Self Employment Tax Lawyers in Washington
In Washington, 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.
Most frequently, employers handle all of these calculations. With regular salaried and hourly employees, this is an easy process, and any decent payroll computer software can do it automatically. However, if you work for yourself, it is your responsibility to figure out precisely what you owe.
Self-Employment tax obligations in Washington, Iowa
If you primarily work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's commonly referred to as the "self-employment tax," if your annual income from self-employment is over .
For usual employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This essentially means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
However, if you're self employed in Washington, Iowa, 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 Washington, Iowa, 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%.
Can a Washington, Iowa Tax Attorney Help?
If you work for yourself in Washington, you have to stay on top of your self-employment taxes, to avoid facing significant legal and financial issues later on. This means you need to keep reliable records of all your income and expenses, in case you need to seek the advice of a tax attorney: the more information you can provide your lawyer, the better he or she can help you.
That said, if you are having trouble figuring out precisely how much self-employment tax you owe in Washington, 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.