Self Employment Tax Lawyers in Hoopeston
In Hoopeston, Illinois, some taxes are imposed on employees, and deducted from their paychecks. Most people are aware of the Medicare and Social Security taxes - which fund those two programs by taking a small percentage of every paycheck an employee receives.
Individuals who are self-employed are still accountable for these taxes, and are responsible for figuring out how much they owe.
Most commonly, 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 clearly what you owe.
Self-Employment tax obligations in Hoopeston, 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 larger than per year.
Employees in a regular employer/employee relationship do enjoy one considerable 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 basically doubles your contribution to these programs, without doubling their financial burden on you.
However, if you are self-employed in Hoopeston, Illinois, you are accountable to pay both the employee and employer share of the employment tax. Basically, 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 Hoopeston, 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 Hoopeston, Illinois Tax Attorney Help?
If you're self-employed in Hoopeston, you need to keep complete records of all your income and expenses from the operation of your business. This will make it much easier for you to calculate your taxes when they come due, and it will make it easier for a tax attorney to give you good, useful advice, should you eventually need it.
That said, if you are having trouble figuring out clearly how much self-employment tax you owe in Hoopeston, 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.