Self Employment Tax in Valdez, Alaska
In Valdez, Alaska, there are particular taxes that are placed 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 crucial 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 process, and any decent payroll computer software can do it automatically. However, if you work for yourself, it is your responsibility to figure out clearly what you owe.
Self-Employment tax obligations in Valdez, Alaska
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 normal employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This basically means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
However, the self-employed in Valdez, Alaska are responsible for making the employer AND employee contributions to those programs, basically doubling what they would have to pay if they were employed by someone else.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Valdez, Alaska. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly lower 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%.
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Can a Valdez, Alaska Tax Attorney Help?
If you are self-employed in Valdez, it's necessary that you keep good records of your income and expenses, because a tax attorney will only be able to assist you to the extent that you help yourself.
If you have any difficulty calculating your self-employment tax liability, an accomplished Valdez, Alaska tax attorney would probably have very little trouble helping you figure it out. A brilliant lawyer can also give you practical legal advice, which can help you avoid more severe tax law issues in the future, by dealing with them before they become problematic.