Are you ready?
With tax season upon us, you might be panicking. I used to do that too. I panicked so much in fact, that I avoided doing my taxes entirely until I was penalized. I know what you’re thinking. That’s insane. So is bungee jumping but a lot of people do it.
I meet with new interpreter clients for consulting services who tell me the same story again and again. They’re where I was and they’re afraid to face their fears because they didn’t keep track of their earnings and they never paid in. It’s not uncommon in this field because we don’t teach business to our new colleagues. So what do I say to those new practitioners who are scared? If you don’t want to bury yourself alive, simply stop digging.
- Get an accountant
- Be honest with the numbers
- Work out a payment plan you can handle with the IRS
- Relax, a little tax debt never killed anyone… but it will get your passport revoked.
Getting an accountant
Don’t trust yourself to do your taxes. I don’t care how simple they are. There is an entire industry of trained professionals who spend years of their lives learning how to increase savings for taxpayers. Your tax liability can be greatly reduced when you work with a professional who knows what to look for. While you might think e-filing for free is cheaper because you’re not paying a couple hundred dollars for the service upfront, you could be losing more money by missing out on expense categories you don’t understand.
Accountants also stay with you, good accountants hound you. My accountant calls me once every couple months to yell at me about adding expenses to my Airtable. When I give him my numbers at the end of the year he pushes me to be more organized and better about informing him of changes. I personally work best that way, find your own style and get an accountant that will aid you in furthering your career.
Honesty is key
You can’t get back everything you deserve if you’re not honest with the numbers. Tell your accountant how much you work, drive and spend on things. They’re not going to judge you because you bought the expensive 3 in 1 printer instead of an open box desktop style. They’re going to work hard to make sure that your expenses are doable and will inform you of your spending boundaries. Without them having full access to the correct numbers, you can’t possibly know what your profit margins look like. Giving them access now is the first step in a strong foundation as you build your practice and clients.
If you’re in debt, get a payment plan
Finding out you owe ten thousand dollars or more to the IRS feels like a punch in the gut. I know this because I have both been informed that I owe that much and have also been punched in the gut. If you don’t know, both are terrible.
The good news is that with a payment plan, you can establish a small figure that is manageable and work it into your business expenses. This way, you’re not struggling to make ends meet over a tax debt that feels utterly suffocating. For a long time, I paid $300/month and that was manageable but there was a time in my life where $25 was all I could scape together. On months when I had more but knew things would be lean in the future, I’d put it aside for the next payment as opposed to making double payments. This is your career and you’ve gotta do what works for you. The worst thing you can do is shame spiral about it and ignore it. For me, that meant hiring someone to handle it for me. I simply didn’t have the capacity or the time to manage it. Now? It’s no problem, I just had to find a solution I could come to terms with.
Side note: I get so many notes from colleagues about how I talk about this unabashedly. I turned my job into a very successful interpreting career that I love but I didn’t do it without making absurd mistakes. Just because I’m good at it now doesn’t mean I always was and also not every interpreter is a responsible adult. Don’t judgement from interpreters who happen to be hold you back from developing the skills you need to have a happy and successful practice.
Try to remain calm about it
Plenty of people have tax debt and you’re allowed to make mistakes. It’s not going to kill you but you need to have a clear head about it. Tax debt to the IRS results in massive penalties when not managed, they can seize your belongings and even revoke your ability to travel outside of the country. If you think tax debt is embarrassing, imagine missing a friends wedding in a gorgeous destination because you were being punished by Uncle Sam.
Taking a smart approach to your tax liabilities may seem really scary but there are resources out there that can make things much easier to manage. For many of the clients I work with on a regular basis, it’s a matter of reducing the elephant to a series of smaller bites. If you’re someone who needs a little help in that arena, don’t hesitate to reach out. I’d love to work with you.