Self Employment Tax Lawyers in Kihei

In Kihei, Hawaii, there are specific taxes that are enforced 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.

But what if you're self-employed? You're still obliged to pay these taxes, since you will also be qualified for those retirement programs. It's also your responsibility to determine what your tax liability is.

Typically, it's the employer who does all the calculations, deciding what deductions need to be made from a worker's paycheck to cover his or her tax liability. But if you are your own boss, you have to do this, and confirm that your figures are accurate.

Self-Employment tax obligations in Kihei, Hawaii

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 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 obtaining, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.

But, if you're self employed in Kihei, Hawaii, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.

In Kihei, Hawaii, 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%.

Can a Kihei, Hawaii Tax Attorney Help?

If you are self-employed in Kihei, 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.

If you have any difficulty calculating your self-employment tax liability, an efficient Kihei, Hawaii tax attorney would likely have very little trouble assisting you figure it out. A reliable lawyer can also give you practical legal advice, which can help you avoid more significant tax law issues in the future, by dealing with them before they become problematic.