Self Employment Tax Lawyers in Des Moines

In Des Moines, Iowa, 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.

But what if you're self-employed? You're still obliged to pay these taxes, since you will also be qualified for those retirement programs. It's also your responsibility to determine what your tax liability is.

Typically, it's the employer who does all the calculations, deciding what deductions need to be made from a worker's paycheck to cover his or her tax liability. But if you are your own boss, you have to do this, and confirm that your figures are accurate.

Self-Employment tax obligations in Des Moines, Iowa

If you own a sole-proprietorship, or work mainly as an independent contractor, you need to pay the "self-employment tax" if you derive any substantial amount of income from self-employment. You must pay these taxes if your income from self-employment is more than annually.

Employees in a regular employer/employee relationship do enjoy one substantial perk that the self-employed do not: their Social Security and Medicare contributions are matched by their employers. So, if you pay in Social Security and Medicare taxes with every paycheck, your employer has to match that. This essentially doubles your contribution to these programs, without doubling their financial burden on you.

However, if you are a self-employed business owner in Des Moines, Iowa, you are liable for both the employee and employer contributions to Medicare and Social Security. This essentially doubles your self-employment tax rate.

The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds per year in Des Moines, Iowa. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly reduced income tax bill, which partially offsets this additional tax burden. It essentially means that the self-employment tax only applies to 92% of your income, as opposed to all of it. This means that your effective self-employment tax rate is about 14%, as opposed to over 15%.

Can a Des Moines, Iowa Tax Attorney Help?

Self-employed individuals in Des Moines must ensure that they keep good, accurate 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 advise you with your legal tax concerns.

That said, if you are encountering trouble figuring out precisely how much self-employment tax you owe in Des Moines, Iowa, a competent tax attorney shouldn't have any trouble helping you on that front. Likewise, if you end up in a dispute with the government over your self-employment tax requirement, a good tax attorney can give you the best possible chance of getting a favorable result.