Self Employment Tax in Searcy, Arkansas
In Searcy, Arkansas, 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.
In most cases, employers make all the necessary calculations to determine how much needs to be deducted from an employee's check to pay these taxes. It's typically very simple, and any decent payroll software can automate this process. But the self-employed are liable for figuring this out for themselves, or hiring an accountant to do it.
Self-Employment tax obligations in Searcy, Arkansas
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.
Persons 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 acquiring, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.
But, self-employed workers in Searcy, Arkansas must make both the employee and employer contributions. Thus, this means that the Medicare and Social Security tax liabilities apply doubly to the self-employed.
In Searcy, Arkansas, 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 additional 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 Searcy, Arkansas Tax Attorney Help?
If you are self-employed in Searcy, it's imperative that you keep good records of your income and expenses, because a tax attorney will only be able to advise you to the extent that you help yourself.
Thus, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a knowledgeable tax attorney in Searcy, Arkansas can advise you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more significant legal and financial issues.