Self Employment Tax Lawyers in Alpena
In Alpena, Michigan, some taxes are enforced on employees, and deducted from their paychecks. Most people are cognizant of the Medicare and Social Security taxes - which fund those two programs by taking a small percentage of every paycheck an employee receives.
It's necessaryl to be aware of one fact: if you're self-employed, you still have to pay these taxes. And it's your responsibility (or the responsibility of someone you hire for this purpose) to figure out clearly how much you owe.
In most cases, employers make all the necessary calculations to determine how much needs to be deducted from an employee's check to pay these taxes. It's normally very simple, and any decent payroll software can automate this process. But the self-employed are accountable for figuring this out for themselves, or hiring an accountant to do it.
Self-Employment tax obligations in Alpena, Michigan
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.
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, basically doubling the amount of money that's contributed to these funds on the employee's behalf.
But, if you are self-employed in Alpena, Michigan, 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.
In Alpena, Michigan, 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 Alpena, Michigan Tax Attorney Help?
If you are self-employed in Alpena, 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 assist 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 accomplished Alpena, Michigan tax attorney would likely have very little trouble assisting you figure it out. A seasoned 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.