Self Employment Tax Lawyers in Calumet City
In Calumet City, Illinois, there are specific taxes that are levied 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 makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to oversee 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 Calumet City, 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 higher than 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 self-employed in Calumet City, Illinois, you are responsible to pay both the employee and employer share of the employment tax. Essentially, this means that the employment tax for self-employed individuals is double what it would be for regular employees.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds per year in Calumet City, Illinois. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly reduced 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 Calumet City, Illinois Tax Attorney Help?
If you are self-employed in Calumet City, 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 advise 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 efficient Calumet City, Illinois 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 egregious tax law issues in the future, by dealing with them before they become problematic.