Self Employment Tax in Cullman, Alabama
In Cullman, Alabama, there are particular taxes that are levied on employees, which are deducted from their paychecks. The generally 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 essential to note that if you are self-employed, you're still accountable for those taxes, and it's your responsibility to figure out what you owe.
Most commonly, 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 clearly what you owe.
Self-Employment tax obligations in Cullman, Alabama
If you mainly work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's regularly referred to as the "self-employment tax," if your annual income from self-employment is over $400.
Employees in a regular employer/employee relationship do enjoy one considerable perk that the self-employed do not: their Social Security and Medicare contributions are matched by their employers. So, if you pay $100 in Social Security and Medicare taxes with every paycheck, your employer has to match that. This basically doubles your contribution to these programs, without doubling their financial burden on you.
But, if you're self employed in Cullman, Alabama, or anywhere else, you are obligated to make the employee AND employer contributions to Social Security and Medicare, basically doubling your employment tax liability.
Currently, the self-employment tax rate in the United States is 15.30% of all income earned from self-employment in Cullman, Alabama. Nonetheless, half of your hypothetical self-employment tax liability can be deducted from your income. This means that you only pay self-employment tax on about 92% of your income, which creates an effective self-employment tax rate of just over 14%.
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Can a Cullman, Alabama Tax Attorney Help?
If you're self-employed in Cullman, you need to keep complete records of all your income and expenses from the operation of your business. This will make it much easier for you to calculate your taxes when they come due, and it will make it simpler for a tax attorney to give you good, useful advice, should you eventually need it.
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 Cullman, 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 severe legal issue over your self-employment tax liability, a tax attorney may prove to be invaluable.