Self Employment Tax Lawyers in Rochester
In Rochester, 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.
But what if you're self-employed? You're still obliged to pay these taxes, since you will also be qualified for those retirement programs. It's also your responsibility to determine what your tax liability is.
Normally, 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 Rochester, Michigan
If you mainly work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's usually referred to as the "self-employment tax," if your annual income from self-employment is over .
For people who are employed by another person or company, the employer typically matches the employee's contributions to Medicare and Social Security. This essentially means that, when you look at your Medicare and Social Security tax statements on your paychecks, you can know that those programs are actually getting double what's shown there - with your employer covering the other half.
But, if you're self employed in Rochester, Michigan, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
In Rochester, 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 Rochester, Michigan Tax Attorney Help?
If you work for yourself in Rochester, you have to stay on top of your self-employment taxes, to avoid facing significant legal and financial issues later on. This means you need to keep reliable records of all your income and expenses, in case you need to seek the advice of a tax attorney: the more information you can provide your lawyer, the better he or she can help you.
If you have any difficulty calculating your self-employment tax liability, an efficient Rochester, Michigan tax attorney would likely have very little trouble assisting you figure it out. A reliable 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.