My first year self-employed went well. Now I owe $6,000 in taxes.

The question

An illustrative letter.

The answer

My dear, first, congratulations. A first year good enough to bring a tax bill this size means your clients trust you and keep coming back. That is the hard part of any business, and you have done it. The bill is a shock, I know, but it is a very common one in a first year of working for yourself, and it can be handled calmly. The worst thing you could do now is put the letter in a drawer.

Why did I owe so much when the year went well?

When you work for an employer, tax comes out of every paycheck before you see it. When you work for yourself, nobody takes it out. Every dollar a client pays you arrives whole, and it feels like yours to spend. But part of it always belonged to the government, and the whole of that part comes due at once, at tax time.

You also pay a tax that employees mostly do not see. Self-employment tax covers your Social Security and Medicare, at 15.3 percent of your net earnings. An employer would normally pay half of that for you. Now you are both the worker and the employer, so you pay both halves, on top of your income tax. Your state, and in some places your city, may want its share as well.

What happens if I file but can't pay?

File anyway, and on time. This matters more than anything else on this page. The penalty for filing late is 5 percent of the unpaid tax for each month the return is late, up to 25 percent. The penalty for paying late is far smaller, half of one percent a month. Interest is added to unpaid tax either way, but a return filed on time keeps the larger penalty off your bill entirely.

So file by the deadline, pay whatever you can with it, and deal with the rest openly. The IRS sees people in your position every day. A taxpayer who files and asks for time is treated very differently from one who goes quiet.

How does an IRS payment plan work?

There are two kinds. If you can clear the balance within 180 days, a short-term plan costs nothing to set up. If you need longer, a long-term plan lets you pay in monthly installments, as long as you owe $50,000 or less in tax, penalties and interest combined. At about $6,000, you are well within both.

You can apply on the IRS website and hear right away whether you have been approved. The setup fee is lowest when the payments come out of your bank account automatically, and that also means you never miss one. Interest and a reduced late-payment penalty keep running until the balance is paid, so pay more than the minimum whenever a good month allows. A CPA can tell you how the details apply to you.

Be careful with offers to put the bill on a credit card or a quick loan. A card charging 25 percent interest costs far more than an IRS plan. Compare the full cost before you choose.

How much should I set aside from each payment?

Many self-employed people move 25 to 30 percent of every payment into a separate savings account the day it arrives, and touch it only for taxes. Your own figure depends on your income, your costs and your state. Your preparer can work out a closer figure from this year's return, and it is worth asking for one.

Keep this money apart from both your business account and your personal one. Money that sits beside your spending money gets spent, as you have found. Money in its own account, with its own name, waits for the day it is needed.

What are quarterly estimated taxes?

Rather than paying everything once a year, the self-employed are expected to pay as they go, in four installments. They are due on April 15, June 15, September 15 and January 15. If you expect to owe $1,000 or more for the year, the IRS expects these payments, and it can charge a penalty when they are missed.

There is a simple way to stay safe. In general, if your four payments add up to at least as much as last year's total tax, you avoid that penalty, even if this year turns out bigger. If your total tax for this first year was about $6,000, four payments of about $1,500 would generally meet that test. The rule is higher for larger incomes, so check yours with your preparer. With the tax account filling every week, those four dates become transfers, not emergencies.

Can I lower next year's bill?

You pay tax on your profit, not on everything clients pay you. Supplies, tools, training, booth or product costs and the business share of your phone can all count as business expenses when you keep the receipts. A home studio used regularly and only for your work may qualify for a deduction too. Saving for retirement through a plan for the self-employed can lower your taxable income while you build something for later.

None of this works without records. One hour a week with your receipts and your bank statements is enough for a business your size.

You built something real this year. Next year, it simply carries its own tax bill, a little at a time, the way every steady business does.

One thing to do this week

Open a separate savings account just for taxes, and move a share of your next client payment into it.