Self Employment Tax in Haleyville, Alabama
In Haleyville, Alabama, 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.
Most often, 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 exactly what you owe.
Self-Employment tax obligations in Haleyville, Alabama
If you derive even a small percentage of your income from running your own business, or working as an independent contractor, you have to pay the "self-employment tax." This tax applies to everyone who makes more than $400 per year from self-employment.
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're self employed in Haleyville, Alabama, or anywhere else, you are required to make the employee AND employer contributions to Social Security and Medicare, effectively doubling your employment tax liability.
Self-employed workers in Haleyville, Alabama pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. However, 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. Additional 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 Haleyville, Alabama Tax Attorney Help?
Self-employed individuals in Haleyville must ensure that they keep good, thorough 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 help you with your legal tax issues.
That said, if you are having trouble figuring out exactly how much self-employment tax you owe in Haleyville, Alabama, 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 obligation, a good tax attorney can give you the best possible chance of getting a favorable result.