Consequences of not paying estimated taxes

Having more expense than income is a common occurrence in today’s world with the current economic situation. This is especially true for someone who owns a small business or gets 1099 income, i.e. the person is paid for services but no taxes are withheld. The small business owner or 1099 person is expected to pay estimated taxes during the current tax year. The idea is that when the tax return is filed next year, no additional tax will be due next April. If he does not pay estimated taxes, the IRS tan take drastic collection actions, including seizure of business equipment. Although the IRS can seize such equipment, they have to go through a lengthy legal process to do so, and some sort of payment arrangement can usually be worked out with them before that happens. Although estimated taxes are due quarterly, they can be paid monthly and this is easier for many people to do. The important thing is to pay something along the way, if taxes are not withheld by your employer.