Glossary

Self-Employment Tax

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Self-employment tax is a tax that covers Social Security and Medicare contributions for individuals who are self-employed. Unlike employees who split these taxes with their employers, self-employed individuals must pay the full tax themselves. This tax is separate from income tax and applies to earnings from self-employment.

The self-employment tax rate is:

12.4% for Social Security.
2.9% for Medicare.

Self-employed individuals must report and pay this tax using Schedule SE when filing their annual tax return (Form 1040). They may also need to make estimated tax payments throughout the year to cover both self-employment tax and income tax.

Self-employed taxpayers can deduct the employer-equivalent portion of self-employment tax (50%) when calculating their adjusted gross income, reducing their overall tax liability.

Recommendation

CP504 Notice – Notice of Intent to Levy

IRS CP504 is a Notice of Intent to Levy, meaning the IRS plans to seize your assets if your unpaid taxes are not resolved.

Tax Offset

A tax offset occurs when the IRS uses a taxpayer’s refund to pay off an outstanding debt, such as unpaid taxes, student loans, or child support.

Tax Lien Withdrawal

A tax lien withdrawal removes the IRS’s notice of a federal tax lien, lifting its public record status and restoring the taxpayer’s ability to manage their assets freely.

CP16 Notice: Overpayment Applied to Balance Due

The IRS CP16 Notice informs taxpayers that their refund or overpayment has been used to pay off a balance due from a previous tax year.

Letter 2802C: Request for Taxpayer’s Signature on Return

IRS Letter 2802C notifies taxpayers that their return lacks a required signature and provides instructions to sign and resubmit.

CP88 Notice: Refund Frozen Due to Unfiled Returns

The IRS CP88 Notice notifies taxpayers that their refund has been frozen due to unfiled tax returns from previous years, and provides instructions for resolution.

CP49 Notice: Overpayment Applied to Previous Tax Debt

The IRS CP49 Notice informs taxpayers that their refund or overpayment has been used to pay off a previous year’s tax debt.

Letter 2645C: Acknowledgement of Inquiry or Information Received

IRS Letter 2645C informs taxpayers that their correspondence or inquiry has been received and provides an estimated timeframe for resolution.

CP05A Notice: Information Verification Needed

The IRS CP05A Notice requests additional information from taxpayers to verify entries on their tax return before the refund can be issued.

CP90 Notice – Final Notice of Intent to Levy and Notice of Your Right to a Hearing

IRS Notice CP90 is the Final Notice of Intent to Levy, which gives you the right to a hearing before the IRS seizes your assets to satisfy unpaid tax debt.