Self Employment Tax in Andalusia, Alabama
In Andalusia, Alabama, there are certain taxes that are enforced on employees, which are deducted from their paychecks. The mostly well-known employment taxes are the Medicare and Social Security tax, for which a small percentage of every employee's paycheck is deducted.
It's critical to note that if you are self-employed, you're still liable for those taxes, and it's your responsibility to figure out what you owe.
Most often, employers handle all of these calculations. With regular salaried and hourly employees, this is an easy procedure, and any decent payroll computer software can do it automatically. But, if you work for yourself, it is your responsibility to figure out exactly what you owe.
Self-Employment tax obligations in Andalusia, Alabama
If you mainly work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's usually referred to as the "self-employment tax," if your annual income from self-employment is over $400.
For people who are employed by another person or company, the employer usually matches the employee's contributions to Medicare and Social Security. This effectively means that, when you look at your Medicare and Social Security tax statements on your paychecks, you can know that those programs are actually getting double what's shown there - with your employer covering the other half.
But, if you are self-employed in Andalusia, Alabama, you are liable to pay both the employee and employer share of the employment tax. Effectively, this means that the employment tax for self-employed individuals is double what it would be for regular employees.
The total self-employment tax (note that this is totally distinct from the income tax) is set at 15.3%, if your income from self-employment in Andalusia, Alabama exceeds $400. But, half of this tax is deducted from your income, for income tax purposes. So, this means that, at most, the self-employed only have to pay income on 92% of their total income, and that amount may be lowered with further deductions for which you may be eligible. This means that, effectively, the self-employment tax rate is only 14%, as opposed to 15.3%
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Can a Andalusia, Alabama Tax Attorney Help?
Self-employed individuals in Andalusia must ensure that they keep good, thorough financial records. This makes it much easier to determine what you owe, and, if you need a tax attorney, it makes it easier for them to help you with your legal tax issues.
With all that said, if you are having difficulty deciding just how much money you owe in Medicare and Social Security taxes from self-employment in Andalusia, Alabama, and keep good financial records, it should be relatively easy for a decent tax attorney to help you. And, if you end up facing a more serious legal issue over your self-employment tax liability, a tax attorney may prove to be invaluable.