Self Employment Tax Lawyers in Hibbing
In Hibbing, Minnesota, 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.
But what if you're self-employed? You're still obliged 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.
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 Hibbing, Minnesota
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 .
For usual employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This essentially means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
But, self-employed workers in Hibbing, Minnesota must make both the employee and employer contributions. Thus, this means that the Medicare and Social Security tax liabilities apply doubly to the self-employed.
Self-employed workers in Hibbing, Minnesota 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 Hibbing, Minnesota Tax Attorney Help?
If you are self-employed in Hibbing, 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.
Thus, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a knowledgeable tax attorney in Hibbing, Minnesota can advise you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more significant legal and financial issues.