Self Employment Tax Lawyers in Petoskey

In Petoskey, Michigan, 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.

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.

Typically, the employer makes all the necessary calculations and deductions from a person's paycheck. If you are self-employed, however, you are required to make this determination, and to ensure that it's accurate.

Self-Employment tax obligations in Petoskey, Michigan

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.

Employees in a regular employer/employee relationship do enjoy one significant 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 effectively doubles your contribution to these programs, without doubling their financial burden on you.

But, if you are a self-employed business owner in Petoskey, Michigan, 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 Petoskey, Michigan. 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 Petoskey, Michigan Tax Attorney Help?

Self-employed individuals in Petoskey 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.

If you have any difficulty calculating your self-employment tax liability, an experienced Petoskey, Michigan tax attorney would probably have very little trouble helping you figure it out. A good lawyer can also give you practical legal advice, which can help you avoid more serious tax law issues in the future, by dealing with them before they become problematic.