Self Employment Tax Lawyers in Cortland

In Cortland, Illinois, there are certain taxes that are imposed 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 eligible 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 Cortland, Illinois

If you own a sole-proprietorship, or work primarily as an independent contractor, you need to pay the "self-employment tax" if you derive any significant amount of income from self-employment. You must pay these taxes if your income from self-employment is more than annually.

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

But, if you are a self-employed business owner in Cortland, Illinois, you are responsible for both the employee and employer contributions to Medicare and Social Security. This basically doubles your self-employment tax rate.

The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds per year in Cortland, Illinois. 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 Cortland, Illinois Tax Attorney Help?

Self-employed individuals in Cortland must ensure that they keep good, thorough financial records. This makes it much easier to determine what you owe, and, if you need a tax attorney, it makes it easier for them to help you with your legal tax issues.

That said, if you are having trouble figuring out exactly how much self-employment tax you owe in Cortland, Illinois, 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.