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When you work for yourself, managing income, taxes, and financial records can be complicated, especially when the IRS gets involved. In this article, we’ll overview…
- How IRS levies for self-employed individuals in Missouri actually work.
- How the IRS tracks income for independent contractors.
- What steps can help protect your business and income if you’re facing tax debt.
How Does The IRS Enforce Tax Levies Against Self-Employed Individuals?
The IRS can levy a self-employed person’s bank accounts or intercept 1099 payments. How effective that is depends largely on the type of business.
If you’re in an industry like painting or contracting where clients change from year to year, it’s harder for the IRS to identify and intercept your income. But if your work is with the same clients or companies every year, the IRS can easily find those payers and direct them to send payments to the government instead of you.
The biggest issue for self-employed people is that taxes aren’t automatically withheld, and that’s where problems start. Around 70% of my clients are self-employed, and most of them get into trouble because they don’t make their estimated tax payments throughout the year.
One of the biggest mistakes people make is calling the IRS directly and setting up a payment plan on their own. It sounds good at first—but what happens is they agree to payments that eat up all their available cash, leaving nothing for current-year taxes. Then the debt just keeps growing.
What you should do is make your estimated tax payments first, and let a professional handle the back taxes. Those estimated payments count as allowable expenses when determining your ability to pay old tax debt. So if you’re sending $1,500 a month in estimated taxes, that’s $1,500 less you’ll be expected to pay on the back taxes. In fact, 85–90% of our clients never pay back the full amount owed because we’re able to negotiate based on their real financial situation.
Can The IRS Intercept Client Payments Or Contract Income For Self-Employed Taxpayers?
It depends on the nature of your business. If you have repeat clients, like a company that issues you a 1099 every year, it’s easy for the IRS to locate and levy those payments. But if your work involves many one-time or short-term clients, tracking that income is much more difficult. There’s also a practical side to this: once clients learn the IRS is involved, many don’t want the hassle of dealing with it. They might stop doing business with you altogether, which can make things even harder.
As a seasoned tax attorney representing self-employed professionals across Missouri, Lance Drury of The Law Office of Lance R. Drury has helped countless contractors, small business owners, and independent earners stop IRS levies and restructure their tax obligations. Lance Drury understands the unique financial pressures of working without a steady paycheck and crafts custom strategies to protect income streams and keep businesses running.
If you’re self-employed and facing IRS collection actions, contact The Law Office of Lance R. Drury today to protect your income and your future.
Can The IRS Levy Digital Payment Platforms Like Stripe, Square, Or PayPal For Unpaid Taxes?
It’s not very common, but it does happen. I’ve seen it most often with PayPal. Sometimes clients operate in multiple states and fail to pay required sales taxes, which can trigger both state and IRS involvement. Platforms like Stripe or Square can be subject to levy, but they’re less frequently targeted unless large, consistent deposits are being made.
Can Restructuring My Business Reduce Exposure To IRS Levies?
Some people try to start a new business entity to escape old tax debts, but that rarely works. Moving income or assets to another business can be viewed as a fraudulent conveyance, and the IRS (or any creditor) can undo those transfers. The better strategy is to get professional help to resolve the existing debt rather than trying to hide or shift it.
Self-employment income also fluctuates a lot, sometimes even month to month. It’s important to budget based on an annual average rather than spending during high-earning months. Take real estate agents, for example. They have about four times the national average of tax problems. They might earn a big commission early in the quarter, spend it, and then have no funds left for quarterly estimated taxes.
I always tell clients: when that big check comes in, immediately send 20–25% to the IRS and make sure it’s properly designated as an estimated tax payment, not for back taxes. Otherwise, the IRS may apply it to old debt automatically.
How Do I Negotiate For Temporary Relief?
If you can prove to the IRS that you can’t afford to pay the full amount, you can negotiate to pay less. That’s what we do for the majority of our clients. Naturally, people who earn more or owe less are more likely to have to pay in full. But for most taxpayers, we can reach a settlement. However, not every expense counts. The IRS won’t allow:
- Excessive dining out
- Extravagant charitable donations
- High discretionary spending (like kids’ sports or gambling)
The IRS uses national expense standards to decide what’s reasonable. For example, they have preset numbers for housing and utilities depending on the county and household size. In practice, at least 80% of our clients exceed those limits because they’re unrealistically low.
To prove your expenses, you need documentation, such as bank statements, credit card statements, or receipts. We help clients compile all of that. It’s time-consuming, but if you want a deal from Uncle Sam, you have to back it up with solid evidence.
Still Have Questions? Ready To Get Started?
For more information on IRS levies when self-employed in Missouri, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (314) 260-6120 today.
