Self Employment Tax in Tempe, Arizona

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In Tempe, Arizona, there are certain taxes that are placed 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 crucial 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.

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 usually very simple, and any decent payroll software can automate this process. But the self-employed are responsible for figuring this out for themselves, or hiring an accountant to do it.

Self-Employment tax obligations in Tempe, Arizona

If you primarily work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's typically 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.

However, if you are self-employed in Tempe, Arizona, 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.

In Tempe, Arizona, self-employed business owners pay a self-employment tax rate of 15.3%. This is, of course, separate from, and additional to, whatever they pay in income tax. In an effort to partially offset this additional tax burden, half of what one pays in self-employment taxes can be deducted from their income when filing their income taxes. This means that the self employed pay income taxes on, at most, 92% of their income. And it's probably less, thanks to all the other deductions they might qualify for. This deduction lowers the effective self-employment tax rate to 14%, rather than the "official" rate of over 15%.

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Can a Tempe, Arizona Tax Attorney Help?

If you are self-employed in Tempe, it's extremely important for you to be diligent in keeping records of your income and expenses, to ensure that you pay all the self-employment taxes that you owe (and also to make sure you don't over-pay). You may one day need a tax attorney to help you with a legal issue, and they can help you far more effectively if you are able to quickly provide them with all the relevant information.

With all that said, if you are having difficulty determining just how much money you owe in Medicare and Social Security taxes from self-employment in Tempe, Arizona, 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.

20 Tax Law cases posted to LegalMatch lawyers in Tempe

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Life in Tempe

Tempe is located in Maricopa County in Arizona.  It has a population of about 175,000 and was incorporated in the year 1894.  Its name comes from the "Vale of Tempe" located in Greece.  Tempe is known for being the headquarters for several prominent corporations.

The economy of Tempe is comprised mainly of large corporations which have their headquarters in the city.  For example, companies such as U.S. Airways and Insight Enterprises have their executive headquarters in Tempe.  Cold Stone Creamery, a popular ice cream franchise, was originally located in the city.  In addition, Tempe is home to Arizona State University at Tempe, where the Insight Bowl is held every year.

Residents of Tempe enjoy great performance in the arts at the Gammage Auditorium and the Tempe Center for the Arts.  Also, visitors frequently enjoy shopping in Tempe's retail district, located at Mills Avenue and at Arizona Mills, one of the largest shopping malls in the state.  The Tempe Marketplace is where you can go for excellent outdoor festivals and concerts.

Lawyers in Tempe, Arizona typically file legal claims at the Tempe Municipal Court.  The municipal court handles a wide range of legal issues and ordinance violations.  Tempe lawyers also participate in a variety of exciting civic and community service events. 

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