Frequently Asked Questions
You’re not alone. Thousands of self-employed individuals in the U.S. have a tendency to build their financial lives and expenditures around their gross income, not their post-tax income. Making timely tax payments in full, four times per year, requires that self-employed individuals have the funds and the discipline to set aside enough money to pay taxes. They need to make accurate and timely tax payments without spending the money on something else. Simply put, many self-employed Americans of all income levels do not have a reliable method to calculate, budget for, then make four large quarterly tax payments to the IRS (you know who you are).
If a family’s income source is from W2 employment, they really don’t have to worry about setting aside taxes. Taxes are already taken out before they see a dime. They don’t have to worry about making sure they pay into Social Security and Medicare so they are there when they need it most. Self-employed people do. It is common to see families with 1099 income sources that spend exactly what they earn on their monthly expenses, leaving virtually no money to pay taxes at the end of each quarter. Typically, something from their monthly expenses needs to be eliminated or lowered, but it remains unidentified until they are forced to cut something back. If they don’t want to pay the IRS’ massive penalties and interest or deal with wage and bank levies, they will have to identify what to work on getting lowered or eliminated. Most commonly with this scenario, we see that somebody has a very high car payment or housing costs that are way out of line with their earnings, and need to be reined in. Barring a catastrophic event, taxes simply must be a part of the budget!
My Tax Vault breaks down your tax saving into much smaller amounts of money, setting little increments of taxes aside right when you get paid. We then make the tax payments to the IRS for you, electronically and before they are even due. This gives you have the ability to make smart choices, and the freedom to build your life’s expenses around your post-tax income, just like a W2 employee. Fiscal responsibility is not a prominent attribute of Americans as a whole. My Tax Vault helps put you back on track to regain control.
Very. For most individuals with 1099 income it is difficult to manage, at the very least. For many, it is downright paralyzing. During the past 16 years of working in the tax business, we have personally come into contact with literally thousands of self-employed people who are struggling to make their payments correctly. They lack a system of saving up and staying IRS compliant. Thousands are simply not in control of making their required tax payments in full or on time, and constantly trying to correct mistakes or catch up.
Even though they may not see themselves as ‘in debt’ to the IRS, many actually are. Hundreds of thousands of people simply have not been able to develop a consistent pattern and practice of correctly doing the math, setting aside enough money, and getting all quarters paid on time. Whether it is due to cash-flow management issues, a lack of spare time or the complicated set of IRS rules, people often end up having to use the first months of the following year to save up and pay the previous year’s tax owed. This is more common than you might think, and a rough way to do it.
If you have 1099 income, the final quarter of the year’s tax is due on January 15th, not April 15th. April is when your first payment of the current year is due, not all or part of the past year! Again, anything later than paying each quarter of tax on or before the quarterly due date is considered to be late by the Internal Revenue Service. People caught in this cycle may not have a tax lien filed yet, or a debt “on the books” with the IRS because they muster up the cash to pay by April 15th, but they are still technically late and behind on paying their taxes, facing penalties and interest.
Filing an extension to buy even more time to file and pay in mid-October is not sustainable or even close to “on time” either. In this case, the prior year’s tax is already late, and the current taxes can get neglected as well in order to catch up on the old ones. This is a needlessly stressful way to handle the payment of taxes. It is not sustainable, and will eventually lead to trouble with the IRS. Our self-employed friends living this way don’t have to! They can draw a line in the sand, and live differently going forward by using My Tax Vault.
Clients can hire us Through our website by clicking “Get Started.” After creating a user login, agreeing to our services agreement and making payment, we begin to gather some basic information about you through our website. We will need your name, address, filing status, and a few pieces of information off of the past two years of income tax returns you have filed.
The entire process takes, on average, about 15 minutes. After we gather all of the information we need, we will have a Client Success representative from My Tax Vault call you for the completion process within 48 hours of finishing your online profile. We want to get to know you and your situation over the phone so that we can implement a tax payment schedule and tax amount that work best for you and your cash flow. Everyone is different, and that is why we will personally contact each one of you to establish and verify the best plan. After this call, your taxes are in our hands and completely on auto-pilot.
We work with each client one by one to help figure how much tax needs to be paid each quarter of the year, per IRS compliance rules. Together, we establish a schedule by which our company can set aside very small increments of tax funds on behalf of our clients, through ACH withdrawals. Then we electronically pay your taxes directly to the IRS, and report it all to you through your secure online profile on mytaxvault.com.
We can implement your tax-savings plan with weekly, bi-weekly, semi-monthly or monthly tax-savings schedules that coincide with when you typically get paid. We set aside the taxes on our members’ behalf frequently, so we keep the amounts withheld much smaller and easier to manage than a full quarterly tax payment. We handle the enrollment of each client in the IRS’ online tax payment system and make the payments directly to the IRS on your behalf. After a simple set-up, saving and paying your taxes is on auto-pilot. My Tax Vault does it all for you.
The IRS doesn’t make it easy. Their tax periods each contain an unequal number of days to earn money and save up the estimated tax, yet all four tax payments are required to be equal in amount, or you can face penalties. For example, the four tax periods in 2019 contain 90, 61, 92 and 122 days. Form 1099 income are required to save up and pay the same amount of tax money for the 61-day tax period as they are for the period with 122-days. Whaaaat?! It’s the law.
The IRS is the last entity you want to owe money to. Contrary to the marketing content in radio and TV ads, tax resolution firms are very rarely able to “settle” IRS tax debts for less than the principle amount owed plus penalties and interest. If everyone could simply ‘settle’ their tax debt for a fraction of what is owed later on, who would ever pay their taxes in full or on time? Not many would.
2270 PER DAY. That’s how many bank account levies the IRS averaged in 2017. If you don’t pay on time, they will eventually get what you owe them, and more.(source: irs.gov)
We have created an automated system that actually prevents people from ever getting behind the curve on IRS payment requirements. And for those who are already behind, we can get them back on track and 100% compliant going forward. My Tax Vault makes a complicated process so much simpler, even for people who have historically been on time in the past! We have developed a cutting-edge system that is specifically designed to save up and pay tax funds on behalf of self-employed people, with no customer involvement needed after sign-up for the entire year. Automated IRS tax compliance means freedom to pay attention to what is most important: generating income. Establishing your own Tax Vault brings a simple fix to a complex problem.
If you have a great system that is effortless on your part, and IRS compliant, stick with it. You are the exception, not the rule. Most self-employed people struggle to get their taxes calculated and paid, in one way or another. For those who have come up with a system that is ‘OK’ up to this point, but think it should be much simpler than it is, it can be. Most people can go generate much more income than $39 in an entire month if they spend their time servicing clients rather than racking their brain over their taxes. Setting up your Tax Vault is the cheapest, simplest way on the planet to make sure you are compliant with the IRS.
It can be very costly. If you think you are in compliance because you pay what you owe when you file, you’re not. Paying your entire past year’s tax balance during the following January Through April, when you file your income tax return, is not considered on time by the IRS! If you don’t pay your taxes in 4 equal payments during the year, you don’t pay enough, or you are late, the IRS can add stiff penalties and interest to your tax bill, period. People often wonder why they still owe the IRS, even after they paid their tax owed in one lump sum (but late). They are likely paying a penalty for late payment, interest on the principle that was late, and also interest on the penalty! Wow.
If you have made tax payments but they were unequal payments throughout the year, and want to avoid being penalized, (and you are not a farmer or fisherman), the IRS requires you to attach Form 2210 to your tax return. This is a twenty-seven line tax calculation worksheet explaining to the IRS why you paid unevenly, and figuring exactly how much you are required to pay with each different quarterly payment. Form 2210 is required to mathematically explain why, but is also used to avoid being penalized for uneven payments. Don’t forget to read and implement the 8 pages of instructions for Form 2210. It is overwhelmingly more common (and easier) to make equal and even tax payments throughout the year to stay in compliance. 2210 can be a complex nightmare, and adopting its use doesn’t mean you will pay less tax, just that you are going to pay unevenly.
If you didn’t make all of the payments in full and on time during the tax year, you can try to ask the IRS for “forgiveness” on any penalties by filling out form 843 (Request for a Refund or Abatement of penalties). Don’t forget to attach a detailed ‘penalty abatement narrative’ telling the story and exact timeline of why you did not comply with the IRS’ tax laws and rules outlined in Form 1040ES. If you want to have the best shot at being successful in getting a release of your penalties for paying late or unevenly, you must also attach supporting documentation to prove exactly what external “hardship” directly caused you to not adhere to IRS laws for self-employed taxpayers. No, thanks! My Tax Vault sounds a lot easier.
If you have a great system that is effortless on your part, and IRS compliant, stick with it. You are the exception, not the rule. Most self-employed people struggle to get their taxes calculated and paid, in one way or another. For those who have come up with a system that is ‘OK’ up to this point, but think it should be much simpler than it is, it can be. Most people can go generate much more income than $39 in an entire month if they spend their time servicing clients rather than racking their brain over their taxes. Setting up your Tax Vault is the cheapest, simplest way on the planet to make sure you are compliant with the IRS.
It can be very costly. If you think you are in compliance because you pay what you owe when you file, you’re not. Paying your entire past year’s tax balance during the following January Through April, when you file your income tax return, is not considered on time by the IRS! If you don’t pay your taxes in 4 equal payments during the year, you don’t pay enough, or you are late, the IRS can add stiff penalties and interest to your tax bill, period. People often wonder why they still owe the IRS, even after they paid their tax owed in one lump sum (but late). They are likely paying a penalty for late payment, interest on the principle that was late, and also interest on the penalty! Wow.
If you have made tax payments but they were unequal payments throughout the year, and want to avoid being penalized, (and you are not a farmer or fisherman), the IRS requires you to attach Form 2210 to your tax return. This is a twenty-seven line tax calculation worksheet explaining to the IRS why you paid unevenly, and figuring exactly how much you are required to pay with each different quarterly payment. Form 2210 is required to mathematically explain why, but is also used to avoid being penalized for uneven payments. Don’t forget to read and implement the 8 pages of instructions for Form 2210. It is overwhelmingly more common (and easier) to make equal and even tax payments throughout the year to stay in compliance. 2210 can be a complex nightmare, and adopting its use doesn’t mean you will pay less tax, just that you are going to pay unevenly.
If you didn’t make all of the payments in full and on time during the tax year, you can try to ask the IRS for “forgiveness” on any penalties by filling out form 843 (Request for a Refund or Abatement of penalties). Don’t forget to attach a detailed ‘penalty abatement narrative’ telling the story and exact timeline of why you did not comply with the IRS’ tax laws and rules outlined in Form 1040ES. If you want to have the best shot at being successful in getting a release of your penalties for paying late or unevenly, you must also attach supporting documentation to prove exactly what external “hardship” directly caused you to not adhere to IRS laws for self-employed taxpayers. No, thanks! My Tax Vault sounds a lot easier.
History and statistics show us that, when it comes to paying quarterly estimated taxes, using a CPA firm to tell us what to do has not been a winning formula. There are about 10 million people in the U.S. that owe the IRS money, out of approximately 120 million in the work-force. 1 in 12 of us working Americans wears the label of, “IRS debtor,” and the majority have 1099 income and an accountant.
Almost all of us have an accountant or bookkeeper of some sort. If having an accountant conclusively meant we were all going to be “on top of it,” there wouldn’t be millions of self-employed people in debt to the IRS right now, and millions more “hanging on by their fingernails.” The IRS published their “tax gap” figures for last year (what has been filed as owed vs. what has actually been paid). The amount owed to the IRS was $406 Billion dollars. We are clearly not, as a country, “on top of it.”
An accountant’s job (for self-employed clients) is to compile all of your income data with relevant records for tax deductions, exemptions, and credits in order to report the proper tax obligation to the government. They will save you money where it is justified and legal. After they prepare a return, they tell what you should be paying per quarter (for the current year), or what should be paid or refunded. An accountant’s job is complicated enough without having to chase all of their clients around to make sure all estimated tax payments are made accurately and on time. They don’t get paid to babysit us in making our payments! My Tax Vault does.
A filing extension is exactly that, and extension to file a return. It is not an extension to pay. If you file in October, like many self-employed people do, the IRS rules state you were still required to pay the taxes on a quarterly basis, for the prior year, by the middle of April, June, September and January. Filing an extension to report your specific tax details doesn’t give you permission to pay the tax late, nor exempt you from additional penalties and interest.
Most accountants’ solution to guide people through making the required estimated tax payments is to give them four vouchers which show an estimated amount owed for each quarter and the due date. A problem arises if you choose to file an extension and file in October. When your accountant prepares the return by October 15th, three of the four vouchers they hand you for the prior year have already passed! The tax amounts listed on three vouchers are already very late. You could only conceivably make one of the four payments accurately and on time, the Q4 payment due January 15th. This is not a sustainable way to stay “on top of” your tax obligations and is a recipe to remain eternally behind on paying taxes. This scenario is unbelievably common, however, and My Tax Vault is the perfect solution to stopping this cycle and starting fresh.
We self-employed people tend to be eternally optimistic that we can always earn our way out of any cash-flow crunch by working harder, more hours or starting yet another new project. We tend to chase the next big contract, receivable or sale in order to save our fiscal year, and pay our taxes, even if late. Millions of self-employed Americans simply do not make four full quarterly estimated tax payments in hopes they will be able to save up enough to make one large payment by the time they file their income taxes the following year. They fail to realize that this is not IRS compliant, and they can charge heavy penalties on any taxes that are remitted to them late. This is a very stressful way to budget for your taxes, not to mention hard on your cash flow.
Every ‘quarter’ you don’t make the full tax deposit, those taxes are considered late, and the IRS can start the clock on late payment penalties and interest from that date on. Just calculating and paying our current taxes is tough enough. Paying current taxes in addition to an IRS installment agreement for rapidly growing old tax debt is downright overwhelming, and a massive waste of money. The vast majority of us want to pay what we owe, yet we fail to properly save up for and pay our income taxes properly for a myriad of reasons. Putting your tax savings and payments on auto-pilot with My Tax Vault makes it so simple and easy to stay up to date with paying the IRS.
The question could be rephrased to read, “Can paying the required amount of tax during the year cause me to get a refund, or owe more tax at the end of the year?” Yes to both.
Your taxable income is actually the greatest predictor of whether you are going to owe or get a refund come filing time. The IRS’ rules are that you base your current year’s quarterly tax payments on what was shown as due on prior year’s return. If you have similar income to last year, your return or amount owed at the end of this year will likely be similar. If you earn a lot more in taxable income than you did in the most recent year, you could end up owing additional tax at the end of the year, even if you use our service. If you earn less than the prior tax year, you could be getting a refund using, as you may have over-paid a little. Regardless of the scenario, use of My Tax Vault will make you 100% IRS compliant if you participate with our service.
Your specific tax exemptions, deductions and credits also play a role. For example, if you filed as a single taxpayer last year, but are married this year, you may qualify for a new exemption and end up with a refund because of this change in your favor, compared to the year prior. On the other hand, if you had a child turn 18 and move out of the house, for example, losing any child-related deductions, exemptions or credits could cause you to owe a little more than the past year. Any of these types of changes, along with any new changes in federal tax rules can cause fluctuations.
No person or service can control the process enough to make it so that you and the IRS owe each other exactly zero dollars at the end of a year. Using My Tax Vault can, however, limit and minimize the discrepancy between you and the IRS. You will simply get the best result by abiding by their rules for calculating your estimated tax payments, and making them in full, and on time!
Many states, like Texas and Florida, don’t have state income taxes. The states that do, charge a much smaller percentage than income tax rates to the IRS. For the typical person, IRS tax rates are the highest by far, of any taxing authority. Because it is usually far less money, we found it is very common for people to be up to date with their state tax, but very far behind with the IRS. The primary need in the market is for a solution with IRS tax payments.
My Tax Vault specifically targets, but is not limited to, individuals who have 1099 income levels that are somewhat consistent from year to year. If you have extremely unreliable income, My Tax Vault may not be a good fit for you. Some people need the ability to pay after they find out what they have earned. Their income fluctuates so drastically that basing their current year’s tax on the prior year’s income may not work for them, even though it may technically be compliant. However, for a different person working in the same professional field, it may make a ton of sense to use our services.
The example of two real estate agents can be used well here. One real estate agent has wildly fluctuating income, with long stretches of many months with no income, then months with very high levels of income. She also has very extreme differences in total yearly income from year to year. She may need to implement the use a different “tax year” (other than the calendar year) or employ other accounting methods to calculate and track her estimated tax payments. She may need to justify why she make uneven payments, or maybe no payment at all in some quarters. My Tax Vault is probably not an ideal service for her. We can keep her in compliance as a taxpayer with the IRS, but it would be difficult to make sure she wasn’t paying the IRS too little or too much, being on a consistent tax payment schedule through our service. She is probably best off having a CPA manage her more complex tax situation.
A second real estate agent has fluctuating income, but he always seems to make a similar amount of money each year. He has been selling real estate in the same area for years and has never made less than $80,000, for example, or more than $120,000. Trends in his market also exist, where the full range of his fluctuations in income don’t take place in just one year. He may have earnings that move by $10,000 up or down each year depending on sales. His taxes owed from one year to the next don’t have a large variation, therefore the chances for severe underpayment or overpayment to the IRS are minimal. This realtor is a great fit for My Tax Vault, and we will make things much easier for him going forward! My Tax Vault is a good fit for the majority of self-employed taxpayers, but if you are unsure please give us a call and we can determine together if our services would make sense for you or not.