Self Employment Tax Lawyers in Hays County

In the U.S., including in Hays County, Texas, taxes are levied on employees, which are usually deducted from their paychecks. The ones that most people are acquainted with are the Medicare and Social Security taxes. The idea is that workers pay into these programs during their entire working lives, and then enjoy the benefits they provide once they retire.

But what if you're self-employed? You're still required 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, the employer makes all the necessary calculations and deductions from a person's paycheck. If you are self-employed, however, you are required to make this determination, and to ensure that it's accurate.

Self-Employment tax obligations in Hays County, Texas

If you are an independent contractor, or run a sole proprietorship (a company which you own, and which is not incorporated as a separate legal entity), you must pay the so-called "self-employment tax" if your income from self-employment is greater than per year.

Employees in a regular employer/employee relationship do enjoy one significant 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 effectively doubles your contribution to these programs, without doubling their financial burden on you.

But, if you are self-employed in Hays County, Texas, 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.

Self-employed workers in Hays County, Texas 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 effectively 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%.

Can a Hays County, Texas Tax Attorney Help?

If you are self-employed in Hays County, 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 efficiently if you are able to quickly present them with all the relevant information.

Anyone having difficulty with figuring out what they owe in self-employment taxes in Hays County, Texas should seek the advice of a reputable tax attorney. Most tax attorneys also have a good knowledge of accounting, so making this determination probably won't be too hard for them. And on top of that, a competent tax attorney can give you objective and useful legal advice, which can help prevent more egregious issues from arising in the future.