Self Employment Tax in Lanett, Alabama
In Lanett, Alabama, there are certain taxes that are levied 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 essential 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 procedure, and any decent payroll computer software can do it automatically. But, if you work for yourself, it is your responsibility to figure out exactly what you owe.
Self-Employment tax obligations in Lanett, 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 everybody who makes more than $400 per year from self-employment.
People who are not self-employed, and work for another person or company, have their contributions to Medicare and Social Security matched by their employers. This means that these programs are receiving, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.
But, if you are self-employed in Lanett, Alabama, 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 Lanett, Alabama, 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 further 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 Lanett, Alabama Tax Attorney Help?
If you're self-employed in Lanett, you need to keep thorough records of all your income and expenses from the operation of your business. This will make it much easier for you to calculate your taxes when they come due, and it will make it simpler for a tax attorney to give you good, useful advice, should you eventually need it.
So, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a qualified tax attorney in Lanett, Alabama can help you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more serious legal and financial issues.