Self Employment Tax Lawyers in Fairfield

In Fairfield, Iowa, there are particular taxes that are placed on employees, which are deducted from their paychecks. The generally 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 obligated 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.

Normally, 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 Fairfield, Iowa

If you primarily work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's typically referred to as the "self-employment tax," if your annual income from self-employment is over .

For normal employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This basically means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.

However, the self-employed in Fairfield, Iowa are responsible for making the employer AND employee contributions to those programs, basically 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 per year in Fairfield, Iowa. 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%.

Can a Fairfield, Iowa Tax Attorney Help?

If you are self-employed in Fairfield, it's extremely important for you to be diligent in keeping records of your income and expenses, to ensure that you pay all the self-employment taxes that you owe (and also to make sure you don't over-pay). You may one day need a tax attorney to assist you with a legal issue, and they can help you far more effectively if you are able to quickly provide them with all the relevant information.

That said, if you are having trouble figuring out clearly how much self-employment tax you owe in Fairfield, Iowa, a competent tax attorney shouldn't have any trouble helping you on that front. Likewise, if you end up in a dispute with the government over your self-employment tax obligation, a good tax attorney can give you the best possible chance of getting a favorable result.