Self-employed Withholding

Physician's Money Digest, March15 2004, Volume 11, Issue 5

According to a report by the IRS' taxpayeradvocate, the problem of unpaidincome taxes can be partially solved bygoing after the self-employed (eg, physicians),who are responsible for about onethird of the estimated $310-billion shortfallin tax payments—money the IRSbelieves is owed to the government intaxes but never paid. On the table is aproposal to withhold taxes from paymentsto self-employed taxpayers. Theadvocate's report recommends that employerswithhold 5% for taxes frompayments to independent contractorswho don't maintain an inventory. Althoughself-employed workers are supposedto set aside funds to meet taxpayments and often must pay estimatedtaxes each quarter, many fail to reportall or part of their self-employed income,according to the report.