Self Employment Tax Lawyers in Mount Prospect
In Mount Prospect, Illinois, some taxes are placed 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 responsible for these taxes, and are responsible for figuring out how much they owe.
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 Mount Prospect, Illinois
If you primarily work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's typically referred to as the "self-employment tax," if your annual income from self-employment is over .
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.
However, if you're self employed in Mount Prospect, Illinois, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
Self-employed workers in Mount Prospect, Illinois pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. However, half of whatever they end up paying in self-employment tax is deductible from income tax. This essentially creates a tax deduction of nearly 8% of one's income, requiring you to only pay taxes on 92% of what you earn. Additional tax deductions may lower that number further. When this deduction is taken into account, the self-employment tax rate is effectively 14%, as opposed to over 15%.
Can a Mount Prospect, Illinois Tax Attorney Help?
Self-employed individuals in Mount Prospect must ensure that they keep good, accurate 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 advise you with your legal tax concerns.
With all that said, if you are having difficulty determining just how much money you owe in Medicare and Social Security taxes from self-employment in Mount Prospect, Illinois, and keep good financial records, it should be relatively easy for a decent tax attorney to help you. And, if you end up facing a more significant legal issue over your self-employment tax liability, a tax attorney may prove to be invaluable.
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