Self Employment Tax in Robertsdale, Alabama
In Robertsdale, Alabama, there are specific taxes that are placed 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.
It's crucial to note that if you are self-employed, you're still responsible for those taxes, and it's your responsibility to figure out what you owe.
Typically, it's the employer who makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to oversee these matters, making it pretty simple for them. But, if you are self-employed, it's up to you to accurately determine what you have to pay in self-employment taxes
Self-Employment tax obligations in Robertsdale, Alabama
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obliged to pay the self-employment tax if your total income from self-employment exceeds $400 per year.
Workers who are employed by someone else enjoy at least one perk that the self-employed do not: their employer matches their Social Security and Medicare contributions, essentially doubling the amount of money that's contributed to these funds on the employee's behalf.
However, the self-employed in Robertsdale, Alabama are responsible for making the employer AND employee contributions to those programs, essentially 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 Robertsdale, Alabama. 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 Robertsdale, Alabama Tax Attorney Help?
If you're self-employed in Robertsdale, you need to keep accurate 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 easier for a tax attorney to give you good, useful advice, should you eventually need it.
Anyone having difficulty with figuring out what they owe in self-employment taxes in Robertsdale, Alabama should seek the assistance of a knowledgeable tax attorney. Most tax attorneys also have a good familiarity of accounting, so making this determination probably won't be too hard for them. And on top of that, a skilled tax attorney can give you objective and useful legal advice, which can help prevent more severe issues from rising in the future.