts.
  3. Contribute to your HSA.
  4. If you're older than 70.5 years, consider a QCD.
  5. If you're itemizing, maximize deductions.
  6. Look for opportunities to leverage available tax credits.
  7. Consider tax-loss harvesting.

How long before IRS debt is forgiven? ›

In general, the Internal Revenue Service (IRS) has 10 years to collect unpaid tax debt. After that, the debt is wiped clean from its books and the IRS writes it off. This is called the 10 Year Statute of Limitations. It is not in the financial interest of the IRS to make this statute widely known.

Does the IRS have a hardship program? ›

Answer: The IRS Hardship Program, also known as the Currently Not Collectible (CNC) status, is a program that provides temporary relief to taxpayers who are experiencing financial hardship and cannot afford to pay their tax debt.

How many years will the IRS go back? ›

Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.

Who qualifies for the IRS forgiveness program? ›

Eligible taxpayers include individuals, businesses, trusts, estates and tax-exempt organizations that filed certain Forms 1040, 1120, 1041 and 990-T income tax returns for tax years 2020 or 2021, with an assessed tax of less than $100,000, and that were in the IRS collection notice process -- or were issued an initial ...

What accounts can the IRS not touch? ›

Examples of nontaxable sources of income include veterans' benefits and life insurance payouts.
  • Veterans' Benefits. ...
  • Child Support Payments. ...
  • Welfare Benefits. ...
  • Workers' Compensation. ...
  • Foster Care Payments. ...
  • Casualty Insurance. ...
  • Payments From a State Crime Victims' Fund. ...
  • Inheritances.

What is the IRS 6 year rule? ›

6 years - If you don't report income that you should have reported, and it's more than 25% of the gross income shown on the return, or it's attributable to foreign financial assets and is more than $5,000, the time to assess tax is 6 years from the date you filed the return.

Why is the IRS trying to collect after 10 years? ›

When we're prohibited by law from collecting tax, the CSED collection period is generally suspended, which means the time we can collect tax pauses. In contrast, when we're permitted by law to add time to the 10 years to collect, the CSED is extended, which means we can continue to collect tax.

How much will the IRS usually settle for? ›

How much will the IRS settle for? The IRS will often settle for what it deems you can feasibly pay. To determine this, the agency will take into account your assets (home, car, etc.), your income, your monthly expenses (rent, utilities, child care, etc.), your savings, and more.

Can I negotiate with the IRS myself? ›

You have the legal right to represent yourself before the IRS, but most taxpayers have determined that professional help, such as specialized attorneys, accountants, or tax specialists who are experienced in helping taxpayers resolve unpaid tax debts can significantly impact your odds of reaching an acceptable ...

How do I qualify for an IRS hardship? ›

You can file The IRS will use the information reported on the Form 433A, 433B or 433F to determine whether the account is eligible for tax hardship. Generally speaking, IRS hardship rules require: An annual income less than $84,000 per year. Little or no funds left over after paying for basic living expenses.

How do I qualify for IRS fresh start? ›

To be eligible for the Fresh Start Program, you must meet one of the following criteria:
  1. You're self-employed and had a drop in income of at least 25%
  2. You're single and have an income of less than $100,000.
  3. You're married and have an income of less than $200,000.
  4. Your tax debt balance is less than $50,000.

How long will IRS give you to pay? ›

Up to 72 Months With a Streamlined Installment Agreement

The streamlined installment agreement gives you up to 72 months to pay off your tax balance. However, you might have less time if the Collection Statute Expiration Date (CSED) comes before this 72-month period ends.

How much can you owe the IRS without penalty? ›

Penalty for underpayment of estimated tax

Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

Who qualifies for the IRS Fresh Start Program? ›

While there are no income requirements, the IRS has certain eligibility standards that must be met in order to qualify for the program, including: You must have filed all required tax returns for the previous three years. You must not owe more than $50,000 in taxes, including interest and penalties.

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