Self Employment Tax in Saraland, Alabama
In Saraland, Alabama, there are certain taxes that are enforced 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 critical 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.
Usually, 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 handle 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 Saraland, Alabama
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obligated to pay the self-employment tax if your total income from self-employment exceeds $400 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 $100 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.
However, self-employed workers in Saraland, Alabama must make both the employee and employer contributions. So, this means that the Medicare and Social Security tax liabilities apply doubly to the self-employed.
Currently, the self-employment tax rate in the United States is 15.30% of all income earned from self-employment in Saraland, Alabama. Nonetheless, half of your hypothetical self-employment tax liability can be deducted from your income. This means that you only pay self-employment tax on about 92% of your income, which creates an effective self-employment tax rate of just over 14%.
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Can a Saraland, Alabama Tax Attorney Help?
If you're self-employed in Saraland, 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 Saraland, 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.