Self Employment Tax in Osceola, Arkansas
In Osceola, Arkansas, there are specific taxes that are levied on employees, which are deducted from their paychecks. The typically 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 responsible for those taxes, and it's your responsibility to figure out what you owe.
In most cases, employers make all the necessary calculations to determine how much needs to be deducted from an employee's check to pay these taxes. It's typically very simple, and any decent payroll software can automate this process. But the self-employed are liable for figuring this out for themselves, or hiring an accountant to do it.
Self-Employment tax obligations in Osceola, Arkansas
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obliged to pay the self-employment tax if your total income from self-employment exceeds $400 per year.
For people who are employed by another person or company, the employer typically matches the employee's contributions to Medicare and Social Security. This essentially 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, the self-employed in Osceola, Arkansas are responsible for making the employer AND employee contributions to those programs, essentially doubling what they would have to pay if they were employed by someone else.
Self-employed workers in Osceola, Arkansas pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. But, half of whatever they end up paying in self-employment tax is deductible from income tax. This essentially creates a tax deduction of nearly 8% of one's income, requiring you to only pay taxes on 92% of what you earn. Further tax deductions may lower that number further. When this deduction is taken into account, the self-employment tax rate is effectively 14%, as opposed to over 15%.
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Can a Osceola, Arkansas Tax Attorney Help?
If you are self-employed in Osceola, it's imperative that you keep good records of your income and expenses, because a tax attorney will only be able to advise you to the extent that you help yourself.
Thus, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a knowledgeable tax attorney in Osceola, Arkansas can advise you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more significant legal and financial issues.