Self Employment Tax Lawyers in Bloomington
In Bloomington, Illinois, there are certain taxes that are enforced on employees, which are deducted from their paychecks. The mostly 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 required 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.
Usually, it's the employer who makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to handle these matters, making it pretty simple for them. But, if you are self-employed, it's up to you to accurately determine what you have to pay in self-employment taxes
Self-Employment tax obligations in Bloomington, Illinois
If you are an independent contractor, or run a sole proprietorship (a company which you own, and which is not incorporated as a separate legal entity), you must pay the so-called "self-employment tax" if your income from self-employment is greater than per year.
Workers who are employed by someone else enjoy at least one perk that the self-employed do not: their employer matches their Social Security and Medicare contributions, effectively doubling the amount of money that's contributed to these funds on the employee's behalf.
But, if you are self-employed in Bloomington, Illinois, you are liable to pay both the employee and employer share of the employment tax. Effectively, this means that the employment tax for self-employed individuals is double what it would be for regular employees.
In Bloomington, Illinois, 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 Bloomington, Illinois Tax Attorney Help?
If you are self-employed in Bloomington, 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 help you with a legal issue, and they can help you far more efficiently if you are able to quickly present them with all the relevant information.
If you have any difficulty calculating your self-employment tax liability, an experienced Bloomington, Illinois tax attorney would likely have very little trouble assisting you figure it out. A reputable 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.