Self Employment Tax Lawyers in Altoona
In Altoona, Iowa, there are specific taxes that are imposed 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 eligible 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, determining 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 ensure that your figures are accurate.
Self-Employment tax obligations in Altoona, Iowa
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.
Employees in a regular employer/employee relationship do enjoy one substantial perk that the self-employed do not: their Social Security and Medicare contributions are matched by their employers. So, if you pay in Social Security and Medicare taxes with every paycheck, your employer has to match that. This essentially doubles your contribution to these programs, without doubling their financial burden on you.
But, if you are a self-employed business owner in Altoona, Iowa, you are liable for both the employee and employer contributions to Medicare and Social Security. This basically doubles your self-employment tax rate.
The total self-employment tax (note that this is completely distinct from the income tax) is set at 15.3%, if your income from self-employment in Altoona, Iowa exceeds . However, half of this tax is deducted from your income, for income tax purposes. Thus, this means that, at most, the self-employed only have to pay income on 92% of their total income, and that amount may be lowered with additional deductions for which you may be eligible. This means that, essentially, the self-employment tax rate is only 14%, as opposed to 15.3%
Can a Altoona, Iowa Tax Attorney Help?
If you are self-employed in Altoona, 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.
Anyone having difficulty with figuring out what they owe in self-employment taxes in Altoona, Iowa 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 serious issues from rising in the future.