Self Employment Tax Lawyers in Champlin
In Champlin, Minnesota, 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.
Most frequently, employers handle all of these calculations. With regular salaried and hourly employees, this is an easy procedure, and any decent payroll computer software can do it automatically. But, if you work for yourself, it is your responsibility to figure out precisely what you owe.
Self-Employment tax obligations in Champlin, Minnesota
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obliged to pay the self-employment tax if your total income from self-employment exceeds per year.
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.
But, if you're self employed in Champlin, Minnesota, 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 Champlin, Minnesota pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. But, 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. Further 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 Champlin, Minnesota Tax Attorney Help?
If you are self-employed in Champlin, it's imperative that you keep good records of your income and expenses, because a tax attorney will only be able to advise you to the extent that you help yourself.
With all that said, if you are having difficulty deciding just how much money you owe in Medicare and Social Security taxes from self-employment in Champlin, Minnesota, 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.